Sales: $203.3 million (1998)
Stock Exchanges: NASDAQ
Ticker Symbol: YHOO
SICs: 7375 Information Retrieval Services; 7374 Data Processing & Preparation; 7372 Prepackaged Software; 7379 Computer Services, Not Elsewhere Classified
Yahoo! Inc. is one of the world’s leading Internet media companies. Using its seemingly never-ending compilation of links to other web sites, as well as its extensive searchable database, the company helps Internet users throughout the world navigate the World Wide Web. Anyone can access the Yahoo! web site for free, because it is funded not by subscriptions, but by the advertisers who pay to promote their products there. The company leads its competitors in the amount of user traffic at its site, with over 95 million pages of information viewed through Yahoo! each day. The company also offers Internet users other peripheral services, such as free e-mail accounts (Yahoo! Mail), online chat areas (Yahoo! Chat), and news tailored to each user’s demographic or geographic area (Yahoo! News). About 30 percent of Yahoo! is owned by Japan’s Softbank Corp., while company founders Jerry Yang and David Filo each own approximately 13 percent.
Yahoo! Inc. got its start in 1994 as the hobby of two Stanford University Ph.D. students who were procrastinating the writing of their doctoral dissertations. Jerry Yang and David Filo—both of whom were candidates in Stanford’s electrical engineering doctoral program—spent much of their free time surfing the World Wide Web and cataloging their favorite web sites. In doing so, they created a web site of their own, which linked Internet users to Yang’s and Filo’s favorite places in cyberspace. At that time, their site was called “Jerry’s Guide to the World Wide Web.”
As their web site grew—both in size and in the number of links from which it was composed—the number of people who used the site also increased dramatically. Thus, Yang and Filo began spending more and more time on their new hobby, gradually converting the homemade list into a customized database that users could search through to locate web sites related to specific interests. The database itself was originally located on Yang’s Stanford student computer workstation, named “akebono,” while the search engine was located on Filo’s computer, “konishiki” (the two computers were named after legendary Hawaiian sumo wrestlers).
As for the transformation of the database’s name from “Jerry’s Guide to the World Wide Web” to “Yahoo!,” the two men became bored with the original tag and set about to change it late one night while bumming around in their trailer on the Stanford campus. Looking to mimic the phrase/acronym “Yet Another Compiler Compiler” (YACC)—a favorite among Unix aficionados—Yang and Filo carne up with “Yet Another Hierarchical Officious Oracle” (YAHOO). Browsing through Webster’s online edition around midnight, they decided that the general definition of a yahoo—rude and uncouth—was fitting. Yang was known for his foul language, and Filo was described as being blunt. The two considered themselves to be a couple of major yahoos, and thus the name which would soon become a household brand was born.
It was not long before the Yahoo! database became too large to remain on the Stanford University computer system. In early 1995, Marc Andreessen—cofounder of Netscape Communications—invited Yang and Filo to move Yahoo! to the larger computer system housed at Netscape. Stanford benefited greatly from this move, in that its computer system finally returned to normal after having been inundated by Yahoo!’s activity and the computing resources that it required for a year.
Expansion in 1995
Commercialization soon followed. Yang and Filo began selling advertisement space on their site in order to fund further growth. The duo soon realized that it was going to be too difficult to manage both the creative and the administrative aspects of the Yahoo! enterprise. They recruited Tim Koogle, also a former Stanford student, to come aboard as CEO. Prior to his arrival at Yahoo!, Koogle had put himself through engineering school by rebuilding engines and restoring cars, and had then gone on to work at Motorola and InterMec Corp.
One of Koogle’s first moves as Yahoo! CEO was to bring in Jeff Mallett as COO. Mallett was a former member of the Canadian men’s national soccer team, who at age 22 began running the sales, marketing, and business development aspects of his parents’ telecommunications company—Island Pacific Telephone in Vancouver. Prior to joining the Yahoo! gang, he also gained experience in marketing at Reference Software and WordPerfect, and acted as vice-president and general manager of Novell Inc.’s consumer division. Together, Koogle and Mallett began transforming Yahoo! from a homegrown list of interesting web sites into the most popular stop along the information highway.
Koogle and Mallett soon became known as “the parents” at Yahoo!’s corporate headquarters. While Yang and Filo would arrive at work wearing T-shirts and sneakers, Koogle and Mallett preferred Italian silk ties. Many viewed the foursome’s working relationship as that of kids with ideas and the adults that they found to transform the ideas into reality. In the August 6, 1998 edition of the San Francisco Chronicle, analyst Andrea Williams of Volpe Brown Whelan & Co. referred to Koogle and Mallett as “Yahoo’s equivalent of the Wizard of Oz, pulling the strings from behind the scenes. … Americans are captivated by the idea of two college kids like Yang and Filo starting an incredible service. But [Mallett] and [Koogle] have turned it into a business that advertisers and investors understand and respect.”
The majority of Yahoo!’s revenue came through banner advertising deals. In basic terms, Yahoo! sold space on its web pages to companies wishing to promote their products to the demographic that frequented the Yahoo! site. The purchased space not only acted as a visual advertisement (such as in a magazine), but was also often an actual link to the advertiser’s own web site. Thus, a simple click on a banner ad by an Internet user could immediately transport that user to the advertiser’s web site. In this sense, banner ads were somewhat superior to other forms of advertisement in that no other method of advertising (television, print media, etc.) had ever led consumers to a company quite so immediately.
As another means of generating revenue, Yahoo! also struck up distribution deals with web sites that were looking to increase their own traffic. For example, Yahoo! itself was not an online retailer, but boasted a lot of user traffic at its site. An online retailer, however, might have goods to sell but a need to first increase traffic at its own site in order to sell those goods. A distribution deal would pair the two sites, with Yahoo! leading its customer traffic to the retailer’s site in exchange for a cut of the transaction revenues whenever customers made purchases. In this sense, Yahoo! (along with competitors such as Excite, Infoseek, and Lycos) came to be known as a “portal”—a gateway to the rest of the Internet.
Through banner advertising and distribution deals, Yahoo! was able to continue offering its services to web surfers for free, as opposed to online services such as America Online (AOL), Prodigy, and Microsoft Network. The latter three charged monthly fees for the use of their offerings. Although these online service companies’ offerings were often more graphically intricate and visually pleasing than the Yahoo! site, they were essentially offering the same thing as Yahoo!—and for a lot more money. According to Jonathan Littman in the July 20, 1998 edition of Upside Today,”Yahoo, much like Amazon.com, built a natural Internet brand through its simple desire to satisfy customers.” It was not long before Yahoo!’ s user base was comparable to that of industry giant AOL, even though its 1995 revenues topped off at only around $1 million.
1996: The Birth of a Brand Name
In 1996, Yahoo! went public, offering shares of its stock for $13. In the first day of trading alone, the company’s stock price sailed to $43, and its estimated valuation was quoted at upwards of $300 million—more than 15 times its eventual 1996 revenues of approximately $20 million. Around that time, Yahoo! decided to start promoting itself in the public advertising arena. Another former Stanford graduate—Karen Edwards—was brought aboard as the Yahoo! “brand marketer,” and immediately lined up ad agency Black Rocket of San Francisco to handle Yahoo!’s account. Black Rocket was composed of four independent advertising executives who, ironically, owned no computers.
That spring, Yahoo! used almost its entire advertising budget for 1996 to run its first national-scale ad campaign on television. Luckily, the ad was an immediate hit. In the television spot, a fisherman used Yahoo! to obtain some baiting tips, and then proceeded to land multiple gigantic fish. According to Jonathan Littman in a July 20, 1998 edition of Upside Today,”The faux testimonial captured the Net’s spirit without being the least bit techie.” From this campaign arose the company tagline “Do you Yahoo!?” Yahoo! executives hoped that the efforts would help their company blossom into a full-fledged media company.
The quest to turn the Yahoo! name into a major brand took a few wacky turns along the way. For example, Edwards decided that the Yahoo! name simply needed to be out in the public eye as much as possible, regardless of the manner in which it appeared. Yahoo! posters began appearing at many outdoor locations, such as sporting events, concerts, and even construction sites. The Yahoo! logo was placed everywhere, with one of the most notable places being a tattoo on the rear-end of a Yahoo!’s financial pages’ senior producer, when he made good on a lost bet. It was also plastered on the side of the San Jose Sharks’ Zamboni ice machine, and printed onto items such as Ben & Jerry’s ice cream containers and Visa cards. The yellow and purple Yahoo! logo even appeared shrink-wrapped onto five Yahoo! employees’ cars, and one spring Edwards planted her flower garden at home in yellow gladioli and purple petunias.
1997-98: Acquisitions and Further Expansion
As Yahoo! became a certifiable household brand name, the company began striving to further satisfy the needs of its users. Following the trend set by online service companies such as AOL, Yahoo! added services and features such as chat areas, Yellow Pages, online shopping, and news. The company also added a feature called “My Yahoo!,” which was a personalized front page for regular users that displayed information tailored to each user’s interests. The company also teamed up with Visa to create an Internet shopping mall (an idea that was later aborted); with publisher Ziff-Davis to create “Yahoo! Internet Life” (an online and print magazine which never came to fruition); and with Netscape to develop a topic-based Internet navigation service to be used with the Netscape Communicator browser software.
By 1997, Internet surfers were using Yahoo! to view approximately 65 million pages of electronic data each day. That year, Yahoo! acquired online white-pages provider Four 11 for $95 million. The purchase gave Yahoo! access to Fourll’s e-mail capabilities, which when integrated into Yahoo!’s offerings allowed the company to provide its users with free e-mail (Yahoo! Mail) as well. By mid-1998, over 40 million people were logging on to Yahoo! each month—12 million of whom had become registered Yahoo! e-mail users. To put those numbers into perspective, one can consider the following: at that time, only 30 million people were tuning in to network-leader NBC’s top-rated show (”ER”) each week, and the number of Yahoo! e-mail users was comparable to that of online service giant AOL.
In July 1998, Yahoo! received a $250 million investment from Japan’s Softbank Corp., increasing Softbank’s share of the company to approximately 31 percent. Yahoo!’s market valuation at that time was $6.9 billion—much higher than that of most other media companies. As an emerging media company, Yahoo! began to move into the Internet access market that year through the launch of Yahoo! Online. To do so, the company initially formed a partnership with MCI WorldCom, but the arrangement deteriorated later that year. Thus, Yahoo! struck up a deal with communications giant AT&T, to provide Internet access through AT&T’s WorldNet service.
