Internet History Timeline
Yahoo is founded by Stanford engineering students Jerry Yang and David Filo in a campus trailer in 1994, bootstrap innovation and hardcore coding were etched into its corporate DNA.
Bill Gross, the indefatigable entrepreneur behind the business incubator IdeaLab, launched a search site called GoTo.com. Other search engines promised results based on human-built directories or computer-driven algorithms. Gross’ search site auctioned its results to the highest bidder.
At the time, the idea seemed radical, even offensive. Who would want results driven by hordes of sellers hawking goods and services? Advertisers would, as it turned out. Although GoTo never became a top-tier search destination, Gross and CEO Ted Meisel quickly saw that the big Web portals and search engines like AltaVista, Yahoo, AOL, and MSN would pay big money for GoTo’s auction-driven results.
www.goto.com changes its name to www.overture.com by the end of that year Web surfers had clicked on Overture ads 1.4 billion times. Advertisers understood the value of being able to bid for juicy keywords. The ads would be laser targeted, and the results — clicks — could be measured precisely. The portals and search sites figured out that the sponsored links could be placed alongside a more objective set of search results. It was a brilliant way to turn searches into revenue.
Laid low by the tech crash, Yahoo brought in Semel in May 2001, when the company was at its nadir. It rebounded spectacularly under his leadership.
Just as Goto.com changes its name to Overture in 2001, Google saw the power of this approach and decided to grow its own. By the time Google published its financial statements for the first time in 2004, everyone knew that the company had harnessed one of the great innovations of the Internet age.
Google’s revenue stood at a measly $240 million a year. Yahoo’s was about $837 million.
Engineers at Google took the concept of pay-per-click search results and in 2002 turned it into a smooth-running, money-printing machine called AdWords. The company developed an automated process for advertisers to bid on keywords. It also made the auctions more sophisticated so customers couldn’t game the system. Crucially, Google determined ad prominence on a Web page not just by the price advertisers were willing to pay per click — as Overture had done — but also based on how many clickthroughs that ad generated. As a result, Google’s system responded quickly to ineffective ads: They disappeared. Google also had a massive database that tracked which ads worked and which didn’t, information it could pass on to its customers to help them create better ad campaigns.
Yahoo CEO Terry Semel offers to buy Google for roughly $3 billion, but the young Internet search firm wasn’t interested. Once upon a time, Google’s founders had come to Yahoo for an infusion of cash; now they were turning up their noses at what Semel believed was a perfectly reasonable offer. Worse, Semel’s lieutenants were telling him that, in fact, Google was probably worth at least $5 billion.
Yahoo’s stock price was still hovering at a bubble-busted $7 a share, a $5 billion purchase price would essentially mean that Yahoo would have to spend its entire market value to swing the deal. It would be a merger of equals, not a purchase.
Overture dominates search-related advertising; its revenue is two times Google’s.
In late 2002, Yahoo acquired Inktomi, which many believed had the second-best search technology on the planet. (Google was still tops.) The price: a bargain $257 million.
In mid-2003, Semel’s patient negotiations with Overture bore fruit. He paid $1.4 billion for the search-driven ad pioneer, roughly 25 percent less than the original asking price.
By the time the deal was actually announced in 2003, the Google and Overture are neck and neck in revenues.
Google goes public. Google’s stock soared above $500 a share, giving the company a market value of $147 billion — right behind Chevron and just ahead of Intel.
Google’s revenue is 2.5 times Overture’s.
By early 2004 — more than a year after the deal — Yahoo had integrated Inktomi’s technology well enough to put an end to a 2000 agreement to use Google’s search technology. Jeff Weiner seems to get the thanks for this. And by late summer, even as Google was preparing to go public, optimism about Yahoo’s future was so high that its stock hit $36.42, eight times its low in 2001. The thinking went that Google’s rapid growth rate and immature management would cause it to stumble, allowing Yahoo to prevail. At the time, Yahoo had a database of 157 million users that could be sliced and diced for advertisers to permit pinpoint targeting, while name brands like Procter & Gamble were skeptical about Google.
Yahoo attempts to placate Microsoft by maintaining Overture as a stand-alone brand. At the same time, they planned an overhaul of Overture’s technology, a project code-named Panama. It was a disaster. With no clear delineations, Yahoo and Overture executives fought over turf. Yahoo hired and fired a half-dozen engineering chiefs at Overture during the first year.
Ted Meisel, Overture’s CEO is replaced by Jeff Weiner, a Semel protégé. Semel had decided in March 2005 to finally, fully integrate Overture into Yahoo, but those who worked on the project say it didn’t become a truly top priority until Weiner took over.
A year of the new world of social networking and online video
A year of social networking darlings www.facebook.com and www.myspace.com
A year expected by many to be Yahoo’s best — turned out dismally. Brand-advertising growth fell by half, while Yahoo’s share of search-related advertising dropped from 32 to 24 percent, according to Piper Jaffray. (During the same period, Google’s edged up from 64 to 68 percent.) Analysts at Morgan Stanley predicted that operating profits at Yahoo would fall by 20 percent. (Final 2006 results had not posted by press time.) “It’s now a given among advertisers that Google has won the search game,” says Jeff Lanctot, vice president of media for Internet ad firm Avenue A Razorfish. No wonder Yahoo’s share price fell 36 percent last year.
Yahoo was interested in buying YouTube, but Google snatched away the Web video star for $1.65 billion.
In December, Semel shook up his top management team, leading to the departures of COO Dan Rosensweig and content chief Lloyd Braun and to the streamlining of the company’s organizational chart. There’s talk that Semel himself may be on the way out.
Yahoo’s HotJobs, was trounced by the competition
By Fred Vogelstein | Also by this reporter
12:00 PM Jan, 16, 2007