David Filo, the quintessential computer geek, made himself a billionaire six times over when he and fellow graduate student Jerry Yang began fooling around on the Internet to create a Web page database of their favorite sites. Thus was the humble and accidental birth of the global Web directory service known as Yahoo! (which originally stood for Yet Another Hierarchical Officious Oracle). Its two genius creators, who called themselves "Chief Yahoos," became the instant darlings of Wall Street analysts and the media. By 2001, Yahoo was attracting more than 120 million worldwide users per month—making it the Big Kahuna of popular Internet portal sites in terms of traffic and global brand.
Filo was born in Wisconsin in 1966 to Jerry, an architect, and Carol, an accountant, but he was raised in Moss Bluff, Louisiana. Moss Bluff was an "alternative community" in which the Filos lived semi–communally with six other families, sharing gardening duties and a kitchen. Filo attended Tulane University in New Orleans, Louisiana, receiving a bachelor's degree in computer engineering in 1988. He continued his education at Stanford University in Palo Alto, California, where he met Jerry Yang. According to Yang, when interviewed in 1997 by online Newsmakers, Filo was his teaching assistant in a computer architecture class, who gave him a failing grade (but Filo does not recall this). The two went together to Kyoto, Japan, in a teaching program through Stanford during the early 1990s, where they became friends. Filo shared an office with Yang at Stanford during the 1993–1994 academic year. That office became the breeding ground and first home for Yahoo.
Dubbed the "barefoot millionaire boys" by Newsmakers because of their tendency to work barefoot in jeans and T–shirts, the young entrepreneurs ran Yahoo out of their trailer office for a year, until the project began to trump study time for the prospective doctoral candidates. After going public in 1996, they were forced to move to larger quarters to accommodate their 200 employees. With a seven–foot Gumby doll greeting them at the door to their new offices and a foosball table upstairs begging for play, Filo and Yang continued to pad around barefoot and treat their new company as a big, fun, creative toy. They became Silicon Valley icons for all those with a modem and a dream.
Increasingly, as the company grew by leaps and bounds, Filo and Yang developed separate roles in the venture. While Yang gravitated toward the limelight, Filo—the more quiet and media–shy of the two—retreated to the internal workings of Yahoo. He even changed his official title from Chief Yahoo to Cheap Yahoo, a nickname given him when he became insistent on off–the–shelf, no–frills PCs. Filo admitted to Newsmakers interviewers that he had become so involved in the minutia of Yahoo that he no longer had time for the simple pleasures he previously delighted in, including tennis, golf, or skiing. Neither he nor Yang completed their doctorate degrees.
Nor has immense wealth changed Filo. On the single day of April 11, 1996—the day Yahoo had its initial public offering (IPO)—Filo and Yang each made $132 million. This was followed with another million, then plural millions, and then billions. Richer than Rockefeller, Filo continued to sleep on a futon in his cubicle at corporate headquarters, amid empty pizza boxes and other indicia of cocoonist life. Both he and Yang still flew coach on airplanes and still parked their own cars. As of 2001, Filo remained a bachelor, married only to his brainchild company. Neither he nor Yang had ever wanted to be president or CEO of Yahoo, and Filo was happy to continue as the behind–the–scenes technology guru at the operational level.
In late 2001, Yahoo stock took a tumble, along with several other high–tech entities, and reduced the net worth of the two founders' shares from an estimated $21.8 billion to $944 million—a 96 percent drop. This plunge equated to combined losses of $995 million per month—an almost unfathomable figure for most Americans. Yet Filo remained loyal to his dream and did not sell a single share.
In the early 1990s, the World Wide Web was an anarchic mass of data, uncategorized and only accessible via a lengthy address, or URL (universal resource locator; the line that begins with http://). During the 1993–1994 academic year, Filo and Yang were involved with an ostensibly academic 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 later related in the San Jose Metro online. With their faculty adviser on sabbatical in Italy, the pair began playing around with the World Wide Web, a computer network of sites, or "pages," that could be linked together, or "hyperlinked." They created a system of organizing these addresses by subject matter, and the online catalog eventually evolved into what they named Yahoo. Many of the early Web sites were put there by creative graduate students like Filo and Yang, the latter of whom posted his own "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 the fast–growing maze of sites on the Web was the lack of organization. Filo and Yang, after becoming frustrated when they could not locate a page they found interesting, simply 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 rolled off the presses. Filo and Yang came up with the idea to provide 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.