Also in 1998, Yahoo! replaced Digital Equipment’s Alta Vista with California-based search engine specialist Inktomi, as the supplier of Yahoo!’s search engine. Yahoo! then purchased Viaweb, a producer of Internet software programs. The acquisition resulted in the posting of a one-time $44 million charge in 1998. Yahoo! planned to use Viaweb’s software to start a new service, which would allow its users to set up their own web sites for the purpose of buying and selling goods online.
In October 1998, Yahoo! purchased Yoyodyne Entertainment for 280,664 shares of Yahoo! common stock. Yoyodyne added its permission-based direct marketing capabilities to Yahoo!, which also obtained the company’s database of consumers, valuable demographic information, and other Yoyodyne assets. Prior to the acquisition, much of Yoyodyne’s direct marketing was done through online games and sweepstakes at Internet sites such as EZSpree.com, GetRichClick.com, EZVenture.com, and EZWheels.com. Yahoo! announced that while those four sites would remain intact after the integration of Yoyodyne into Yahoo!, the former company’s overall brand would be phased out.
By the end of the year, Yahoo!’s user traffic had increased considerably since 1997, with web surfers viewing approximately 95 million pages of information through Yahoo! each day—a huge increase from the previous year’s average.
The End of the Century and Beyond
By the end of the 20th century, the computer industry—and the Internet industry in particular—was becoming increasingly inundated with new players. In July 1998, NBC had purchased a 19 percent interest in Snap!—another portal operated by CNET Inc. Disney followed suit by grabbing a 43 percent stake in Infoseek Corporation; At Home Corporation purchased Excite, Inc.; and Microsoft Corporation increased promotion of its MSN portal. Even America Online made moves to increase its scope through the acquisition of Netscape and its Netcenter portal. Nobody wanted to be left out of the Internet game, since many analysts predicted that it would be the next true media industry.
By the end of the 1990s, it was approximated that 90 million people throughout the world had Internet access and were surfing the web on a somewhat regular basis. According to International Data Corp. in the September 7, 1998 edition of Business Week, it was predicted that figure would balloon to 328 million people by 2002. As stated by Business Week’s Himelstein, Green, Siklos, and Yang, “What’s emerging faster than many imagined is a Net generation that rises not to its newspapers and TV news shows but to its coffee and glowing computer screens. Some 64 percent of cybersurfers watch less TV now than they did before their Web-cruising days, while 48 percent are not reading as much, according to market researchers Strategis Group.”
Yahoo! tried to maintain its large share of the market by continuing to focus on its users and their satisfaction. Recognizing that it would only take one click of a computer mouse for a Yahoo! user to defect to one of its competitors, the company made moves to provide its users with even more. In January 1999, Yahoo! announced the purchase of GeoCities, the third most-visited web site in December 1998—directly behind top-rated AOL.com, and second-rated Yahoo.com. The GeoCities site was a creator of electronic communities for people. Based on people’s interests, GeoCities allowed its users to set up their own personal home pages. Yahoo! hoped that the acquisition of GeoCities would bring many of that site’s users to Yahoo!, and vice versa.
As the 21st century approached, many people felt that the Internet industry was nearing a shakeout, through which only a handful of companies would survive. Yahoo! was poised to weather the storm, however, and possessed the resources to do so. As the first Internet company to go public and the first to turn a profit, as well as the first to advertise itself on national television, Yahoo!’s brand was well known and its site was rated at the top of the heap. According to analyst Paul Noglows of Hambrecht & Quist Inc. in the September 7, 1998 edition of Business Week,”Yahoo has the potential to emerge as the first pure Internet giant.” Its ability to do so in the computer-dependent environment of the 21st century seemed certain.
Alden, Christopher J., “Kingmaker,” Red Herring, August 1998.
Hansell, Saul, “Yahoo to Acquire GeoCities,” The New York Times, January 28, 1999.
Himelstein, Linda, Heather Green, Richard Siklos, and Catherine Yang, “Yahoo!; The Company, the Strategy, the Stock,” Business Week, September 7, 1998.
Mittner, Greta, “Yahoo Plays Yoyodyne’s Game,” Red Herring Online, October 13, 1998.
Napoli, Lisa, “Yoyodyne Deal Signals Next Stage of Marketing,” New York Times, October 14, 1998.
Swartz, Jon, “Yahoo’s Other Dynamic Duo,” San Francisco Chronicle, August 6, 1998, p. D3.
—Laura E. Whiteley
LIVE BILLBOARD DATING CAMPAIGN
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Yahoo!, one of the early stars of the Internet, was launched in 1993 as Jerry's Guide to the World Wide Web, offering early users of the Web a way to navigate the quickly expanding Internet—in effect a table of contents. The company's founders soon dropped the name "Jerry's Guide" in favor of something more memorable, Yahoo!, an acronym for Yet Another Hierarchical Officious Oracle. To build the fledgling brand, in April 1996 the company released the "Do You Yahoo!?" marketing campaign.
The $5 million effort included television, radio, and print elements. One of the most memorable of the television spots, which aired in 1997, featured a balding young man using Yahoo! to search for a cure for his thinning hair. The final shot of the spot showed him strutting down the street with a huge, bushy Afro, turning the heads of his fellow pedestrians.
The "Do You Yahoo!?" campaign succeeded in raising the brand recognition of Yahoo! and attracting more visitors to the Web portal. In the late 1990s Yahoo! was far and away the most valuable Internet business, with a market value exceeding $4.3 billion. Yahoo! Stumbled when the Internet sector crashed in the first few years of the new millennium, and its search-engine business was surpassed by a new rival, Google. But Yahoo! was able to rebound and continued to market its portal with the "Do You Yahoo!?" campaign until 2004.
In 1993 Stanford engineering student Dave Filo's personal list of favorite websites had grown beyond 200 "bookmarks." He and fellow engineering student Jerry Yang wrote software that grouped their favorites sites into convenient on-screen folders. When they posted their list on the Web under the title "Jerry's Guide to the World Wide Web," people all over the world contacted them to say thanks. It was the Web's first table of contents.
Filo and Yang then planned to visit and categorize 1,000 websites a day. They decided to avoid the engineer's natural impulse to automate the process, instead throwing tremendous hours of human labor into the project. Yang hated the name "Jerry's Guide," so he and Filo followed the technology community's affinity for acronyms and came up with Yahoo! which stood for "Yet Another Hierarchical Officious Oracle."
Yahoo!'s distinguishing founding idea was using a cadre of professional Web surfers to organize a directory of websites into coherent categories. This approach differed from competitors like Excite (then called Architex), which relied on Web-scouring software to view and catalog. According to Fortune magazine, "Yahoo! had the best name, the worst technology, and a quaint belief
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that while other companies' machines were able to survey website addresses by the thousands every second, the human touch could somehow win out."
In 1995 Netscape and America Online both offered to absorb Yahoo! Yang and Filo declined but later signed with Sequoia Capital. Sequoia put up $1 million, which grew to $560 million by the end of 1997. Among the strong competitors that emerged were Excite, developed by another group of Stanford graduate students, and Lycos, which was developed at Carnegie Mellon.
But while human intelligence gave Yahoo! the early lead among Web search engines, what enabled Yahoo! to far outdistance the pack was a rapid rollout of E-mail, financial services, and a strong marketing effort. According to Fortune, in the first quarter of 1996 Yahoo!, Lycos, Excite, and Infoseek all delivered roughly the same number of pages. By the end of 1996, however, Yahoo! delivered twice as many pages as second-place Excite. By the third quarter of 1997 Yahoo! visitors looked at 50 million pages a day—more than the other three search engines combined.
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"Do You Yahoo!?" aimed to attract those people who intended to go online, an estimated 18 million people in 1998, according to IntelliQuest. Karen Edwards, Yahoo!'s director of brand management, referred to the company's target market as Internet intenders or near-surfers. This market's demographics skewed toward educated, affluent males, generally in the 25-54 age range. As time went on and women gained more interest in the Internet, the target group broadened to include them, and in the 2000s the ongoing campaign targeted a mass audience, touting Yahoo!'s wide range of services. Moreover, as Yahoo!'s overseas traffic increased, the campaign had to be adopted to different cultures and translated into various languages, although "Do you Yahoo!?" tested much better in English than translated.
In 1997 Yahoo! and other high-tech advertisers were counting on television to expand their markets. In May of that year BusinessWeek reported that 40 percent of U.S. homes had computers, but annual growth was down from the 20-30 percent clip of the past few years to about 13 percent. Yahoo! and others used advertising to show the ease and advantages of going online, in hopes of drawing more and more people into the Internet services market.
Yahoo!'s strengths against its competition included a huge lead in market capitalization and its reputation as being tops in the search, finance, and news areas. Lycos was more aggressive than Yahoo! in pursuing acquisitions that added new services and broadened its market appeal. Lycos also chose to link separately branded sites to serve different demographic segments. Infoseek and Altavista benefited from the massive shadows of their owners, Disney and Compaq respectively.
Excite had strong health and search features and was the Web page for Dell's PC buyers. In October 1996 Excite introduced a $10 million campaign from Foote Cone & Belding featuring the Jimi Hendrix song "Are You Experienced?" On December 7, 1998, Excite premiered a new network and cable television campaign. Six 30-second commercials showed people botching common activities in embarrassing, humorous ways. One spot told viewers that the woman pictured could send photographs to friends around the world using Excite. She then walked through a screen door she had just closed. In another spot a man was all thumbs as he installed an air conditioner only to watch it plummet from his window. The spots ended with the suggestion that if this person could use Excite "you can too."
By 1998 Yahoo!'s growth and success had moved it into the domain of a new set of competitors. The company was being viewed as a key part of the computing establishment and a great destination for Web users. It felt less like a search engine and more like an online service. The competition grew to include Microsoft and America Online (AOL). Microsoft was spending $61 million on television spots built around its theme "Where do you want to go today?" Trying to outduel Microsoft, AOL spent about $66 million on television advertising. AOL's advantages included billions in monthly Internet user fees and the longest track record as a content aggregator.
In 1998 NBC launched a television campaign for its Web portal company Snap!. The commercials used the tagline "Don't Suffer from Information Overload. Snap! Out of It." A 1996 multimillion dollar campaign from Infoseek appeared regularly in full-page ads in the Wall Street Journal. All told, at one point in the 1990s Yahoo! had to contend with nearly 60 different competitors, yet its chief rival had yet to emerge: Google, the search engine that turned itself into a verb, something Yahoo! had failed to achieve. Yahoo! would be forced to reengineer its search capabilities to compete with Google, but more importantly Yahoo! retooled its business model, so that shopping and entertainment and other ventures overshadowed its search-engine business.
