Jerry Yang teamed with fellow Stanford student David Filo to make the emerging World Wide Web a place that could be navigated. What started out as a part–time project mostly for their own benefit turned into Yahoo! Inc., the world's most used search engine for the Web, complete with personalized features for shopping, searching, connecting, and using the Internet.
Yang was born Chih–Yuan Yang in Taiwan in 1968, and was raised by his mother, Lily, an English and drama teacher, after his father died when he was only 2. He immigrated to the United States at age 10 with his mother, grandmother, and younger brother Ken, settling in the Berryessa suburb of San Jose. His mother moved the family in 1978 soon after the United States reestablished diplomatic ties with China so that her sons would not eventually be drafted into the Taiwanese army. Yang spoke Mandarin Chinese and hardly any English, but he honed his skills and became a straight–A student. He attended Piedmont Hills High School, where he was class valedictorian, played on the tennis team, and was elected president of the student body his senior year. He was admitted to Stanford University, where he obtained his bachelor's and master's degrees in electrical engineering in 1990, completing both degrees in just four years. There, he met David Filo, who is two years older than Yang, and the two became close friends. Yang and Filo went to Kyoto, Japan, together in a teaching program through Stanford during the early 1990s. While in Kyoto, Yang met his future wife, Akiko, a fellow Stanford student of Japanese heritage who had grown up in Costa Rica. After returning to Stanford during the 1993–94 academic year, the two shared the office where they would spawn their creation.
Doctoral students Filo and Yang in 1993–94 were involved with a project on the computer–aided design of computer chip circuitry. Their office was in a trailer containing a couple of computers, an array of golf clubs, and a sleeping bag. "I was terribly bored," Filo related in San Jose Metro Online. With their faculty adviser on sabbatical in Italy, the pair began fooling around with the World Wide Web, a computer network of sites, or "pages," that can be linked together, or "hyperlinked," featuring text and graphics. The Web can be used for uncountable tasks, from accessing photographs of celebrities to finding out more about a company to consulting academic papers. Early on, though, many of the sites were put there by creative graduate students like Yang. He posted a "home page" (a main site giving general information about a person or a company) with his picture, some golf scores, his name as it appears in Chinese, and hyperlinks to sumo wrestling sites.
One of the problems with this maze of pages on the Web was the lack of organization. Akin to entering a library without the aid of a card catalog or other system to direct patrons to the correct shelf, it was difficult, if not impossible, to locate information on the Web without a URL, or domain name. This is the address that begins with "http://" and usually contains the letters "www." for World Wide Web, followed by a word that somewhat describes the topic of the site, such as a person's or company's name, followed by a three–letter code indicating whether the site is a nonprofit site (.org), a company or personal site (.com), an educational institution (.edu), or a governmental branch (.gov). After becoming frustrated when they could not locate a page they found interesting, Filo and Yang began collecting these confusing codes for their favorite sites so that they could access them again. Others were doing this as well, with some companies publishing books listing numerous sites and describing the content. The Web, however, was changing and growing too quickly. Books could not adequately catalog the universe of information, and often sites would move to a different server (main computer) or change names, rendering the books outdated before they were published.
Filo and Yang came up with the idea of providing a kind of road map for online users. They designed some crude software that organized web pages into topics that could be used immediately to "link" to those pages. In early 1994, "Jerry's Guide to the World Wide Web" was born, and the name was later revised to "Jerry and David's Guide to the World Wide Web." The two provided the service free to all Stanford users. As their list grew, they began subdividing the topics to provide more structure. Later that summer, the system was dubbed Yahoo!, or Yet Another Hierarchical Officious Oracle.
Although Yahoo! wasn't the first search engine to exist, its categorization was vanguard, and it was the only one to offer whimsy. David Matsukawa in Transpacific explained, "Yahoo! had an attitude. It was start–up culture, not corporate. It talked to the folks making the pages. And it talked to the folks venturing out on the waves for the very first time. It said, 'Hey, the Internet is a fun place.'" They built it, and people came. By November 1994, 170,000 people a day were using the site. By 1998, Yahoo! was counting about 26 million unique visitors out of a staggering 1 billion "hits" per month, which averages out to more than 850,000 a day. America Online (AOL), the giant Internet access service, offered a buy–out, and deals poured in from Microsoft and Prodigy as well. Filo and Yang, working 20 hours a day for the sheer enjoyment of it, turned them all down.