Chronology: David Filo
1966: Born in Wisconsin.
1988: Earned bachelor's degree in computer engineering from Tulane University.
1990: Befriended Jerry Yang; both travel to Kyoto, Japan, on teaching assignment.
1994: With Yang, created Web directory and calls it Yahoo!
1995: Accepted $1 million investment capital for start–up costs to incorporate.
1995: Yahoo! began selling advertising space online.
1996: Yahoo! Inc. went public.
1996: Gave up director's title at Yahoo! but remained Cheap Yahoo.
1998: Yahoo! began offering Internet service through MCI.
2001: Lost 96 percent value on Yahoo! stock, but hung on.
Although Yahoo! was not 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 of 1994, 170,000 people a day were using the site. By 1998 Yahoo! was counting about 26 million unique visitors out of a staggering one billion "hits" per month, which averaged 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 University was irked 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 the San Jose Metro. He and Filo began considering starting up a business from a 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. "It was getting to be a burden," not to mention, they were not making any 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. In early 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.
By the summer of 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 quickly became accepted. 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. They also 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. Their graphics were bright and slick, and they later hired an expert to assist with logical categorization.
Yahoo! also scored points when it developed a "personalized" page called My Yahoo!, which allowed users to customize the Yahoo! page with all of the links that interested them the most. Early in 1996, they started offering a directory tailored to children ages eight through fourteen called "Yahooligans!" They later added a "get local" option, which included sites containing information specific to certain cities in the United States.
Meanwhile, Filo and Yang remained essentially modest with their success. At the start of their mammoth operation, the two paid themselves around $40,000 a year and lived in modest apartments. Filo was driving a beat–up, junk–filled Datsun to the company's headquarters in Santa Clara where his office resembled a dorm–room nightmare, littered with empty cans, Rollerblades, and assorted CDs. He remained 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 were known to donate money to help disadvantaged people learn about computers.
In January 2000, Yahoo! stock closed at an all–time high of a split–adjusted $237.50. Within days, company executives learned that main competitor America Online Inc. planned to purchase media giant Time Warner Inc.—creating a new media empire that would drastically diminish Yahoo's presence in cyberspace. Internal dissention broke out, most of it over whether Yahoo! should try something similar. At first blush, the best strategy seemed to be the purchase of online auction site eBay. Purists Filo and Yang opposed the deal, as did Yahoo's president, Jeff Mallett. Another deal, this time with OgilvyInteractive, was also declined. But Yahoo began to lose advertising revenues to competitors, and by November 2000 Morgan Stanley had downgraded its stock. The first of several internal Yahoo management shakedowns occurred, which continued well into 2001, with the announcement of a new CEO in April. Meanwhile, eBay was recording a 79 percent increase in revenues, up to $184 million. Had the merger gone through, Yahoo would not have needed to rely on advertising for 90 percent of its revenues.
Still, Yahoo! has remained true to its original mission: to guide users through the Internet. It remains patently user–friendly, refusing to sell its search listings to advertisers and prohibiting pop–up or pop–under ads on its home page that would slow down or disrupt user experience. The company believes this will save it, in the end—an admirable goal in the dog–eat–dog world of cyberspace competition. As Fortune magazine explained in its November 2001 issue, while Yahoo may not be considered a growth company, it remains a so–called "richly–valued company."
Social and Economic Impact
Were it not for the creative genius of David Filo and Jerry Yang, many would–be Internet users might have remained missing in action in cyberspace to this very day. Since Filo's original mission was to help other users through the maze of Internet sites, rather than to create a business profit, he and Yang have remained true to their customers and created a portal of informational ease not paralleled in the industry.
Sources of Information
Contact at: Yahoo!
701 First Avenue
Sunnyvale, CA 94089
Business Phone: (408)349–3300
Elgin, Ben, et al. "Inside Yahoo!" Business Week, 21 May 2001.
Gunther, Marc. "The Cheering Fades for Yahoo." Fortune, 12 November 2001.