Yang believed that success depended upon giving Web users what they wanted and publicizing the brand voraciously. He recruited Karen Edwards to promote the brand. Edwards, who came from BBDO, where she had worked on the Apple account, wasted little time before putting Yahoo! on television with the $5 million ad campaign.
By 1997 advertising of Internet services had grown dramatically. High-tech products like personal computers, printers, and Internet service providers were becoming commodities. Yahoo! and its competitors offered the same access for the same price. As Edwards observed, "It's just like beer or cars. The products are similar enough that image has a lot to do with why people buy one instead of the other."
INTERESTING YAHOO! FACTS
- In 1999 Yahoo! was an $11 billion company that did not own a building
- Although a billionaire, company cofounder David Filo put in 100-hour workweeks
- Cofounder Jerry Yang was so popular in his parents' home country of Taiwan that he registered in hotels under an assumed name
- Yahoo!'s grassroots marketing included a "Yahoo! for Barry Bonds" sign that flashed on the screen at the San Francisco baseball player's home stadium every time he hit a home run
- In 1998 Yahoo! was the most popular website in Japan, where 10 million people were online
Chris Charron, an analyst with Forrester Research in Boston, noted, "Users find what they're looking for at Yahoo! While many competitors load their sites with elaborate graphics that can confuse users and delay them, Yahoo!'s site is clear, uncluttered, and fast." A search on competitor Alta Vista might return millions of matches, while the same search on Yahoo! would return a more manageable number of matches arranged in categories.
Edwards also led a so-called guerrilla marketing approach that saw Yahoo! popping up seemingly everywhere, including in magazines and at rock concerts, sports contests, and some unconventional venues. She gave a free auto paint job to any employee who would agree to having the Yahoo! logo displayed on his or her car. The company had a barter deal with the National Football League's 49ers in which the fans shouted, "Yahoo!" to cheer their team as the portal's purple logo burst onto the football stadium screen. Millions saw the Yahoo! Zamboni from the San Jose hockey arena in a scene from the movie EdTV. The Yahoo! logo appeared on a wide array of products, including backpacks, sunglasses, baseballs, computer glasses, skateboards, Slinkys, surfboards, yo-yos, and school stationery.
Some analysts, like those at Fortune, said that these early and inexpensive grassroots promotions were critical in getting Yahoo! far in front of the competition. With little advertising money, Yahoo! often bartered services to expand its reach. And it launched national advertising before nearly all of its competitors. Fortune also lauded Yahoo!'s cobranding of products, services, and contests with well-regarded brands, such as Ben & Jerry's, Visa, and MCI, and with community outreach to 75 nonprofit organizations. All the advertising and marketing would not have helped if Yahoo! did not also evolve and add new services. Users grew accustomed to finding something new at Yahoo! continually. Stock quotes, maps, chat rooms, news, weather, sports, Yellow Pages, and classifieds all broadened the site's appeal and kept its image of being fresh and cool.
Black Rocket's advertising strategy meshed well with Yang's vision of the company. The agency treated Yahoo! not like a technology company but as a consumer brand. "By conjuring up a cool California image—hip but not rad, easy-to-use but not simplistic—it managed to create a cult-like following not unlike that of Apple Computer Inc.'s Macintosh," said BusinessWeek. As it expanded, Yahoo! kept promoting new services under its single brand name. Competitor Lycos took the opposite strategy and built separately branded sites, including Tripod and WhoWhere.
The Yahoo! name itself paid dividends. The memorable and fun name gained wide credit for helping to attract investor attention and build a following. Black Rocket convinced Yahoo! to use the company name in the advertising slogan because it was unusual, irreverent, and memorable. "The name contains the promise of the product," said Owen Shapiro, senior analyst at market and brand research firm Leo J. Shapiro & Associates in BusinessWeek. "It reinforces the idea that when I go to Yahoo!, I'll be so pleased I'll be Yahooing afterwards." The name also implied that everyone knew what Yahoo! was.
While the early ads in the campaign emphasized Yahoo!'s search engine, by 1998 the company was emphasizing its shopping capabilities with spots showing an Arctic fisherman using Yahoo! to buy a hot tub and an overweight superhero buying handbags through Yahoo! to give to crime victims because he could no longer run down purse snatchers.
As the new century dawned, the idea of "Yahooing" did not catch on with Internet users as the company had hoped. Instead, users began to use the term "Googling" to mean "performing an online search." Nevertheless, Yahoo's brand recognition was still strong, and the company found its own lucrative niche on the Web, supported by new executions of the "Do You Yahoo!?" campaign that promoted Yahoo!'s varied product offerings. For example, one 30-second television spot, which premiered during the 2002 Super Bowl, took place on the island of Palau in Micronesia and featured a tourist and dolphin who both realized that they had settled on their vacation destination by using Yahoo! Campaign spots were also translated into other languages to reach an increasingly global market.
A rapid rise in its stock price gave Yahoo! a market value of $4.3 billion in early 1998—by far the highest of any Internet company. More people accessed Yahoo! at work than any other website, and it ranked second only to America Online in traffic from home. In February 1998 Yahoo! attracted 31.2 million users to its site, 8 million more than second-place finisher Netscape and 13 million more than third-place finisher Microsoft. In May 1999 Advertising Age named Yahoo! its top marketer in the portal category. The company also regularly ranked among the top five sites in average minutes a user spent online a month, according to Media Metrix. And, unlike many early Internet giants, Yahoo! was profitable.
Yahoo! was not, however, immune to the effects of the dot-com crash that occurred at the start of the twenty-first century. Chief executive Timothy Koogle stepped down in the spring of 2001, and a few months later Karen Edwards, part of the team that had developed the "Do You Yahoo!?" tagline, quit "to spend more time with her family." The company continued to use the tagline for nearly two more years. Black Rocket lost the Yahoo! account in August 2003, and the company's new ad agency developed a marketing campaign anchored by the tagline "Life engine."
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――――――. "Yahoo!'s New Tune." Adweek, April 5, 2004, p. 10.
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Shortly after its launch in 1994 Yahoo! Inc. became one of the Internet's top search engines. Although the company remained primarily associated with its search engine in subsequent years, it also expanded its business operations to include a range of integrated online products and services, including Yahoo! Personals, America's second-most-popular forum for online dating. In 2004 Yahoo! Personals set out to differentiate itself from competitors by using select members of its paid subscription base as the stars of its online advertising. This effort, dubbed "Project: Real People," was not particularly newsworthy on its own, and Yahoo! Personals did not have a media budget sufficient to achieve saturation among its target market of professional singles. A three-day launch event, the "Live Billboard Dating Campaign," sought to rectify this situation.
The "Live Billboard Dating Campaign" was a $140,000 attempt to generate widespread media coverage of the Yahoo! Personals brand. The campaign, which began on January 7, 2004, centered on the efforts of one Yahoo! Personals subscriber, Julie Koehnen, to find an eligible bachelor using the online service. What made the campaign so noteworthy, however, was the fact that Koehnen conducted this search for a date while living, over the course of three days, on a platform erected along the bottom of a highly visible billboard on the Sunset Strip in Los Angeles. The billboard featured Koehnen's Yahoo! Personals photo and text stating, "Julie is looking for a few good dates. (And she's not coming down until she gets them!)" The attached platform offered the amenities necessary for Koehnen to search for dates using Yahoo! Personals and to host romantic prospects live at the billboard before choosing one among the group for further dates. Koehnen's life atop the billboard platform was broadcast, unedited, on the Yahoo! Personals website.
The campaign generated hundreds of stories in the local and national media, including live interviews of Koehnen on such programs as Good Morning America, and it spurred substantial increases in online traffic to the Yahoo! Personals site. Yahoo! Personals overtook Match.com during the first quarter of 2004 to become the nation's leading online dating service. The "Live Billboard Dating Campaign" won a Gold EFFIE Award in 2005.
Yahoo! was founded in 1994 by Stanford University Ph.D. students David Filo and Jerry Yang, and it quickly became one of the Internet's leading search engines. In the late 1990s and early 2000s the company expanded into a broad range of online communications, content, and shopping products and services, including the dating website Yahoo! Personals, which debuted in 1997.
Yahoo! Personals served as a forum for singles to search for and communicate with prospective romantic partners. A user created his or her own personal profile, including a photo, and could search the profiles of all other users for potential dates. Yahoo! Personals introduced a subscription model into its service in 2001. Users could still search listings for free, but to interact fully with other singles and post one's own profile, a monthly subscription fee was required. Subscription fees discouraged frivolous use, thereby allowing the larger community of users to take the site more seriously. As Yahoo! Personals and its competitors refined their services—the subscription model became the industry standard—more and more Internet-savvy singles turned to such online dating forums. By 2003 the personals category was outperforming all other online revenue sources (excluding gambling and pornography), and Yahoo! Personals was the number two dating service in cyberspace.
Among the primary marketing challenges facing Yahoo! Personals in this rapidly expanding market was the difficulty of differentiating itself from its competitors. Most online dating sites offered roughly the same services at roughly the same prices, and there were limited possibilities for cultivating brand allegiance. Another primary challenge was the still-prevalent, if declining, stigma attached to online dating. Many potential users feared the idea that individuals would misrepresent themselves online; others were worried about the embarrassment connected with telling friends and family that a romantic partner had been located via the Internet.
A 2003 Yahoo! Personals campaign called "Believe," crafted by the advertising agency Black Rocket Euro RSCG, sought to position the company as a source of hope in a bleak world, eschewing sexual messages in print and TV work that focused on the common fears and anxieties, as well as the fundamental optimism, of the dating experience. In 2004 Yahoo! Personals attempted to meet these challenges in a new way by focusing on real people in its advertising. The "Project: Real People" campaign, which was introduced with the "Live Billboard Dating Campaign," was built on a strategy of using actual Yahoo! Personals customers as models in online and print ads. This not only served the purpose of differentiating the brand's communications from those of competitors who employed professional models, but also spoke to the issue of stigmatization by showcasing the attributes of actual users of the service.
The "Live Billboard Dating Campaign" had a primary target group of women and a secondary, complementary target group of men. Both groups fit the same profile: 25- to 49-year-old professionals who had never been married, who lived in one of the top 10 Yahoo! Personals urban markets, who were curious but unsure about online dating, and who were interested in an alternative to the dating environment offered by nightclubs and bars.
