Top 5 Myths About Yahoo


Yahoo may no longer be king of the online mountain, but it's still flying pretty high.
Yahoo may no longer be king of the online mountain, but it's still flying pretty high.
Chris Hondros/Getty Images

Long ago, when one could still conceivably sit down and count the individual pages on the World Wide Web -- long before blogs, Facebook, Wikipedia and a little company called Google -- there was Yahoo.

In 1994, the founders of a tech company called Yahoo came up with the now painfully obvious idea of categorizing and listing all of the major sites on the fledgling World Wide Web. Keep in mind that search engines were just coming on the scene in the mid-1990s (remember Lycos and AltaVista?) and were quite awful by today's standards.

Yahoo quickly became a major player on the nascent Internet, rode the wave of the dot-com boom and expanded exponentially in the process. The name Yahoo became so synonymous with the Internet that the brand even spawned a print magazine, "Yahoo Internet Life."

Yahoo is no longer the king of the online mountain -- Google has been holding that crown for some time now -- but the scrappy, fiercely independent company has refused to roll over and play dead.

Despite the company's durability, the rumor mill runs full-steam in Silicon Valley and Yahoo has amassed its fair share of myths and misconceptions over the years. We're going to examine the top five Yahoo myths, in no particular order, starting with the near-constant reports of the company's demise.

5
The Yahoo Brand is Struggling

Yahoo is often lumped together with AOL as one of the dinosaurs of the Internet age. Yahoo was once the portal of choice for organizing and navigating the Web. Critics say the company lost its innovative edge years ago by grasping at failed side projects and bowing too easily to Google's almighty dominance.

If you read the business pages, you'll find almost weekly reports of Yahoo executives leaving or being pushed out. Then there are the aborted acquisitions, buyouts and partnerships with the likes of AOL, Microsoft and Google. All this bad news is enough to make you wonder if anyone even uses Yahoo anymore.

The answer is a resounding "yes!" Take a look at the traffic rankings at Alexa.com and see how many times a Yahoo brand website shows up at the top. Here's a sampling of Yahoo's current hits:

  • Yahoo News is the number one online news site, beating the BBC, The New York Times and CNN. My Yahoo ranks number five.
  • Yahoo Finance is the number one business and money site.
  • Yahoo Answers ranks second only to Wikipedia as the Internet's most popular reference site.
  • As of July 2009, the newly designed Yahoo homepage ranked number one on Alexa's list of "Hot URLs," and four Yahoo! pages made the top ten [source: Alexa].

It's also important to note that other popular sites, like delicious and flickr, are Yahoo properties, even though few people associate them with the yellow and purple portal.

4
Yahoo Has Lost the Search Engine War
In 2000, Yahoo teamed with Medallion Financial to equip New York City cabs with Internet access.
In 2000, Yahoo teamed with Medallion Financial to equip New York City cabs with Internet access.
Chris Hondros/Getty Images

Google has officially reached godlike status. Year after year, its share of the total search market continues to rise. Some analysts report Google taking an astounding 74 percent of the U.S. search engine market in June 2009 [source: Patriquin].

Yahoo Search, on the other hand, grabbed a mere 17 percent of the search engine market that month. At first, that makes Yahoo look like the big loser. Then you notice who came in third: a humble mom-and-pop operation called Microsoft.

Microsoft has been trying to scrape together a double-digit share of the search engine market for more than a decade [source: Sullivan]. The company's efforts have had limited success: Despite pouring $80 million dollars into an advertising blitz for its revamped search engine Bing, it only took 6.5 percent of the June 2009 search market [source: Eaton].

Search engine analysts also point out that market share isn't everything. A more useful indicator, at least from a revenue-generating standpoint, is the number of raw queries made on each search engine.

Once again, Google is in a class by itself when it comes to raw queries. Google processed 9 billion queries in June compared to 2 billion for Yahoo and 799 million for Microsoft. The important thing to note here is that Yahoo's raw search numbers have remained steady -- up from 1.9 billion in June 2008 -- meaning it's not necessarily losing ground to Google [source: Sullivan].

Yahoo may be a distant number two, but the "big loser" slot is already spoken for.

3
The Yahoo-Google Partnership Would've Been a Monopoly

Yahoo and Google make a lot of money selling online advertising. Much of that advertising appears alongside search results. Both companies use online bidding systems that allow advertisers to set a fair market price for each search keyword ("beer" or "T-shirts," for example). Google's bidding system is called AdWords and Yahoo's service is called Panama.

In June 2008, Google and Yahoo announced a limited partnership that would allow Yahoo! to use Google's AdWords technology to display certain ads on Yahoo! brand Web sites. Google already has similar arrangements with AOL and Ask.com [source: Kordestani]. Under the non-exclusive arrangement, Yahoo would choose the specific keywords that would be handled by Google [source: Shankland].

The U.S. Department of Justice (DOJ) waved its antitrust flag immediately. After all, Google and Yahoo are the top two search engines, controlling more than 90 percent of the search market share. The Department of Justice indicated that it would fight any deal that denied consumers the "benefits of competition," namely lower prices and better service [source: Helft].