However, Stanford was upset that Yahoo! was tying up their network with all the traffic. "They told us we were crashing their system and that we'd have to move the thing off campus," Yang stated in San Jose Metro. He and Filo began considering starting up a business from this hobby that was becoming overwhelming. "It was a really gradual thing, but we'd find ourselves spending more and more time on it," explained Yang in the Metro. "It was getting to be a burden." Not to mention, they weren't making money off their labor of love. A friend at Harvard, Tim Brady, devised a business plan for Yahoo! for a class project, which allowed the pair to really visualize the potential. Around March or April 1995, the partners packed up, dropped out, and moved on. They accepted a $1–million investment offer from Mike Mortiz at Sequoia Capital, a fund that had financed other Silicon Valley winners such as Apple and Oracle. Filo and Yang rented an office suite, ordered business cards defining themselves as Chief Yahoos, and hired a staff made up of graduate school friends and interns.
Chronology: Jerry Yang
1978: Immigrated to the United States.
1994: Established Yahoo! with David Filo.
1995: Dropped out of Stanford Ph.D. program; accepted $1 million in start–up funding from Sequoia Capital; began selling advertising space.
1996: Completed initial public offering of stock.
1998: Joined with MCI to provide Internet service.
1999: Yahoo!'s market value reached $70 billion.
2000: Stock peaked at $237 a share.
2001: Stock fell to $12 a share; market value fell to $5.2 billion.
By the summer of 1995, Yahoo! was rapidly establishing itself in the online world. Netscape Navigator, the software most people were using to run the Web on their computers, added a "Directory" button on their interface that linked users to Yahoo! About that time, in August 1995, Yahoo! began selling advertising space on their pages. Initially frowned upon as "sell–outs" by Web purists who had worked to ban all commercial activity on the new technology, the practice was quickly accepted. Also that month, Yahoo! teamed up with Reuters news service, based in London, so that users could access news wire stories online with a click of a button. Since then, they have added other user–friendly elements, such as links to weather, stock quotes, phone listings, interactive maps, and loads of other information that Web users now take for granted. In addition, their graphics were bright and slick, and they later hired an expert to help with logical categorization.
Despite the ballooning success, Filo and Yang suffered some setbacks. A San Francisco Chronicle columnist kept a long–standing pessimistic view of the fledgling operation, even printing a litany of anonymous readers' comments that gushed over the legion of Yahoo! competitors, touting the superiority of the many other services. Then, in late 1995, Netscape ditched its Yahoo! link for that of a competing search engine, for which it was paid handsomely. Pundits predicted the offbeat little company would drown in the sea of other search directories, many of which had corporate backing. Though the Netscape back–out resulted in a temporary drop in the amount of traffic on Yahoo!, the numbers rose again. Yang and Filo also approached Netscape with the idea of offering their users a variety of search engines to choose from when they are surfing, instead of limiting them to only one that is willing to pay lots of money for the spot. Netscape agreed, deciding to charge each company a set amount to be included on its directory list.
Yahoo! also scored points when it developed a "personalized" page called My Yahoo!, which allows users to customize the Yahoo! page with all of the links that interest them the most. A popular culture aficionado, for example, could design a page with links to movie and music data and reviews, celebrity sites, online magazines, and more, whereas a business executive might want to pull up business periodicals and other relevant news sources, stock quotes, and competitors' home pages. Early in 1996, they started offering a directory tailored to children ages 8 through 14 called "Yahooligans!" They later added a "get local" option, which included sites containing information specific to certain cities in the United States.
Although the World Wide Web was booming in the mid–1990s, investors were still trying to figure out how to turn a profit. When Yahoo! first offered its stock publicly on April 12, 1996, the value at the end of the day was $848 million. However, by the end of the year, the stock was down 44 percent. Fortune magazine, in December 1996, reported that "Internet advertising doesn't seem to work. The search companies are generating paltry revenues and losing money." By late 1997, however, the outlook had drastically changed for the better. In September another Fortune writer remarked that Yahoo!'s "stock price has continued to defy gravity," and a Computerworld article two months later noted, "Yahoo is still the only search engine company posting profits several quarters in a row now and its revenue this year has more than doubled compared with last year's." As far along as March 1998, the only other search engine boasting a profit was Lycos.