Like the broader "Project: Real People" effort, the "Live Billboard Dating Campaign" counted among its primary goals the destigmatization of online dating as well as the communication of the idea that real people found real romance via the service. The selection of Julie Koehnen as the subject of the campaign was thus calibrated to perform these functions vis-à-vis both target groups. As an attractive, well-spoken 39-year-old screenwriter, she was meant to show the female target group that Yahoo! Personals was an appropriate forum for impressive, interesting women to meet men. Meanwhile, Koehnen was intended to show men that they might meet someone as desirable as her by using Yahoo! Personals. Koehnen selected and conducted her dates live at the billboard site, effectively showcasing the Yahoo! Personals process.
Local and national media outlets were also a crucial target for the hybrid event. The "Live Billboard Dating Campaign" sought to make an impression across America with a limited budget, and it could only do so if print publications and TV programs became convinced that it was a newsworthy event. The project was designed specifically to generate media coverage—i.e., free airtime and print space for Yahoo! Personals—and a variety of media outlets were contacted in advance of the January 7 launch so that they would arrive to cover Koehnen's activities live.
LOCATION, LOCATION, LOCATION
The location for the "Live Billboard Dating Campaign"—the Sunset Strip in Hollywood—was ideal for a number of reasons. First, a warm climate was essential to the event, as the campaign's star, Julie Koehnen, would be living outdoors for three days in midwinter. Also, Los Angeles was one of the top markets for Yahoo! Personals, and within Los Angeles the Sunset Strip had a particularly high concentration of vehicle and foot traffic as well as a trendy reputation that would resonate with the campaign target of single professionals. But other, less obvious factors were also crucial to the selection of this location. The outdoor-advertising company that owned the billboard was able to fit the three-day Yahoo! Personals campaign in between two other, longer-term advertisers—not necessarily an easy scheduling feat—and the prevalence of movie filming in the area made it possible for Yahoo! to acquire the appropriate permits for the live webcast in spite of the unusual filming setup. The various elements of the campaign thus fell into place.
The leading online dating site prior to the "Live Billboard Dating Campaign" was Match.com, which offered a $25 monthly subscription service similar to Yahoo! Personals' $20 service. Match.com, like Yahoo! Personals, built an advertising campaign influenced by reality TV. Helmed by Bartle Bogle Hegarty and debuting in July 2003 on the reality program Cupid, the campaign spots attempted to mimic the spirited bickering characteristic of reality TV, which was often structured around head-to-head competition between participants. The spots opened with the personal-ad photos of two supposed Match.com users, and then the photos morphed into characters who competitively berated one another. For instance, one female addressed a competing Match.com user, pictured alongside a palm tree, with this over-the-top diagnosis of her personality: "You're insane, and I hope you never leave that little island you're stuck on."
Though not among the Internet's most popular dating sites, eHarmony, introduced in 2000, offered a matchmaking formula that distinguished it from most of Yahoo! Personals' competitors, and a correspondingly higher subscription fee made it one of the more lucrative of competing services. Priced at $50 a month, more than twice the cost of Yahoo! Personals, eHarmony claimed to use scientifically sound psychological profiling to match its subscribers with one another. Rather than simply submitting a personal profile and making contacts with prospective dates of their own volition, eHarmony subscribers submitted to a psychological evaluation consisting of 436 questions, and the service used the results to generate a list of compatible fellow subscribers. EHarmony grew from a base of 20,000 subscribers in December 2000 to more than 4.5 million by the end of 2004.
"Project: Real People," a projected yearlong campaign, was built around 50 Yahoo! Personals members chosen from a pool of 38,000 who had responded to a casting call in the months leading up to the launch. The 50 "Project: Real People" participants, representing a diverse cross-section of the online dating community, were photographed for print and online ads that were slated to run in the weeks and months following the "Live Billboard Dating Campaign." Though the idea of using real people to pitch the dating service was unique in the industry, it was of limited news value, and Yahoo! Personals did not have budgetary resources sufficient to achieve saturation via a traditional media campaign.
The "Live Billboard Dating Campaign," largely conceived and implemented by Yahoo! in-house marketers working within a $140,000 budget, was designed to address these issues. Both a three-day launch event for the larger "Project: Real People" campaign and an innovative marketing campaign in its own right, the "Live Billboard" effort was a hybrid of outdoor advertisement, buzz-marketing stunt, and reality TV show starring an actual Yahoo! Personals subscriber. Beyond announcing the "Project: Real People" campaign, the "Live Billboard Dating Campaign" was intended to drive traffic to the Yahoo! Personals website, to spur subscriptions, and to build awareness of the process by which singles met one another using the service.
A billboard on a high-traffic area of the famous Sunset Strip in Hollywood was outfitted with a living room, dining room, and office featuring wireless Internet capability. Julie Koehnen, one of the 50 "Project: Real People" finalists, was singled out for her ability to represent the dynamism, attractiveness, and charm that Yahoo! wanted consumers to associate with users of its online dating service. She was asked to live on the billboard for approximately 12 hours a day from January 7 to January 9, 2004, while conducting a search for dates using Yahoo! Personals.
The focus of Koehnen's days on the billboard was the conducting of this search, made possible by her wireless-equipped office, but she was also treated to a variety of wellness and entertainment services, including yoga sessions and visits from a fortune-teller and a comedian, and she made time for the numerous media interviews that the campaign was intended to generate. Over the course of the three days Koehnen interviewed, in person, three men per day at the billboard. At the end of this process she selected one bachelor to invite back for a date on the final evening of her billboard residency. From 8 a.m. to 6 p.m. each day Koehnen's activities were aired, uncut and unedited, on the Yahoo! Personals website, as "Live Julie TV." The billboard above Koehnen's living space featured her photograph and copy reading, "Julie is looking for a few good dates. (And she's not coming down until she gets them!)" The Yahoo! Personals logo as well as the Web address where users could go to view Koehnen's profile were also prominently showcased.
The three-day campaign generated 347 television and radio stories in more than 100 American markets, including coverage on every major Los Angeles network affiliate, more than 50 stories on Los Angeles TV stations alone, and live interviews or stories on such national shows as CNN Headline News, Good Morning America, Good Day Live, ABC News Live, and ESPN2's Cold Pizza. Traffic to the Yahoo! Personals website spiked significantly: unique visits increased 19 percent from the two-week period preceding the campaign and increased 44 percent compared to the same period the previous year. More than half a million viewers watched "Live Julie TV" over the course of its three-day run, and Koehnen received more than 1,000 E-mails from Yahoo! Personals subscribers as a result of her billboard residency.
Yahoo! Personals subscriptions increased 199 percent compared with the same period the previous year and 27 percent compared with the two weeks prior to the campaign, and the creation of individual profiles on the site increased by 250 percent and 14 percent respectively, by those same measures. During the first quarter of 2004 Yahoo! Personals overtook Match.com as the most popular online dating service, with an average of 6.4 million visitors per month, compared to Match.com's 5.2 million. The "Live Billboard Dating Campaign" won a Gold EFFIE Award in 2005; hosted by the New York American Marketing association, this annual awards event was one of the most prestigious in the advertising industry. "Project: Real People" ran through 2004 and was extended, featuring new batches of Yahoo! Personals subscribers, in subsequent years.
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――――――. "Yahoo Plays Cupid to Millions and Finds He Is Very Well-Paid." Wall Street Journal, February 11, 2004.
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701 First Avenue
Sunnyvale, California 94089
Telephone: (408) 349-3300
Fax: (408) 349-3301
Web site: http://www.yahoo.com
Sales: $3.5 billion (2004)
Stock Exchanges: NASDAQ
Ticker Symbol: YHOO
SICs: 518111 Internet Service Providers; 518112 Web Search Portals; 516110 Internet Publishing and Broadcasting; 518210 Data Processing, Hosting, and Related Services
Yahoo! Inc. is one of the world's leading Internet media companies. Using its seemingly neverending compilation of links to other Web sites, as well as its extensive searchable database, the company helps Internet users navigate the World Wide Web. Anyone can access the Yahoo! Web site for free because it is funded not by subscriptions but by the advertisers who pay to promote products and services there. Yahoo! leads its competitors in the amount of user traffic at its site, with over
2.4 billion page views viewed through its 25 international sites in 13 languages each day. The company also offers Internet users other peripheral services, such as free e-mail accounts (Yahoo! Mail), online chat areas (Yahoo! Chat), and news tailored to each user's demographic or geographic area (Yahoo! News). The company's principal shareholders are the FMR Corporation with 12.5 percent of the stock, cofounder David Filo with 7.9 percent, cofounder Jerry Yang (6.7 percent), and CEO Terry S. Semel (1.2 percent). Yahoo! stock sold at around $35 a share during 2004.
Yahoo! Inc. got its start in 1994 as the hobby of two Stanford University students who were writing their doctoral dissertations. Jerry Yang and David Filo, both of whom were candidates in Stanford's electrical engineering doctoral program, spent much of their free time surfing the World Wide Web and cataloging their favorite Web sites. In doing so, they created a Web site of their own that linked Internet users to Yang's and Filo's favorite places in cyberspace. At that time, their site was called "Jerry's Guide to the World Wide Web."
As their Web site grew, both in size and in the number of links from which it was composed, the number of people who used the site also increased dramatically. Thus, Yang and Filo began spending more and more time on their new hobby, gradually converting the homemade list into a customized database that users could search to locate Web sites related to specific interests. The database itself was originally located on Yang's Stanford student computer workstation, named "akebono," while the search engine was located on Filo's computer, "konishiki" (the two computers were named after legendary Hawaiian sumo wrestlers).
As for the transformation of the database's name from "Jerry's Guide to the World Wide Web" to "Yahoo!," the two men became bored with the original tag and set about to change it late one night while bumming around in their trailer on the Stanford campus. Looking to mimic the phrase/acronym "Yet Another Compiler Compiler" (YACC), a favorite among Unix aficionados, Yang and Filo came up with "Yet Another Hierarchical Officious Oracle" (YAHOO). Browsing through the online edition of Webster's dictionary around midnight, they decided that the general definition of a yahoo—rude and uncouth—was fitting. Yang was known for his foul language, and Filo was described as being blunt. The two considered themselves to be a couple of major yahoos, and thus the name which would soon become a household brand was born.
It was not long before the Yahoo! database became too large to remain on the Stanford University computer system. In early 1995, Marc Andreessen, co-founder of Netscape Communications, invited Yang and Filo to move Yahoo! to the larger computer system housed at Netscape. Stanford benefited greatly from this move due to the fact that its computer system finally returned to normal after having been inundated by Yahoo!'s activity.