In reality, the partnership wouldn't have constituted a monopoly or negatively affected prices. Since both sites use bidding to set their prices, their alliance wouldn't have changed under this limited arrangement. More likely, the very prospect of two players of this magnitude playing together was enough to spook the DOJ and convince Google to drop the deal.

It probably wouldn't surprise you to learn that one the biggest opponents of the deal was Microsoft. Equally not surprising is the fact that one of the greatest opponents of Microsoft's aborted purchase of Yahoo a few months earlier was Google [sources: Keane and Drummond].

2
Yahoo Doesn't Make Any Money
A time capsule of the Internet age: A Yahoo employee takes a break from work in 1997.
A time capsule of the Internet age: A Yahoo employee takes a break from work in 1997.
Eric Sander/Getty Images

Let's get something straight right here and now: Yahoo makes money. Lots of it. In the second quarter of 2009, it made $141 million in net revenue [source: AFP]. The problem at Yahoo isn't making money; it's spending it.

As we mentioned earlier, Yahoo owns the most trafficked Web sites in major categories like finance and news. Yahoo Mail also dominates the webmail sector, grabbing 56 percent of the total U.S. market share [source: Hopkins]. Flickr, the Yahoo!-owned photo-sharing site, has also gained major ground on Photobucket, the service favored by MySpace users [source: Dougherty].

A year ago, before its stock price took a nosedive, Yahoo was valued at $54 billion. This number represents Yahoo's cash assets plus the moneymaking value of its many Web sites and services, including Yahoo Japan and China's Alibaba [source: Caulfield].

Unfortunately, Yahoo has suffered from a severe hemorrhage of leadership over the past few years, worsened by a nasty case of budgetary bloating. The bloating stemmed from increased investment in product development without sufficient return on that investment [source: Maher].

The bright spot is that Yahoo recorded an eight percent growth in profits in the second quarter of 2009, largely due to cost-cutting measures [source: AFP].

1
Jerry Yang is a Bad Leader

In 1994, Stanford University doctoral students Jerry Yang and David Filo built the first Yahoo Web portal as a lark. When their ad-hoc list of favorite Web sites starting drawing hundreds of thousands of visitors a day, they dropped out of school and launched one of the most successful businesses of the dot-com age.

Since they were engineers, not businessmen, Yang and Filo hired fellow Stanford alum Tim Koogle to be their suitably experienced CEO. Yang and Filo stayed on as "Chief Yahoos."

At Yahoo, Yang has earned a reputation as being fiercely competitive and fiercely loyal. He famously choked back tears as he announced Yahoo's first layoffs in 2000 [source: Pham]. BusinessWeek recently included Yang in its list of the "25 Most Influential People on the Web" [source: BusinessWeek].

When Yang was called to replace departing CEO Terry Semel in 2007, he reacted in typical "Yahoo-first" style, taking an annual salary of $1 [source: Pham]. (Compare that to Semel's $70 million annual salary.) Analysts were split on Yang's ascension: Many thought his appointment would be an excellent way to raise morale [source: Wharton]. Others thought that Yang's lack of day-to-day business experience would be his Achilles heel. It turns out that both camps were right.

The Yahoos love their fearless, dressed down techie leader, but he only lasted 17 months in the CEO slot, blowing a generous buyout offer from Microsoft and bobbling a potential partnership with Google. As it turns out, Yang isn't a bad leader, but he may be a bad businessman.

For more great lists, take a look at the links on the next page.

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Sources

  • Agence France Presse. "Yahoo! profits rise on cost-cutting as revenues slide." July 22, 2009http://www.google.com/hostednews/afp/article/ALeqM5gbOKORNCAsljMNvsWN_Rn7gw31LQ
  • Alexa.com. "Top Sites: By Category" (accessed July 23, 2009)http://www.alexa.com/topsites/category
  • BusinessWeek. "The 25 Most Influential People on the Web." September 29, 2008 (July 20, 2009)http://images.businessweek.com/ss/08/09/0929_most_influential/index.htm?chan=technology_best+of+the+web
  • Caulfield, Brian. "Why Carl Icahn Didn't Buy Enough Yahoo!" Forbes. December 1, 2008 (July 23, 2009)http://www.forbes.com/2008/12/01/Yahoo!-yang-icahn-tech-enter-cx_bc_1201Yahoo.html
  • Dougherty, Heather. "Photobucket losing market share." Hitwise. March 5, 2009 (July 23, 2009)http://weblogs.hitwise.com/heather-dougherty/2009/03/photobucket_losing_market_shar_1.html
  • Drummond, David. "Yahoo! and the Future of the Internet." The Official Google Blog. February 3, 2008 (July 20, 2009)http://googleblog.blogspot.com/2008/02/Yahoo!-and-future-of-internet.html
  • Eaton, Nick. "Microsoft-Yahoo! search deal imminent." Seattle Post-Intelligencer. July 23, 2009http://blog.seattlepi.com/microsoft/archives/173981.asp
  • Helft, Miguel and Lohr, Steve. "Google Won't Pursue Yahoo! Ad Deal." The New York Times. November 5, 2008 (July 20, 2009)