Yahoo

• 1. Introduction

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  Yahoo began as a handmade list. In January 1994, two electrical engineering graduate students at Stanford University named Jerry Yang and David Filo started cataloguing their favorite corners of the web on a site they called "Jerry and David's Guide to the World Wide Web." That unpretentious directory, organized by hand into layers of subcategories, would grow into one of the most visited destinations on the early Internet and then, across the following two decades, become one of the most debated cautionary stories in corporate history.

  What turned a student hobby into a company worth billions? Why did Yahoo pass up two separate chances to own Google? And how did a company that once received 95 million page views a day end up sold off in pieces? The answers run through dot-com mania, a string of leaders who could not agree on what Yahoo was supposed to be, data breaches affecting billions of users, and choices about human rights that drew condemnation from journalists and lawmakers alike.

• 2. A Name With a History

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  "Yahoo" is technically a backronym. The letters stand for "Yet Another Hierarchically Organized Oracle" or, in an alternate version, "Yet Another Hierarchical Officious Oracle." The word "hierarchical" captured the directory's layered structure. "Oracle" was chosen to suggest a source of truth and wisdom. "Officious," the founders explained, was not meant in its usual critical sense; it referred to the office workers who would browse the database from their desks.

  Filo and Yang have consistently said, though, that the formal backronym came after the fact. They picked the word because they liked the slang meaning that circulated among college students in David Filo's native Louisiana in the late 1980s and early 1990s: rude, unsophisticated, uncouth. That definition itself traces back to Jonathan Swift. The Yahoo race appears in Gulliver's Travels as a species of brutish fictional beings, and it is from that literary source that the Louisiana slang descended.

  The domain yahoo.com was registered on the 18th of January 1995, and Yahoo was formally incorporated on the 2nd of March 1995.

• 3. The Dot-Com Rise

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  By 1998, Yahoo was the most popular starting point on the web, and its human-edited directory was receiving 95 million page views per day. That figure was triple the daily traffic of rival Excite. Yahoo had gone public in April 1996, and its stock price climbed 600% within two years.

  The company moved quickly to expand beyond a simple directory. Free email arrived in October 1997, after Yahoo acquired RocketMail and rebranded it as Yahoo Mail. Yahoo also replaced the crawler technology underlying its search with Inktomi in 1998, having previously relied on AltaVista. Its two largest acquisitions came in 1999: it paid $3.6 billion for Geocities, then the third most-browsed site on the web, and $5.7 billion for Broadcast.com.

  The stock peaked on the 3rd of January 2000, closing at $118.75 per share. Then the dot-com bubble burst. By the 26th of September 2001, the share price had fallen to $8.11. Geocities, that costly acquisition, never became profitable despite its popularity. Yahoo eventually shut it down entirely, deleting millions of user-created web pages. In September 2009, the month before it closed, Geocities still drew more than ten million unique visitors.

• 4. The Google Decisions

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  In 1998, Larry Page and Sergey Brin approached Yahoo with an offer to sell their nascent search engine for $1 million. Yahoo declined. That refusal alone would become a recurring reference point in technology business writing.

  Four years later, Yahoo had another opening. In 2002, CEO Terry Semel entered negotiations to buy Google outright. Google's asking price was reportedly $5 billion. After weeks of back-and-forth, Yahoo's final offer stood at $3 billion. Google's leadership rejected that figure and ended the talks. The failure to close that deal is widely regarded as one of the largest strategic errors in corporate history.

  Yahoo did turn to Google in the interim: starting in June 2000 it used Google to power its search results. Over the following four years, Yahoo built its own search infrastructure, drawing partly on technology from its $280 million acquisition of Inktomi in 2002. By 2004 it had returned to running its own search. The pattern of coming close to owning the thing it most needed, and then watching that thing grow into a competitor, would define Yahoo's relationship with search for the rest of its independent life.

• 5. The Microsoft Bid

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  In February 2008, Microsoft made an unsolicited offer to buy Yahoo for $44.6 billion. Yahoo's board rejected it, arguing the bid substantially undervalued the company and did not serve shareholders. Microsoft raised its offer to $47 billion. Yahoo held out, demanding an increase of more than 10% beyond that. Microsoft withdrew the offer in May 2008.

