After Yahoo first launched in 1994, users flocked to the web portal for their online news, email and search needs. Without competition from Google, Facebook or other internet giants, Yahoo was able to attract advertisers willing to pay top dollar for banner ads, yet the company paid little attention to search features and did not value top-notch programmers. A string of poor business choices has ultimately led to the company’s demise, and recently Verizon agreed to purchase Yahoo’s core business for $4.83 billion.
Yahoo presents an interesting business case for online MBA students, who can learn from both Yahoo’s successes and mistakes. Here, we’ll examine what happened with this former web icon in six points.
Image via Flickr by Neon Tommy
Good Timing Was Not Enough to Overcome Poor Decisions
Yahoo was essentially launched at just the right time to provide a more than 20-year span of impressive growth, yet good fortune was not enough to overcome the following poor business decisions:
1. A missed opportunity with Google and search – In 2002, Yahoo had the chance to buy Google for $1 billion, but executives dragged their feet; by the time they decided to pursue the offer, Google’s price had soared to $3 billion. In the late ’90s, search was only generating six percent of Yahoo’s income stream, and the company believed it was not worth improving.
2. Mismanagement of Flickr – Before Yahoo purchased Flickr in 2005, its founders had plans to turn the photo sharing site into a social network. Yahoo mismanaged its acquisition of Flickr, however, and missed the social media boat.
3. Not pursuing Facebook – Yahoo attempted to purchase Facebook back in 2006 for $1 billion, but the initial offer was refused by CEO Mark Zuckerberg. Reports indicate that the board of directors would have forced Zuckerberg to accept an offer of $1.1 billion, yet Yahoo executives would not agree to the increased bid.
4. Failure to merge gracefully with Microsoft – Although Microsoft’s $44.6 billion takeover bid was rejected in 2008, Yahoo ended up signing a deal with Microsoft the very next year to use the Bing search engine after failing to develop an effective search engine of their own. This was likely the result of a team of lower quality programmers, as Yahoo was known not to place emphasis on the quality of its programming staff in the way Microsoft, Facebook and others have.
5. Failure with Tumblr – Yahoo purchased the young Tumblr microblogging organization in 2013 for $1.1 billion, but failed to turn their acquisition into a profitable component of the company. After investing hundreds of millions of dollars into the project, Tumblr essentially disappeared into obscurity and proved to be one of the last opportunities for Yahoo to redeem itself in the business world.
6. Lack of clear vision and a string of poor leaders – From the beginning, Yahoo as a whole lacked a clear vision regarding the overall purpose of the company. They were not a search company, nor a tech company, but functioned primarily as a media company that considered programming to be a necessary commodity to translate production work into code. Coupled with a string of poor leaders lacking vision for the future, Yahoo’s ultimate demise was foreseen years beforehand by some former employees.
Leadership and Foresight Are Critical to Any Successful Business
If Yahoo’s ultimate fate can teach future business leaders of the world just one thing, it would be the importance of great leaders who have a clear vision for where the company as a whole is headed. Organizations lacking such leaders are bound to fail, time and again. If you are ready to advance your career and learn important skills to enter the rapidly changing business world, consider an online MBA degree from the University of Maryland.
Sources
https://techcrunch.com/2016/07/25/verizon-buys-yahoo-for-4-83-billion/
https://www.quora.com/Why-did-Yahoo-fail-relative-to-Google
http://paulgraham.com/yahoo.html
http://www.bbc.com/news/technology-35243407
http://www.telegraph.co.uk/technology/2016/07/25/yahoo-9-reasons-for-the-internet-icons-decline/