By Saniat Ahmed Choudhury
Yahoo, the legendary pioneers of the internet whose name was once synonymous with the World Wide Web itself, has sold its core business to the US telecom giant Verizon for a paltry sum of $4.83 billion dollars. After months of ensuing speculations, conjectures and bidding battles for the company, Verizon came out victorious, an act that was in line with its purchase of the crumbling internet service provider AOL last year for a slightly smaller sum.
Just to put matters into perspective, Yahoo was once valued at around a whopping $130 billion in the year 2000 at the height of the dot-com bubble. Google was still in its infancy, and Microsoft’s foray into the internet was nowhere as successful. In fact, in 2008 Microsoft offered to buy Yahoo for $44.6 billion dollars, but was rejected because the premiers of Yahoo believed it to be an undervalued sum.
The sale also brings an end to CEO, Marissa Mayer’s ambitious attempts to turn the company around towards a more effective direction after she took the helm four years ago. Under her reign, Yahoo bought the blogging service Tumblr for $1.1 billion and other smaller Internet services like Summly and Geocities, and also decided to revamp Yahoo! Mail logistically and aesthetically. Much of these decisions, however, were met with chagrin from users and investors alike, and considering the company reported a loss of $4.4 billion last year (that resulted in a 15% cut in their workforce), their vexation was, to a certain extent, justified.
However, pinning the entirety of the blame for Yahoo’s failure on Mayer would be unjust. She did, for example, manage to put Yahoo’s sites back on the top of the list of most trafficked online properties in 2013, narrowly overtaking all of Google. The bulk of the blame should go to the lack of foresight of the founders’, and the continuous employment of lackluster executives.
Yahoo was founded by Stanford School of Engineering graduates Jerry Yang and David Filo. After the initial online directory that they developed attracted potential investors, they hired a Motorola executive Tim Koogle as their CEO. They noticed that much of what they were doing was much better than their closest competitors, and used this to their advantage to bring order to the chaos that was the internet through a brilliantly optimized search engine and other such devices. Through My Yahoo, they allowed users to customize their web spaces personally to their liking, a mechanism that is now offered as a default by any online service hoping to survive on the internet.
But while these were groundbreaking steps that revolutionized the internet as we know it, Yahoo’s own growth never actually advanced from then on. An essential criterion that a technological company must have for it to survive and progress is to make difficult choices and possess the willingness to take risks. That is where Yahoo stumbled, and fatally. With the blessings of the founders, company executives refused to move into other areas of the internet that may have seemed unprofitable at the time, including online retail services that Amazon bravely ventured into.
This lack of vision also resulted in their failure to make proper purchasing decisions, including the act of not acquiring Google ($3 billion) and Facebook in 2002 and 2006, respectively, when they could have. In fact, when Yahoo reduced their initial offer for Facebook from $1 billion to $850 million, it demonstrated how unwilling they were to venture into hitherto uncharted territories Those executives must be kicking themselves right now, considering Google is now worth $507 billion, while Facebook is worth $348billion.
Eventually, Jerry Yang did step in in 2005 to make one of Yahoo’s best decisions till date – the purchase of 40% of China’s largest e-commerce site Alibaba for $1 billion. But even this parade was rained upon, as Yahoo sold most of its Alibaba shares for a profit of a few billion dollars in 2012. While that may have seemed like a smart act at the time, we now know otherwise, considering Alibaba is now worth over $200 billion, and the share Yahoo sold would now have been worth about $80 billion.
Yahoo now owns 15% of Alibaba, which is roughly $30 billion, and it has to be pointed out here that this share was not a part of the Verizon purchase. In fact, the parts that Verizon did not purchase include a 35.5% share of Yahoo’s Japanese affiliations and some patents, all of which together are worth more than the core that Verizon bought. Selling of these shares may not be as profitable as it may sound, as the sale may result in a massive tax bill.
Everything may not be as dark and desolate on the horizon as it may seem. Yahoo still has about 1 billion users. Marissa Mayer affirms that it is not the sinking ship that everyone believes it to be, and has insisted that she isn’t jumping overboard anytime soon. With the assistance of new ownership, the company might just make the triumphant return that it has been trying to make for ages.
However, the fact remains that a company like Yahoo failed to live up to its seemingly infinite potential because its leaders mistook the boom in public interest in the Internet in the late 90s for their own genius, and believed they could ride that wave for as long as they could. Their present predicament will now forever serve as a reminder for tech companies, old and new, of what NOT to do in their quest for greatness and longevity.