  That same year the company was already under serious pressure. Hundreds of employees were laid off as Yahoo struggled to compete. Carol Bartz, who had previously served as CEO of Autodesk, was brought in to replace Yang in January 2009. Her tenure ended abruptly in September 2011, when chairman Roy J. Bostock fired her after she missed targets. CFO Tim Morse stepped in as interim CEO.

  Scott Thompson followed as CEO in April 2012, bringing with him a sweeping reorganization and an announcement of 2,000 layoffs, roughly 14% of the company's 14,100 workers. The cuts were projected to save around $375 million annually. Thompson lasted 130 days before being fired on the 13th of May 2012, departing with total compensation of at least $7.3 million.

• 6. The Mayer Years

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  Marissa Mayer became president and CEO on the 15th of July 2012, effective the 17th of July. Her early moves generated genuine attention: Yahoo acquired the blogging platform Tumblr in June 2013 for $1.1 billion in cash, with founder David Karp staying on to run it. A comScore report covering July 2013 found that more people in the United States visited Yahoo properties that month than Google properties, the first time Yahoo had led that comparison since 2011.

  Mayer also hired journalist Katie Couric to anchor a new online news operation and launched an online food magazine. But optimism faded. By January 2014 she had fired Henrique de Castro, her first major hire. On the 12th of December 2014, Yahoo paid $583 million to acquire video advertising company BrightRoll.

  By December 2015, Mayer was being ranked as the least likable CEO in the technology industry. In February 2016, she announced another round of layoffs, cutting 15% of Yahoo's workforce. On the 25th of July 2016, Verizon Communications announced it would acquire Yahoo's core Internet business for $4.83 billion, excluding Yahoo's 15% stake in Alibaba Group and its 35.5% stake in Yahoo Japan.

• 7. The Breaches

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  While the sale to Verizon was being negotiated, Yahoo disclosed two of the largest data breaches ever recorded. The first announcement came in September 2016: a breach that had occurred sometime in late 2014 had exposed more than 500 million user accounts. Three months later, in December 2016, Yahoo reported a second, earlier breach. That one had taken place around August 2013 and affected over one billion accounts. On the 3rd of October 2017, Yahoo revised that figure upward: all 3 billion of its user accounts had been affected by the 2013 theft.

  The stolen data included names, email addresses, telephone numbers, dates of birth, encrypted passwords, and in some cases unencrypted security questions and answers. Yahoo also disclosed that the 2014 breach appeared to have used manufactured web cookies, which allowed the attackers to access accounts without knowing passwords.

  The consequences were immediate. On the 21st of February 2017, Verizon lowered its purchase price for Yahoo by $350 million and reached an agreement with Yahoo to share liability for the breaches. Verizon completed the acquisition on the 13th of June 2017, at which point Mayer resigned. The portions of Yahoo not sold to Verizon were renamed Altaba, which was later wound down and made a final distribution to shareholders in October 2020.

• 8. Censorship and Human Rights

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  Among the most serious criticisms Yahoo faced involved its cooperation with Chinese authorities. In April 2005, journalist Shi Tao was sentenced to ten years in prison by the Changsha Intermediate People's Court of Hunan Province. His alleged offense was providing state secrets to foreign entities. The "secrets" in question were a brief list of censorship instructions he had forwarded from a Yahoo Mail account to the Asia Democracy Forum ahead of the anniversary of the 1989 Tiananmen Square protests and massacre. Yahoo Holdings, the company's Hong Kong subsidiary, had supplied Chinese authorities with the IP address linked to the email.

  A second case involved Wang Xiaoning, an engineer from Shenyang who had used a Yahoo group to post calls for democratic reform. He was arrested in September 2002 after Yahoo assisted authorities by providing identifying information. In September 2003 he was convicted of incitement to subvert state power and sentenced to ten years in prison. In April 2007, his wife Yu Ling filed suit against Yahoo in federal court in San Francisco with assistance from the World Organization for Human Rights USA.

  In February 2006, Yahoo's general counsel told the U.S. Congress the company had not known the true nature of the case against Shi Tao. In July 2007, the actual warrant emerged, listing "State Secrets" explicitly as the charge and requesting all login times, IP addresses, and relevant email content from the account "huoyan1989" from the 22nd of February 2004 onward. In November 2007, a U.S. congressional panel said Yahoo had been, at best, inexcusably negligent and at worst deceptive in its testimony. Human Rights Watch and Reporters Without Borders noted the striking contradiction of companies whose existence depends on the free flow of information acting as instruments of censorship. Yahoo exited mainland China entirely in November 2021.