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Madden, Normandy, and Margaret McKegney. "Out of Yahoo!'s Hot Seat." Ad Age Global, March 2001.
Pickering, Carol. "A Tale of Two Startups." Forbes, 5 October 1998.
Reeves, Richard, and Joan Caplin. "The New Wealth." Money, October 1997.
"Web Masters." Forbes, 11 October 1999.
Wylie, Margie. "Barefoot Millionaire Boys." Newsmakers, 10 November 1997. Available at http://news.cnet/news.
David Filo co-founded Yahoo! Inc. with fellow Stanford University doctoral student Jerry Yang in March of 1995. Initially a search tool for the World Wide Web, Yahoo! grew into the leading Internet portal with more than 100 million surfers using the site every month by the year 2000. Filo continues to oversee the technological development of Yahoo! and owns roughly eight percent of its stock.
Filo earned an undergraduate degree in computer engineering from Tulane University. After completing his master's degree in electrical engineering at Stanford University, Filo elected to stay at Stanford to begin working on a doctorate degree in electrical engineering. It was there that he and Yang became friends in 1989. After having difficulty keeping track of his growing list of favorite sites with the new Mosaic software that allowed users to browse the World Wide Web, Filo enlisted Yang's help to develop a program that would let him to group these pages together by subject. Filo and Yang then posted the organized list of sites, named "Jerry's Guide to the World Wide Web," on the Web. After receiving e-mail from Web users across the globe about the usefulness of the list, Filo and Yang decided to catalog the entire Web, using several layers of categories and subcategories.
As traffic on the site grew, Stanford began experiencing bottlenecks and eventually asked Filo and Yang to move the site to the commercial sector. After turning down buyout offers from the likes of Netscape and AOL, Filo and Yang decided to postpone their dissertations and co-found Yahoo!, an acronym for "Yet Another Hierarchical Officious Oracle." Recognizing their limitations, the pair hired Tim Koogle to run the business, focusing their efforts instead on developing the technology (Filo's area of expertise), and creating a household brand name (a task well suited to the outgoing Yang). When the company conducted its initial public offering in 1996, Filo and Yang both became millionaires. Their shares eventually were worth billions.
As the head of technology, Filo is largely responsible for creating many of Yahoo's innovations, including its main sources of revenue. The firm makes its money mainly from advertising, specifically the banner bars and button ads that appear along the edges of Web pages. Thanks to technology that allows the firm to monitor a browser's online activity, Yahoo! is able to push advertising closely related to each user's interests. That technology also allows the firm to keep track of how many surfers click on an advertisement, giving marketing firms valuable information about how many people they are reaching. Other revenue sources include operating e-stores for retailers and designing Web sites for corporate clients. Although declining advertising sales and tumbling stock prices prompted Yahoo! to announce in 2001 that its CEO, Timothy Koogle, would be stepping down to make room for a new leader, Filo and Yang both plan to retain their roles at Yahoo!.
Mangalindan, Mylene; and Suein L. Hwang. "Yahoo!'s Isolation Plays into Downfall; The Coteries of Early Hires Made the Company a Hit, but an Insular Place." Contra Costa Times. March 11, 2001.
Schlender, Brent. "How a Virtuoso Plays the Web: Eclectic, Inquisitive, and Academic, Yahoo's Jerry Yang Reinvents the Role of the Entrepreneur." Fortune. March 6, 2000.
Stross, Randall E. "How Yahoo! Won the Search Wars." Fortune. March 2, 1998.
"Web Crawlers." Forbes. October 9, 2000.
SEE ALSO: Koogle, Timothy; Yahoo! Inc.; Yang, Jerry
Yahoo's David Filo
YAHOO'S DAVID FILO
Born in 1966 in Wisconsin, David Filo grew up in Louisiana in an "alternative community" (a commune-like atmosphere) with six other families. He received his B.A. from Tulane University in New Orleans before relocating to California to attend Stanford University. At Stanford, Filo met Jerry Yang and the pair went on to create Yahoo. In time the pair's "road map" to the Internet, called Jerry's Guide to the World Wide Web, was renamed Jerry and David's Guide to the World Wide Web. Yang has received more notoriety for Yahoo because he has served as its spokesperson while Filo has preferred to stay behind the scenes.