Expansion in 1995
Commercialization soon followed. Yang and Filo began selling advertisement space on their site in order to fund further growth. The duo soon realized that it was going to be too difficult to manage both the creative and the administrative aspects of the Yahoo! enterprise. They recruited Tim Koogle, also a former Stanford student, to come aboard as CEO. Prior to his arrival at Yahoo!, Koogle had put himself through engineering school by rebuilding engines and restoring cars and had then gone on to work at Motorola and InterMec Corporation.
One of Koogle's first moves as the company's CEO was to bring in Jeff Mallett as COO. Mallett was a former member of the Canadian men's national soccer team who, at age 22, began running the sales, marketing, and business development aspects of his parents' telecommunications company, Island Pacific Telephone, in Vancouver. Prior to joining the Yahoo! gang, he also gained experience in marketing at Reference Software and WordPerfect and acted as vice-president and general manager of Novell Inc.'s consumer division. Together, Koogle and Mallett began transforming Yahoo! from a homegrown list of interesting Web sites into the most popular stop along the information highway.
Koogle and Mallett soon became known as "the parents" at Yahoo!'s corporate headquarters. While Yang and Filo would arrive at work wearing T-shirts and sneakers, Koogle and Mallett preferred Italian silk ties. Many viewed the foursome's working relationship as that of kids with ideas and the adults that they found to put these ideas into practice. In the August 6, 1998, edition of the San Francisco Chronicle, analyst Andrea Williams of Volpe Brown Whelan & Co. referred to Koogle and Mallett as "Yahoo's equivalent of the Wizard of Oz, pulling the strings from behind the scenes. . . . Americans are captivated by the idea of two college kids like Yang and Filo starting an incredible service. But [Mallett] and [Koogle] have turned it into a business that advertisers and investors understand and respect."
The majority of Yahoo!'s revenue came through banner advertising deals. In basic terms, Yahoo! sold space on its Web pages to companies wishing to promote their products to the demographic that frequented the Yahoo! site. The purchased space not only acted as a visual advertisement, as in a magazine, but often served as a link to the advertiser's own Web site as well. Thus, a simple click on a banner ad by an Internet user could immediately transport that user to the advertiser's Web site. In this sense, banner ads were somewhat superior to other forms of advertisement in that no other purveyor of advertising (television, radio, magazines) had ever led consumers to a company quite so immediately.
As another means of generating revenue, Yahoo! struck up distribution deals with Web sites that were looking to increase their own traffic. For example, Yahoo!, while not itself an online retailer, boasted a lot of user traffic at its site. An online retailer, however, might have goods or services to sell but a need to first increase traffic at its own site in order to sell those goods. A distribution deal would pair the two sites, with Yahoo! leading its customer traffic to the retailer's site in exchange for a cut of the transaction revenues whenever customers made purchases. In this sense, Yahoo!, along with competitors such as Excite, Infoseek, and Lycos, came to be known as a "portal"—a gateway to the rest of the Internet.
Through banner advertising and distribution deals, Yahoo! was able to continue offering its services to Web surfers for free, as opposed to online services such as America Online (AOL), Prodigy, and Microsoft Network. The latter three charged monthly fees for the use of their offerings. Although these online service companies' offerings were often more graphically intricate and visually pleasing than the Yahoo! site, they were essentially providing the same thing as Yahoo! while at the same time charging for the service. According to Jonathan Littman in the July 20, 1998 edition of Upside Today, "Yahoo, much like Amazon.com, built a natural Internet brand through its simple desire to satisfy customers." It was not long before Yahoo!'s user base was comparable to that of industry giant AOL, even though its 1995 revenues topped off at only around $1 million.
The Birth of a Brand Name: 1996
In 1996, Yahoo! went public, offering shares of its stock for $13. In the first day of trading alone, the company's stock price sailed to $43, and its estimated valuation was quoted at upwards of $300 million, more than 15 times its eventual 1996 revenues of approximately $20 million. Around that time, Yahoo! decided to start promoting itself in through advertising. Another former Stanford graduate, Karen Edwards, was brought aboard as the Yahoo! "brand marketer," and she immediately lined up ad agency Black Rocket of San Francisco to handle Yahoo!'s account. Black Rocket was composed of four independent advertising executives who, ironically, owned no computers.
That spring, Yahoo! used almost its entire advertising budget for 1996 to run its first national-scale ad campaign on television. Luckily, the ad was an immediate hit. In the television spot, a fisherman used Yahoo! to obtain some baiting tips, then proceeded to land a number of gigantic fish. According to Jonathan Littman in a July 20, 1998 edition of Upside Today, "The faux testimonial captured the Net's spirit without being the least bit techie." From this campaign arose the company tagline "Do you Yahoo!?" Yahoo! executives hoped that the efforts would help their operation to blossom into a full-fledged media company.
Yahoo! Inc. is a leading global Internet communications, commerce and media company that offers a comprehensive branded network of services to more than 274 million individuals each month worldwide. As the first online navigational guide to the Web, www.yahoo.com is the leading guide in terms of traffic, advertising, household and business user reach. Yahoo! is the No. 1 Internet brand globally and reaches the largest audience worldwide. Headquartered in Sunnyvale, Calif., Yahoo! has offices in Europe, Asia, Latin America, Australia, Canada and the United States.
The quest to turn the Yahoo! name into a major brand took a few wacky turns along the way. For example, Edwards decided that the Yahoo! name simply needed to be out in the public eye as much as possible, regardless of the manner in which it appeared. Yahoo! posters began appearing at many outdoor locations, such as sporting events, concerts, and even construction sites. The Yahoo! logo was placed everywhere, with one of the most notable places being a tattoo on the rear-end of a Yahoo!'s financial pages' senior producer, when he made good on a lost bet. It was also plastered on the side of the San Jose Sharks' Zamboni ice machine and printed onto items such as Ben & Jerry's ice cream containers and VISA cards. The yellow and purple Yahoo! logo even appeared shrink-wrapped onto five Yahoo! employees' cars, and one spring Edwards planted her flower garden at home in yellow gladioli and purple petunias.
Acquisitions and Further Expansion: 1997–98
As Yahoo! became a certifiable household brand name, the company began striving to further satisfy the needs of its users. Following the trend set by online service companies such as AOL, Yahoo! added services and features such as chat areas, Yellow Pages, online shopping, and news. The company also added a feature called "My Yahoo!," which was a personalized front page for regular users that displayed information tailored to each user's interests. The company also teamed up with Visa to create an Internet shopping mall (an idea that was later aborted), with publisher Ziff-Davis to create "Yahoo! Internet Life" (an online and print magazine which never came to fruition), and with Netscape to develop a topic-based Internet navigation service to be used with the Netscape Communicator browser software.
By 1997, Internet surfers were using Yahoo! to view approximately 65 million pages of electronic data each day. That year, Yahoo! acquired online White Pages provider Four11 for $95 million. The purchase gave Yahoo! access to Four11's e-mail capabilities, which when integrated into Yahoo!'s offerings allowed the company to provide its users with free e-mail (Yahoo! Mail). By mid-1998, over 40 million people were logging on to Yahoo! each month, 12 million of whom had become registered Yahoo! e-mail users. To put those numbers into perspective, one can consider that at that time, only 30 million people were tuning in to network-leader NBC's top-rated show ER each week, and the number of Yahoo! e-mail users was comparable to that of online service giant AOL.
In July 1998, Yahoo! received a $250 million investment from Japan's Softbank Corporation, increasing Softbank's share of the company to approximately 31 percent. Yahoo!'s market valuation at that time was $6.9 billion, which was much higher than that of most other media companies. As an emerging media company, Yahoo! began to move into the Internet access market that year through the launch of Yahoo! Online. To do so, the company initially formed a partnership with MCI WorldCom, but the arrangement deteriorated later that year. Subsequently, Yahoo! crafted a deal with communications giant AT&T to provide Internet access through AT&T's WorldNet service.
Also in 1998, Yahoo! replaced Digital Equipment's Alta Vista with California-based search engine specialist Inktomi as the supplier of Yahoo!'s search engine. Yahoo! then purchased Viaweb, a producer of Internet software programs. The acquisition resulted in the posting of a one-time $44 million charge in 1998. Yahoo! planned to use Viaweb's software to start a new service, which would allow its users to set up their own Web sites for the purpose of buying and selling goods online.
In October 1998, Yahoo! purchased Yoyodyne Entertainment for 280,664 shares of Yahoo! common stock. Yoyodyne added its permission-based direct marketing capabilities to Yahoo!, which also obtained the company's database of consumers, valuable demographic information, and other Yoyodyne assets. Prior to the acquisition, much of Yoyodyne's direct marketing was done through online games and sweepstakes at Internet sites such as EZSpree.com, GetRichClick.com, EZVenture.com, and EZWheels.com. Yahoo! announced that while those four sites would remain intact after the integration of Yoyodyne into Yahoo!, the former company's overall brand would be phased out.
By the end of the year, Yahoo!'s user traffic had increased considerably since 1997, with Web surfers viewing approximately 95 million pages of information through Yahoo! each day, a huge increase from the previous year's average.
Phenomenal Growth in the 2000s
By the end of the 20th century, the computer industry, and the Internet industry in particular, was becoming increasingly inundated with new players. In July 1998, NBC had purchased a 19 percent interest in Snap!, another portal operated by CNET Inc. Disney followed suit by grabbing a 43 percent stake in Infoseek Corporation. At Home Corporation purchased Excite, Inc., and Microsoft Corporation increased promotion of its MSN portal. Even America Online made moves to increase its scope through the acquisition of Netscape and its Netcenter portal. Nobody wanted to be left out of the Internet game, since many analysts predicted that it would be the next true media industry.
- The company begins as "Jerry's Guide to the World Wide Web" and is later renamed Yahoo!
- Yahoo! moves to Netscape.
- The company goes public.
- The company establishes Internet guides in Chinese and Spanish and teams with AT&T's WorldNet Service to provide Internet access.
- GeoCities and Broadcast.com are acquired in a multi-billion dollar deals.
- The company acquires HotJobs.
- Overture Services Inc. is bought in a $1.6 billion stock deal.
Yahoo! tried to maintain its large share of the market by continuing to focus on its users and their satisfaction. Recognizing that it would only take one click of a computer mouse for a Yahoo! user to defect to one of its competitors, the company began to provide its users with even more features and services. In January 1999, Yahoo! announced the purchase of GeoCities, the third most-visited Web site in December 1998 (directly behind top-rated AOL.com) and second-rated Yahoo.com. The GeoCities site was a creator of electronic communities for people. Based on people's interests, GeoCities allowed its users to set up their own personal home pages. Yahoo! hoped that the acquisition of GeoCities would bring many of that site's users to Yahoo!, and vice versa.
