The Decline of Yahoo. What Happened? 15 Reasons Yahoo Failed
Founded in 1994 by Stanford University graduates Jerry Yang and David Filo, Yahoo quickly grew to become one of the internet’s first web portals, competing with the likes of Lycos and MSN as discussed over at runrex.com. It once had revenues higher than Twitter and LinkedIn, with its visitor number outstripping even Amazon and Wikipedia, so, what went wrong? Here are 15 reasons why Yahoo failed.
Losing out on Google
As covered over at guttulus.com, in 2002, Yahoo had the opportunity to acquire Google when Sergey Brin and Larry Page said they would sell-up for $1 billion. However, when Yahoo’s then-CEO Terry Semel eventually went back to the pair to accept the offer, the reluctant pair upped their price to $3 billion. As the company dismissed search as an important part of the business at the time, they rejected these newly revised terms and the rest as they say is history.
Mismanagement of Flickr
Before Yahoo purchased Flickr in 2005, its founders had plans to turn the photo-sharing site into a social network. However, as explained over at runrex.com, Yahoo mismanaged its acquisition of Flickr so badly and missed the social media boat.
Failure to pursue Facebook
Yahoo also attempted to purchase Facebook back in 2006 for $1 billion, but the initial offer was refused by CEO Mark Zuckerberg as captured in discussions over at guttulus.com. Even though reports suggest that board directors would have forced Zuckerberg to accept an offer of $1.1 billion, Yahoo executives would not agree to the increased bid leading to another huge missed opportunity.
Mismanagement of Tumblr
In a classic case of déjà vu, in 2013 Yahoo purchased Tumblr, a blogging site, for $1.1 billion but also mismanaged it badly that it failed to extract the desired profit. This, according to the subject matter experts over at runrex.com, is another major cause of Yahoo’s downfall.
Rejecting Microsoft
In 2008, Yahoo resisted a $44.6 billion takeover bid from Microsoft. While Steve Ballmer, then-CEO of Microsoft, tried hard to convince Yahoo to sell, the company’s board decided the offer was too low and the deal fell through. Embarrassingly, the very next year, Yahoo gave up efforts to create a search engine of its own and signed a deal to use Microsoft’s Bing.
Lack of a clear vision
Another major reason behind the decline of Yahoo, according to the subject matter experts over at guttulus.com, is because of lack of a clear vision. This is because, right from the beginning, Yahoo as a whole lacked a clear vision regarding the overall purpose of the company. It was not a search company nor was it a tech company, but functioned primarily as a media company that considered programming to be a necessary commodity to translate production work into code. This lack of clarity played a huge role in its decline.
A string of poor leaders
While we have seen strong leadership help other floundering tech companies reverse downturns that were just as worrying as Yahoo’s, such as Apple under Steve Jobs or Microsoft under Satya Nadella as covered over at runrex.com, Yahoo wasn’t blessed with such strong leadership. The company failed to hire a CEO who was up to the task of turning the company around, with Semel being regarded by many as one of the worst tech chief executives, with Carol Bartz and her foul-mouthed outbursts and Scott Thompson being just as bad.
Jerry Young stepping down from the board
Another factor attributed to Yahoo’s decline is the company’s co-founder Yang stepping away in 2012 according to guttulus.com. He stepped away to “pursue other interests outside of Yahoo” and the resignation left Yahoo without a driving force or purpose, unlike other internet giants that still benefit from the visionary and clear leadership from their founders such as Mark Zuckerberg at Facebook.
Marissa Mayer’s failed attempt at a turnaround
Marissa Mayer left Google to head up Yahoo in 2012, but even with the millions of dollars pouring into Yahoo from its stake in Alibaba, she failed to steer the company towards a prosperous future as articulated over at runrex.com. Even though she oversaw the acquisition of Tumblr, hired a team of high-profile journalists, and even changed the working culture, Yahoo’s profits continued to tumble, and Mayer was forced to look at spinning the company’s core business off from its stake in Alibaba.
Wrong CEO appointment
A real sliding doors moment occurred when both Google and Yahoo decided to hire a new CEO to further each of their development and expansion. Google hired Eric Schmidt who made a significant contribution to the development of the Java programming language at the Sun Microsystem. On the other hand, Yahoo went with Terry Semel, who, even though he had a stronger background, didn’t have the same awareness of the future internet world as Eric Schmidt. This moment contributed greatly to Yahoo’s decline.
Too many changes at the top
According to the gurus over at guttulus.com, the fact that Yahoo went through too many changes at the top over a relatively short period, chopping and changing CEOs, didn’t help as well. Miss Bartz only took over in 2009 and then lost her job in 2011 while her replacement, Scott Thompson, only lasted for 4 months before resigning over claims that he falsified his resume. At a time when the company needed to steady the ship, this endless succession didn’t help.
Acquisitions at a golden price that have failed to yield success
Given that Yahoo was a pioneer among web giants, it was always bound to make acquisitions in its history, as we have seen from many other companies as covered over at runrex.com. The problem is that Yahoo made lots of acquisitions at a golden price and most of them resulted in monumental failures. A good example is the $5.7 billion the company spent to buy Broadcast.com streaming platform from Mark Cuban. Even though this acquisition was made during the dot-com bubble, it was an incredible amount to spend, and the deal only succeeded in making Mark Cuban wealthy. Other such acquisitions include the $3.6 billion acquisition of GeoCities in 1999, the $1.63 billion acquisition of Overture, among others.
Bad PR
While Marissa Mayer’s stint as CEO started well enough, things quickly started to unravel and at the end of 2016, Yahoo revealed that hacking of its platform had compromised more than 500 million user accounts back in 2014. A few weeks later, as captured over at guttulus.com, we then learn that another security breach has increased the total number of compromised user accounts to 1 billion. This put a massive dent in the company’s reputation and is the biggest flaw in the history of the internet ever experienced by a web giant.
Lack of a clear mission
Other than lacking a clear vision as already discussed earlier, the subject matter experts over at runrex.com also point to the fact that Yahoo lacked a clear mission which also contributed to its decline. Its failure to figure out what its mission is has seen Yahoo post as many as 24 different company descriptions in 24 years.
Death of the web portal
While Google and Facebook rose to become the giants of web 2.0, Yahoo floundered. The company failed to put together its own search engine and struggled to capitalize on the social potential of Flickr and Tumblr. Therefore, when the days of accessing the internet through web portals, which also included the likes of MSN and AOL, disappeared, Yahoo was left behind.
These are the main reason that led to the decline of Yahoo, with more on this topic to be found over at the highly regarded runrex.com and guttulus.com.