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Truth behind the Failure of Yahoo!
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One of the first companies from the dot-com era, Yahoo! has reached the end of its lifecycle. On July 25th, 2016, Yahoo got acquired by Verizon in a deal worth $4.8 billion. The deal is still under shareholders and regulators' approval and is most likely to close in 2017.

Sadly, the figure - $4.8 billion – represents the steep and steady decline of Yahoo that once held market capitalization of $125 billion at its peak in 2000. The deal represents Yahoo’s identity crisis, its inaction, and mostly missed opportunities. Assumptions aside, let’s take a look at the truth behind failure of Yahoo.

Marissa Mayer failure of Yahoo

Marissa Mayer at an interview while working for Google.


American Internet entrepreneur and programmers David Filo and Jerry Yang, co-created Yahoo in 1994. Had it launched a year or two later, it would have been an ephemeral tale of an internet company already. The web-portal rose to dominance, mainly benefitting from Y-Combinator co-founder Paul Graham, who once worked there. Money started pouring it, and it gave Yahoo the hubris they need to suppress and acquire smaller competitors.

Unsurprisingly, here’s the truth of Yahoo. It has never bothered to build a strong internet brand like Google, Microsoft or Facebook did. In fact, Yahoo owes its success to the internet companies it has acquired during its rein. Here are some of Yahoo’s acquisitions:

  • - $5.7 billion
  • Geocities - $3.6 billion
  • Tumblr – $1.1 billion
(L) Tumbler founder David Karp; (R) Yahoo CEO Marissa Mayer

(L) Tumbler founder David Karp; (R) Yahoo CEO Marissa Mayer

Regardless, Tumblr and Broadcast are considered to be Yahoo’s worst acquisitions of all time. As a matter of fact, there were largely written off as losses. Geocities, on the other hand, went on to become the third most visited website on the planet to being shut down.


Yahoo’s leadership never around to developing its core products. In fact, time and again, Yahoo lost to new entrants in the market. Here are some examples of it:

  • Gmail over Yahoo Mail
  • Quora over Yahoo Answers
  • Instagram over Yahoo-owned Flickr

Worst of all, in 2009, Yahoo Search lost to Google Search as the most popular search engine on the planet. In fact, Yahoo Search was scrapped off for Bing Search, which was licensed by Microsoft.

During its reign in 2000, Yahoo had dominance over all of these services. It had over a hundred million active users. Instead of experimenting and improvising to bring more traffic, Yahoo chose the easy route, i.e. acquisitions, and failed to develop its core products into something even more powerful.


Jack ma failure of yahoo

Jack Ma at the World Economic Forum 2008

One of the smartest investments Yahoo co-founders ever made was purchasing a 40% stake in Chinese e-commerce site Alibaba for $1 billion. Today, Alibaba is 50times more powerful than Yahoo is.  In fact, Yahoo’s stake in Alibaba would be worth $80 billion dollars, but in 2012, the search engine chose to sell off its stock. Sadly, Yahoo owns only 15% of Alibaba, which is worth $30 billion.


Another truth of Yahoo – bad hiring choices.

Yahoo CEO Marissa Mayer will always be known for backing their most unsuccessful acquisition– buying Tumblr for $1 billion. Her second worst decision would be the sale of Alibaba stake in 2014. Believe it or not, this is nothing when you compare to the blunders made by previous CEOs.

Mayer’s predecessor, Scott Thompson laid off 2,000 people when he took the reins. He proceeded to sell of Alibaba Stock, which would today be worth billions of dollars. In fact, he got so worried about appearing as a qualified professional that he even lied about having a degree in computer science. Thompson got fired on the 130th day of his job, but he banked $7.3 million for his time at Yahoo.

scott failure of yahoo

CEO Scott Thompson greets Yahoos at Sunnyvale HQ.

While we’re at it, let’s not forget Terry Semel, the worst predecessor of all time. Semel failed to acquire Google when he had the opportunity to, in fact, he missed the opportunity, twice! He also failed to acquire Facebook and DoubleClick (now a Google-owned advertising giant). One last opportunity he missed was when Microsoft offered to buy Yahoo for $40 billion.


We all know how this story ends. Yahoo that was once the dominating Internet power, before Alta Vista came along, much before Google was the dominating search engine, has nothing but failed at every junction. Assuming they would have bought Google, the world we live in would be a completely different place. Basically, everything that came out of Google, would not exist! I, for one, am glad Yahoo didn’t buy Google. Nevertheless, Yahoo will always hold a special place in my heart. I do not think I would have spent those late Friday nights alone without reading silly answers on Yahoo Answers! The dead-company-walking is now out of the race, but whatever you say the failure of Yahoo makes an interesting management lesson. We hope that with the acquisition of Yahoo!, Verizon is able to bring reforms in its media and advertising products.

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