The new century saw a dramatic rise in both sales and profits for Yahoo! In 2001 the company had sales of $717 million; in 2002, $953 million; in 2003, $1.6 billion; and in 2004, $3.5 billion, a one-year increase of 120 percent. This period began with a loss of $92.8 million in 2001. In 2002, however, the company posted a net income of $42.8 million. This rose in 2003 to $237.9 million and to a healthy $839.6 million net income in 2004. Such phenomenal growth was fueled by a number of factors, including steady acquisitions of other Internet companies. During the years 2000 to 2004, Yahoo! acquired thirteen companies: Arthas.com, eGroups, Kimo, Sold.com, Launch Media, HotJobs, Inktomi, Overture Services, Beijing 3721 Technology Co. Ltd., FareChase, OddPost Inc., Music-Match, and Kelkoo. Web traffic increases have also played a part. As of March 2004, the Yahoo! network of properties received some 2.4 billion page views per day.
A flurry of new joint ventures also promised continuing growth for Yahoo! In November 2001, the company teamed with SBC Communications to offer co-branded DSL and Dial services. This partnership was reaffirmed in November 2004 when the two companies agreed to a multi-year extension of their venture. They planned to move beyond products offered only on a home computer to products for home television and audio systems, Cingular wireless phones, SBC FreedomLink Wi-Fi, and SBC Home Networking equipment. Yahoo! CEO Terry Semel explained: "The new services that will be developed out of this expanded relationship represent the next step in Yahoo!'s strategy to further deepen consumer relationships by extending our products and services beyond the desktop. SBC and Yahoo! are putting consumers in the driver's seat, delivering what they want—when, how and where they want it." In December 2004, the company teamed with Nextel Communications Inc. to offer a group of Yahoo! products and services, including e-mail, instant messaging, games, and news content, on Nextel handheld devices. The venture combined Yahoo!'s wireless messaging capabilities with Nextel's nationwide network. In January 2005, the company signed a deal with Verizon Communications Inc. to offer Verizon's broadband customers a new Verizon Yahoo! portal. "We are very excited to team up with Verizon, the largest communications company in the U.S., as their partner of choice, in order to provide Verizon's subscribers with a compelling new Verizon Yahoo! offering," said Dan Rosensweig, Yahoo!'s chief operating officer. With such ambitious plans for the future, growth projections for Yahoo! remained optimistic.
HotJobs.com, Ltd.; Kelkoo S.A.; Musicmatch, Inc.; Overture Services, Inc.; Yahoo! Europe; Yahoo! Japan.
America Online, Inc.; About Inc.; Google Inc.; Microsoft Corporation.
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—Laura E. Whiteley —update: Thomas Wiloch
headquarters: 701 first ave.
sunnyvale, ca 94089 phone: (408)349-3300 fax: (408)349-3301 email: [email protected] url: http://www.yahoo.com
Yahoo! Inc. is an Internet company that provides a wide variety of services to more than 200 million consumer and business customers. It can be accessed at www.yahoo.com, which is the company's U.S. address on the World Wide Web. The site was designed to make the Internet user-friendly, even for individuals with little computer or technology experience. Yahoo! offers directories of other sites along with a description of the content. The company has moved beyond its modest beginning as a search engine and now offers news, shopping, e-mail, chat rooms, and media services.
Yahoo! was created in 1994 by two graduate students at Stanford University. Within two years of the company's development, the founders, David Filo and Jerry Yang, had abandoned their academic careers and were working full time as managers of this fledgling venture. Yahoo! became a publicly traded company in a 1996 initial public offering that was a success by any standard. The stock opened at $13 a share and ended its first day of trading up 154 percent at $33 a share.
Yahoo! is a member of the Standard & Poor's 500 Index and operates a global network of 24 international sites produced in 13 languages. The company offers services in the following areas: listings, media, finance and information, commerce, communications, enterprise solutions, and access and distribution. Yahoo! has entered into partnerships or agreements with numerous corporations and media outlets that provide content and listings for the site. This comprehensive network of strategic alliances has transformed Yahoo! from a simple search engine to a full-service Internet portal placing a multitude of information at the fingertips of the public.
The company reported profits soon after its launch and was widely regarded as the first bona fide Internet success story. In 2001 Yahoo! posted annual revenues of $717.4 and a net loss of 92.8 million dollars compared with $1,110.2 million in revenues and a net income of $70.8 million in 2000. Investors did not focus on the daily activities of the start-up. Stock prices for the company were astonishing. In 1997 the company grew 242 percent and the stock rose 500 percent. By the following year, the price had jumped 584 percent. In 1998, almost to the disbelief of Wall Street firms, Yahoo! stock was trading at a whopping 745 percent increase from its original price on the day of the 1996 IPO.
Analysts are applauding Yahoo!'s efforts to diversify and generate new sources of revenue. The recent addition of HotJobs.com and the completion of several other deals are considered a solid beginning for recovery. John Corcoran, an analyst with CIBC World Markets Inc. is quoted as saying, "Things are improving for them. We think the stock is more than halfway back to where it should be." Holly Becker, an analyst for Lehman Brothers is more cautious in her review, "Yahoo! is dependent on new business initiatives, which are just beginning to impact the bottom line and remain somewhat uncertain." Fred Moran an analyst at Jeffries & Co. States, "Yahoo is in a transition. They have maintained a course of adding new revenue, such as subscription-based services, but the revenues from these services is materializing very gradually." Expectations for the company are positive for 2002 and beyond.
Yahoo! was developed by two Ph.D. candidates enrolled in Stanford University's electrical engineering program. David Filo and Jerry Yang were both computer programmers, but the creation of Yahoo! had little to do with programming or technology. It began life as a list of favorite sites entitled "Jerry's Guide to the World Wide Web." They published this list on the Internet to serve as a navigation tool for other users. Prior to 1994 the Web was not browser capable, which severely limited the number of users to those who possessed enough technical expertise to manipulate the required codes. In 1994 a program named Mosaic, which would later be renamed Netscape Navigator, was released. This new browser allowed nonscientists to view information on the Web with ease. Filo and Yang provided the public with a neatly organized address book of the best sites to visit.
The single most pivotal event in the history of this young company may have occurred the day the founders' Ph.D. advisor ordered them to move the extracurricular project off-campus. The site had become enormously popular, receiving hundreds of thousands of visitors daily, and the incredible growth was placing a strain on the university's computer network. When both AOL and Netscape offered the partners jobs at their respective organizations, the two grad students began to consider a future as entrepreneurs. When venture capital dollars were offered in February 1995, they couldn't resist. Sequoia Capital fronted them more than $1 million dollars to turn their pet project into a business. In return, Sequoia would acquire 25 percent of the operation. Filo and Yang left Stanford University six months short of completing their degrees. A management team was formed (including new CEO Tim Koogle), staff was hired, and a business strategy was hatched. Yahoo! generated its first revenues in 1995 by selling advertising space on its pages. The company adhered to its user-friendly policies and did not overload its site with a multitude of banner ads or pop-up ads, which required users to click through to access a listing.
In 1996 SOFTBANK of Japan invested $100 million dollars in the start up company. Despite the large infusion of cash, Yahoo! registered to make its initial public offering (IPO) in April 1996. In most cases, the goal of an IPO is to generate enough cash to finance the continued growth and expansion of the company. Yahoo! did not need the money. The offering was rooted in its desire to gain respect as a leader in this new field. The initial offering was a success, due in part to the very small amount of stock actually released to the public. As a result, demand for the stock was high, supply was low, and the price climbed dramatically.
The company actively developed new features for the portal, which promoted the feeling of community among users. Geographically themed sites were introduced for members in Los Angeles, Chicago, New York, and Washington DC. International expansion was also a priority in 1996. Using the funds and expertise provided by the investors at SOFTBANK, Yahoo! Japan and Yahoo! Europe were launched.
Beginning in 1997, the company increased its presence in cyberspace through strategic acquisitions. Internet directory firm Four11; Viaweb, an e-commerce software organization; and Yoyodyne Entertainment, a marketing company, joined forces with Yahoo! Growth continued for the next several years, and the popular sites Broadcast.com and GeoCities were purchased as part of the growing Internet consolidation trend. Smaller firms were being swallowed by stronger competitors as market conditions began to slow down. When the dot-com bubble burst in 2000, Yahoo was able remain in business, but revenues and investor goodwill disappeared quickly.
In 2001 CEO Tim Koogle left his post and was replaced by former Hollywood executive, Terry Semel. Semel had no experience in the field of technology, but his personal connections, and skill in navigating the entertainment industry, made him an attractive candidate. As the World Wide Web embraces new media services, such as music and video streaming, Semel can be a valuable asset to the firm. He faces this challenge without the help of longtime Yahoo! executive Jeff Mallett. Mallett stepped down from his position in April 2002. Despite the changes in the executive offices, Yahoo! continues to move forward with ambitious plans to offer new features and revitalize the flow of revenue.
Yahoo!'s goal is to be the home page for every Internet user. A home page is the first page that a browser opens to whenever a user logs onto the Web. Once the user has entered cyberspace via the Yahoo! portal, the goal is to keep all "eyes" on related company sites, filled with company-provided content and services. In 1996 Yahoo! was reporting 20 million page views a day and, by June 2000, this number had multiplied to 685 million pages a day. The number of pages viewed on an Internet site correlates directly with the amount of revenues generated. Sustained profitability is the ultimate challenge of any company, but it is particularly important for Internet firms.
From its inception, Yahoo! realized that it was necessary to be more than just a search engine to be successful. It wanted to provide useful, quality content to its users in a simple and understandable manner. The company forged agreements with respected business and media firms, thus avoiding the high costs and risks of producing content in-house. It then hired employees known as "surfers" to personally review and categorize all Web sites that requested inclusion in the Yahoo! directories. The management of the company did not want the site to be automated and impersonal.
FAST FACTS: About Yahoo! Inc.
Ownership: Yahoo! Inc. is a publicly traded company on the NASDAQ Stock Exchange.
Ticker Symbol: YHOO
Officers: Terry S. Semel, Chmn. and CEO, 58, 2001 base salary $254,853; Jerry Yang, Chief Yahoo!, 32; David Filo, Chief Yahoo!, 35
Principal Subsidiary Companies: Yahoo! Inc. is the parent company for subsidiaries HotJobs.com, Launch Media, GeoCities, and a number of smaller technology firms.