Yahoo! was making money, not only by charging advertisers for space on its pages, but they were also getting a cut from online sales. For instance, if a customer ordered a volume from Amazon online booksellers, Yahoo! would get a flat fee and a commission from that sale. Because of this new avenue for profits, Yahoo! decided to cancel a pending deal with Visa, which would limit its ability to work with other merchants. Other partnerships have been established, however. In 1998, Yahoo! joined with MCI to become an Internet provider as well as a search provider. The strong brand name was expected to be a boon in wooing users. Also that year, Yahoo! teamed up with National Geographic Traveler magazine to offer information about cities of the world and expanded its television listings by partnering with Gist.
In 1999 Yahoo! had a market value of $70 billion, with Yang and Filo's wealth measuring approximately $7.5 billion. Revenues doubled in 1999 to $588.6 million, with a profit of over $61 million. The company has local operations functioning in 15 countries and has five times as many regular users as America Online has subscribers. However, by 2001 the bottom had dropped out of the economy, with Internet–related businesses suffering the quickest and most dramatic drops in value. Yahoo!'s market value dropped to $5.2 billion, and stock prices fell from a peak of $237 a share in January 2000 to $12 a share by November 2001. Marc Gunther of Fortune, noted, "A onetime darling of Silicon Valley and Wall Street, Yahoo has been hit by a triple whammy: the collapse of the dot–com bubble, a severely depressed advertising market, and the widespread economic uncertainties brought on by the September 11 terrorist attacks." Critics have also pointed to Yahoo!'s cavalier attitude toward advertisers who once would pay Yahoo!'s price for banner ads. Now Yahoo! must lure back advertisers who have moved on or now balk at high–priced space on the site.
Social and Economic Impact
Meanwhile, Yahoo!'s main men, Yang and Filo, have remained pretty much the same. At the start of their mammoth operation, the two paid themselves around $40,000 a year and lived in modest apartments. Yang continued dressing in preppy chinos and button–down shirts, even to business conferences. Though Yang eventually bought a nice home in Los Altos, California, and a new Isuzu Rodeo, he told Forbes, "It's nice to know that your family is provided for, but the money isn't that important." He is still very close with his family, spending every Sunday with his brother and mother at her house for dinner. Throughout the company's rise, Yang functioned as the public relations man, happy to grant interviews and appear on television, whereas Filo was reluctant to be in the spotlight, spending most of his time behind the scenes and often sleeping on a blanket in his office. The two have also been known to donate money to help disadvantaged people learn about computers.
According to Brent Schlender of Fortune, "Given Yahoo's huge popularity—100 million people browse its offerings monthly—it's no stretch to say that Jerry and Dave's company, as much as any other, fomented the Internet revolution." Acknowledging it was a phenomenon that started out as a part–time distraction, Yang is hesitant to close the books on the significance of his company. He told Fortune, "Maybe in a few years we'll be better at this, but at the moment it's really hard for us to objectively evaluate ourselves. I've been very afraid to have Yahoo placed in a historical context this soon, because I don't think we've done it yet. The Yahoo story is still being written."
As long as people are using the Web, it seems there will be a need for the creative, continuously expanding search service of Yahoo! Although there are other engines, Yahoo! has staked its place, perhaps because of its co–founders' passion for their work, which shows in the product, and also because it is easy for even Web novices to use. Yahoo!, claimed Yang in San Jose Metro, "conveys the sense of fun involved in all this, the sense of adventure. That is what really distinguishes our site. It is a place for adventures. A place to discover things."
Sources of Information
"A Couple of Yahoos." San Jose Metro, 11 April 1996. Available at http://www.metroactive.com.
Colvin, Geoffrey. "Shaking Hands on the Web." Fortune, 14 May 2001.
Elgin, Ben. "Inside Yahoo!" Business Week, 21 May 2001.
Goodell, Jeff. "Jerry Yang." Rolling Stone, 30 March 2000.
Gunther, Marc. "The Cheering Fades for Yahoo." Fortune, 12 November 2001.
"Jerry Yang." Newsmakers 1998, Issue 3. Farmington Hills, Mich.: Gale Group, 1998.
O'Brien, Jeffrey M. "Behind the Yahoo!" Brandweek, 28 June 1999.
Schlender, Brent. "How a Virtuoso Plays the Web." Fortune, 6 March 2000.
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