Chief Competitors: Main competitors to Yahoo! Inc. include America Online (AOL)/Time Warner, Microsoft MSN, Terra Lycos, and Amazon.com.
Current strategies address the needs to expand services offered domestically, develop in depth information about current user preferences, create Yahoo! online properties in international markets, and identify new methods of producing revenues.
Yahoo! pioneered navigation on the World Wide Web and is arguably the most dominant company formed strictly as an Internet venture. Ironically, the efforts of traditional media and technology companies may be exerting the greatest influences on its operations. The merger of Time Warner and America Online, as well as the evolution of Microsoft's MSN have created formidable competitors for the startup. Together America Online and Time Warner possess an enormous customer base drawing from both AOL's Internet customers and Time Warner's subscribers from cable networks and publishing ventures. In addition they have already established a fee-paying relationship with these customers and have collected demographic information for targeted marketing. Time Warner also provides AOL with content, global distribution networks, and vast financial resources. Yahoo! recognizes the advantages in this model and will adapt its strategies accordingly to remain competitive.
Yahoo! has been able to post profits by charging advertising and sponsorship fees for site placement. However, faced with stiff competition and a soft economy, the company is moving quickly to establish fee-based services. It is exploring the possibility of subscription-based streaming media, which would offer audio and video programming at a fee. Sporting events, news, and movies on demand would be offered for a monthly fee or on a pay-per-view basis. Yahoo! is also considering tacking on user fees for its previously free e-mail, data storage, and photo-sharing services. The company is also working to expand its business to business products and enterprise information solutions.
CHRONOLOGY: Key Dates for Yahoo! Inc.
David Filo and Jerry Yang begin construction on the site working from a trailer on the Stanford University campus
The company is incorporated and funded by venture capitalists
Yahoo! Inc. becomes a publicly traded company in a highly successful IPO
Acquires Broadcast.com and Geocities
Stock reaches its highest level, trading at $250.06 a share
Internet bubble bursts, revenues decline, stock price tumbles to a low of $7.75, and CEO Tim Koogle steps down
Hollywood executive Terry Semel leads the organization as it begins to offer fee based services in attempts to generate revenue.
Hooligans and hooliganism usually mean there's trouble afoot. These slang terms are used to describe young "ruffians" or hoodlums and the mischief they cause. Yahoo! decided to change that notion when it coined the term "Yahooligans" and used it as the name of its children's site. Yahooligans! can be found on the Yahoo! home page and offers fun, safe, and educational activities for children. Young Internet users can read news stories of the day written in an understandable and non-threatening style. Movie reviews are limited to films that are suitably rated for children and young adults. The site also provides an instant messaging service for chatting with friends online.
Yahoo!'s products include search and directory tools that allow users to browse listings for real estate, automobiles, and even careers. It became a major factor in the online job search market with its acquisition of HotJobs.com in 2001. Web surfers can also find information on books, movies, investments, health, and weather by accessing personalized pages. Media services allow consumers to download music, videos and even concert feeds with a personal computer. Commerce and shopping services are also popular Yahoo! destinations. Yahoo! offers online shopping, auctions, and travel planning. Communication is a premier benefit of the World Wide Web, and Yahoo! offers some of the most popular systems. E-mail, instant messaging, calendars, and chat rooms are heavily trafficked applications. Enterprise Solutions focuses on the business and corporate community. Yahoo! provides platforms, which allow companies to integrate content into their own intranets or extranets. Other business tools include conferencing and meeting capabilities and online training classes.
The Internet is rapidly gaining users around the world, and Yahoo! has plans to greet them all in every language. The first international sites were launched in Japan in 1996, and the company now boasts the largest worldwide community of users. Yahoo! is aware of the risks of entering global markets but has confidence that it will be successful in its quest for worldwide acceptance. The company places a great deal of importance on global citizenship and attempts to respect and comply with local cultures, customs, and laws in any market it enters. The network of Yahoo! sites now extends to 24 countries with many custom-built sites. The company maintains offices in Europe, Asia, Latin America, Australia, and Canada. Sunnyvale, California, remains Yahoo! central.
Yahoo! employees are encouraged to volunteer time to local community causes. Each year the company organizes opportunities for the staff to participate in special events as a group. Yahoo! staff members have pledged time to the environment by working to beautify the California coastline as well as local elementary schools. Commitment to children is also a priority. Volunteers have signed up to be classroom buddies in elementary schools, leading activities such as reading, sports, and computers. Other projects centered on the need for animal rights, assisting elderly citizens, and participating in career and employment mentoring days.
A ROOM WITH AN ATTITUDE
The corner office was once a status symbol that helped define our corporate culture. Times have changed. The Internet revolution created a new way of communicating and doing business for everyone. Internet companies have taken it even one step further and are breaking with many work place traditions. Jeans and T-shirts are in. Video games and foosball tables replace lunchroom tables. Even the meeting rooms aren't immune to the new trends. Conference rooms are often designated with numbers, letters, or a combination of the two. Yahoo! and many other Silicon Valley companies decided that the room names should reflect the often quirky personalities of the employees. If you are invited to a meeting at Yahoo!, you may be assigned to a meeting room named after one of the ten Biblical plagues: "Frogs," "Boils," "Blood," or even "Pestilence." The room dubbed "Darkness" houses comfortable couches for sleeping. Another set of rooms proudly proclaim the company's attitude: "Decent, Definitely, and Disposed." Yes, one of the favorite jokes is to tell lost souls who are searching for a meeting, "We're in Decent!"
You don't have to be a technical genius to be a Yahoo! employee, or Yahoo!, at least not according those who have made the commitment. Candidates are encouraged to search for their dream job in the Yahoo! database of open positions. It is even possible to become an international Yahoo! and see the world. Employees are encouraged to be innovative, creative, fun-loving, and dedicated. The Silicon Valley offices are very casual and boast foosball and video games. The "team" theme is evident throughout the corporate headquarters, which are bathed in the company colors: purple and yellow. Parties are scheduled regularly for holidays including a Halloween party day nicknamed YaBoo!. The downturn in Internet fortunes has been felt at the Yahoo! headquarters, and management has been forced to institute a company-wide lay off impacting hundreds of employees.
SOURCES OF INFORMATION
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"yahoo tacks fee onto e-mail, storage." cnetnews.com, 21 march 2002.
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For an annual report:
on the internet at: http://docs.yahoo.com/info/investor/invinfo.html
For additional industry research:
investigate companies by their standard industrial classification codes, also known as sics. yahoo! inc.'s primary sic is:
7373 computer integrated design
also investigate companies by their north american industry classification system codes, also known as naics codes. yahoo! inc.'s primary naics code is:
514191 on-line information services
As one of the early Internet search engines, Yahoo! enjoyed the benefits of being first to market as it evolved from a search engine to an Internet portal. Yahoo! became a strong Internet brand in its first year of operation. It was the first search engine to develop a commercial look and one of the first to attract online advertisers. While the company has developed alternative revenue streams, it has remained dependent on Internet advertising for the bulk of its revenue.
FORMATION OF YAHOO!
Yahoo! began in 1994 as a database for finding Internet resources. The online directory of Web servers was developed by two Stanford University graduate students, Jerry Yang and David Filo, who had Master's degrees in electrical engineering. Their Web search engine was initially made available to the public on Stanford's Web site, where it was an instant hit. Unlike other search engines that would come along, Yahoo! used hierarchical menus to organize Web sites. Yang and Filo soon took a leave from their doctoral studies to devote themselves full-time to Yahoo!.
Yahoo Corp. was formed in April 1995. Tim Koogle, a Stanford graduate in electrical engineering and mathematics, joined as CEO, and the company had 14 employees. By April 1995 Yahoo had about 200,000 daily users who accessed its search engine. The company obtained $1 million in financial backing from venture capital firm Sequoia Capital. Users could search 40,000 Web pages, a small percentage of the 5 million then in existence.
Yahoo hoped to generate revenue by selling advertising space. Web design firm CKS Partners of Portland, Oregon, was hired to redesign Yahoo!'s interface. On July 31, Yahoo was relaunched as an advertising-supported directory. Five advertisers paid $60,000 each for a three-month contract. They included telecommunications giant MCI Communications Corp., a San Francisco-based startup called Worlds Inc., the Internet Shopping Network, MasterCard International, and online retailer NECX. The only competition at the time was InfoSeek, which began in January 1995. InfoSeek also gained revenue from ads, charging $15 for every 1,000 times an ad appeared on someone's computer screen. Yang expected that competition would soon become fierce.
Analysts noted Yahoo's new commercial look and predicted it would become the model for future services on the Internet. The site displayed a newly designed company logo. "Extra!" news tag added to some headings suggested more informational depth. Computer Weekly predicted, "Eventually, the company may become a one-step site for all the services an Internet user might want."
STRONG BRAND HELPS IPO SUCCEED, 1996
After its first year of operation Yahoo! was the best known and most widely used Internet guide. The company had attracted an additional $4 million in financial backing from Ziff-Davis Publishing Co. and Japanese software giant Softbank Corp. It generated $500,000 in revenue in its first six months. In January 1996 Ziff-Davis and Yahoo! formed a strategic partnership whereby the magazine ZD Internet Life would become Yahoo! Internet Life and the two companies would publish an online guide for computing resources on the Internet.
At the beginning of 1996 Yahoo! provided links to about 100,000 sites. The company tried to list the most important sites. It worked closely with advertisers and supplied them with demographic information and traffic reports. To broaden its perspective, Yahoo! formed a partnership with the Internet division of Canada's Rogers Communications to develop an Internet search service for Canadian sites. Around this time Rogers also launched CANOE, the Canadian Online Explorer, which enabled users to browse online editions of such Rogers publications as Maclean's, The Financial Post, and the Sun newspapers.
Yahoo! held its initial public offering (IPO) in April 1996, selling 2.6 million shares at $13 per share on the NASDAQ. By the end of the first week shares more than doubled to nearly $33. Search engines Lycos and Excite also had their IPOs that same month. Following its IPO, Yahoo! Inc. enjoyed a market capitalization of more than $1 billion. It gained a $106 million investment from Softbank and together the two companies launched Yahoo! Japan, which was the first major directory service to contain language and content for a non-English speaking audience. Yahoo! Japan quickly became the most-trafficked site outside of North America. Softbank owned a 37 percent interest in Yahoo!
Yahoo! and Ziff-Davis International Media Group partnered to launch Yahoo! Europe in the United Kingdom, France, and Germany, with other countries to follow in 1997. In the United States Yahoo! began forming online alliances with local print and broadcast media companies to create city guides that organized and indexed sites relating to each city. The first cities to be covered were New York, Los Angeles, and San Francisco.
Yahoo! rolled out many new services in 1996, including My Yahoo!, a personalized service that delivered content from a user's favorite Web sites and provided other personalized information based on user preferences.
Although it was the recognized market leader, Yahoo! lost money in 1996, and its stock fell by 44 percent. Yahoo! planned to become profitable by turning itself into a media company. As Yang told Fortune, "The fundamental bet we are making is that we are a media company, not a tools company." The company planned to survive by creating brand loyalty.
ADDS SERVICES AND BECOMES A PORTAL, 1997-1998
Yahoo!'s branding efforts resulted in 39 percent of the general public knowing the Yahoo! name, according to a Yankelovich study. To build its brand recognition Yahoo! was the first Internet-only company to advertise on television. New services launched in 1997 included Yahoo! Finance, which included investment research, market summaries, and financial news as well as links to stock quotes, company profiles, and similar information.
By 1997 Yahoo! was posting profitable quarterly financial results, including $210,000 in the first quarter and $610,000 in the second quarter. Revenue in the second quarter more than quadrupled to $13.5 million from $3.3 million a year ago. First-quarter advertising sales were $9.5 million, compared to $1.7 million in the first quarter of 1996. Third quarter revenue reached $17.3 million, with an operating profit of $222,000 and net income of $1.6 million. Traffic reached an average of 50 million page views per day in September. Wall Street took note and toward the end of 1997 analysts were recommending Yahoo! as being financially sound and likely to benefit from increased Internet spending by advertisers and retailers.
During 1998 Yahoo! developed plans for becoming a portal and developing additional revenue streams from commerce and other sources. In mid-1998 the company acquired Viaweb Inc., an Internet commerce software vendor, for $49 million in stock. The acquisition gave Yahoo! the ability to design, build, promote, and host online storefronts and give merchants tracking and reporting tools. The Viaweb Store was subsequently relaunched as Yahoo! Store. Later in the year Yahoo! acquired Yoyodyne for about $30 million in stock. Yoyodyne specialized in target marketing, and Yahoo! would use its resources to develop ongoing promotional programs for its advertisers.
Yahoo! continued to operate at a profit in 1998. For the first quarter it had revenue of $30.2 million and a net profit of $4.3 million. About 22 percent of its revenue came from commerce and sponsorships. Strong traffic helped Yahoo! report financial results ahead of analysts' expectations for the rest of the year. In May Yahoo! led all Internet sites with 30.6 million unique visitors, followed by America Online with 22.8 million and Netscape with 18.9 million. For September average page views reached 144 million, with the number of registered users increasing by 7 million to more than 25 million. PC Magazine named Yahoo! the best Web search engine of 1997, citing its news-searching capabilities and extensively cross-referenced directory. It also praised the company's microsites, including Yahoo! Finance, regional guides, Yahooligans! For Kids, and Beatrice's Web Guide, a partnership with Women's Wire. Yahoo! also featured chat rooms and a free e-mail service. For fiscal 1998 the company's revenue reached $203.3 million, up from $70.5 million in fiscal 1997.
Yahoo! extended its brand in many ways. Globally it operated sites in 11 countries overseas, including a newly launched Chinese-language Web site based in Hong Kong. Like other search engines, Yahoo! offered extra services such as news, yellow and white pages, free e-mail, chat, and instant messaging. The Yahoo! name was also found on its own magazine, Yahoo! Internet Life, and a co-branded Visa credit card. New services launched in 1998 included Yahoo! Small Business and Yahoo! Clubs.
ACQUISITIONS AND NEW SERVICES, 1999-2000
In 1999 Yahoo! enjoyed strong revenue growth and profitability due to its global operations. Its stock joined the Standard & Poor 500 Index. Early in the year the company announced that it would acquire GeoCities, one of the largest domains on the World Wide Web, for an estimated $3.5 to $5 billion in stock. GeoCities hosted personal Web sites and sold ads on those sites. In its most recent quarter GeoCities lost $8.4 million on sales of $7.5 million.
Later in the first half of 1999 Yahoo! made another major acquisition when it paid $5.7 billion in stock for Broadcast.com, a multimedia Internet broadcasting company with the capability to send TV-quality video over the Internet. For 1998 Broadcast.com lost $15 million on sales of $24.4 million. As part of its strategy to deliver content to wireless devices, Yahoo! acquired Online Anywhere in June for about $80 million. Online Anywhere's software would enable Yahoo! to more easily format its content for wireless devices.
Among the many new services introduced during 1999 on Yahoo! were auctions, Yahoo! Radio, Corporate My Yahoo!, electronic bill paying, and Yahoo! Everywhere. A new version of its instant messaging service incorporated live voices, allowing users to talk to each other by pressing a talk button. The company's broad array of services added a great deal of "stickiness" to its site and kept people coming back.
Yahoo!'s fourth quarter profits surged to $57.6 million on revenue of $201 million, due to soaring advertising and e-commerce revenue. During December 1999 traffic increased to an average of 465 million page views per day, compared to 167 million page views per day in December 1998. The company's international operations accounted for 30 percent of its traffic and 13 percent of its revenue.
Yahoo! enjoyed strong revenue growth during the first half of 2000. In the second half of the year the dot.com shakeout began to affect Yahoo!'s advertising revenue as advertisers cut back on their spending. Yahoo!'s mid-2000 acquisition of eGroups for $432 million in stock enhanced the company's e-mail communications services for its online communities.
At the end of the first quarter Yahoo! had 125 million registered users for its personalized services, an increase of 25 million over December 1999. Page views per day rose to 625 million in March. A promotional arrangement with Kmart's Bluelight.com resulted in 1 million new users for Yahoo! With a network of 10,500 linked merchants, Yahoo! claimed that it enabled more than $1 billion of online transactions in the first quarter of 2000.
Even though Yahoo!'s third quarter earnings exceeded expectations, the company's stock dropped 21 percent following its quarterly report. In spite of Yahoo!'s diversification, analysts noted that page views and site traffic were the most important factors driving the company's revenue. In the first half of 2000, advertising accounted for 91 percent of Yahoo!'s revenue, with business services accounting for the other 9 percent. In the third quarter the company's merchant and advertising base fell to 3,450 from 3,675 in the second quarter.
New services launched in 2000 included the Yahoo! B2B Marketplace, a site designed to help companies find products and suppliers by serving as a portal to other vertical trading communities. Targeting enterprise customers, Yahoo! introduced Corporate Yahoo!, an enterprise information portal that would contain both Yahoo! content and corporate data. Corporate Yahoo! included personalization features taken from the My Yahoo! service for consumers.
During the year Yahoo! upgraded its instant messenger service to let users conduct hands-free conversations by eliminating the talk button. Conversation links were also added to news stories to enable people to talk to other users about a particular story. Yahoo! Finance Vision was a new site that incorporated video interviews, original production, and editorial content from other providers, all on one Internet page.
Consumers interested in conducting their personal finance transactions online were introduced to a new account aggregation service on Yahoo!, where they could consolidate their banking, credit card, investment, and other financial account information using Yahoo!'s online banking center or its My Yahoo! personalization tool.
Yahoo!'s communications initiative and its Yahoo! Everywhere program converged when the company began offering free voice-based services that included Internet content over the telephone, voice mail, and long distance calling. With Yahoo! by Phone, users could call a toll-free number to check e-mail, weather, news, and other information. Yahoo! Mail was expanded to include voice mail, while Yahoo! Messenger was extended to include the ability to make free PC-to-phone calls.
WEAK AD MARKET RESULTS IN QUARTERLY LOSSES, 2001
Further weakness in the online advertising market affected Yahoo!'s financial performance in 2001. Several stock analysts downgraded the company's stock at the beginning of the year. After a year-long slide, Yahoo!'s stock had lost 90 percent of its value. Profits for the first quarter were down 87 percent from a year ago, and second quarter losses of $48.5 million were accompanied by reduced earnings forecasts. In March chairman and CEO Tim Koogle gave up his CEO title but remained as chairman. Terry Semel, a former entertainment executive who was once co-CEO of Warner Bros., was hired as the new CEO. In April the company laid off 421 employees, some 12 percent of its 3,510 workers. Co-founder Jerry Yang noted that Yahoo! was in a transition from a period of tremendous growth to one of long-term growth in a volatile economy. To sustain that growth Yahoo! sought to balance its revenue from advertising, e-commerce, and services. One analyst speculated that Yahoo! would begin charging subscription fees for services such as multimedia content, enhanced financial services, and enhanced instant messaging.
In an effort to boost revenue and develop new revenue streams in 2001, Yahoo! Auctions began charging listing fees in January. In February it introduced a Sponsored Sites program for B2B and shopping, whereby paid listings would appear in some search results. Later in the year Yahoo! began charging U.S. customers for domestic voice calls made over the Internet as part of an updated version of Yahoo! Messenger. Yahoo! also expanded its B2B efforts by introducing three Industry Marketplaces for computer hardware, software, and electronics.
The addition of multimedia services also appeared to be a key part of Yahoo!'s plan to develop new revenue streams. The company began using streaming media to encourage online shopping on Yahoo! ShoppingVision and entered into a strategic relationship with ValueVision International, the third-largest home shopping network. Yahoo! also added video to its instant messaging service, which ranked third behind America Online and the Microsoft Network. Yahoo!'s $12 million acquisition of Launch.com added streaming music videos and music news as well as an Internet radio station. Yahoo! also entered into a wide-ranging agreement with Sony that included online movie marketing, e-commerce, and Web site development. For corporations, Yahoo! introduced Yahoo! Broadcast Services to give them Internet broadcasting capabilities for videoconferencing.
Despite its financial woes, Yahoo! continued to be one of the most popular Internet destination in 2001. In March it was the number one Internet property in terms of both page views and unique audience, ahead of such sites as eBay, Amazon.com, America Online, the Microsoft Network, and the Lycos Network. According to a mid-2001 study by Jupiter Media Metrix, Yahoo! was one of four Internet sites that accounted for more than half of all the time spent online by Internet users in the United States. With more than 192 million registered users as of mid-2001, Yahoo! had more people using its site than any other company.
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SEE ALSO: Filo, David; Koogle, Timothy; Portals, Web; Yang, Jerry; Ziff-Davis Inc.