Early history (1994-1996)
In January 1994, Jerry Yang and David Filo were Electrical Engineering graduate students at Stanford University. In April 1994, "Jerry's Guide to the World Wide Web" was renamed "Yahoo!". Filo and Yang said they selected the name because they liked the word's general definition, which comes from Gulliver's Travels by Jonathan Swift: "rude, unsophisticated, uncouth." However, a swimming coach of the senior producer of Yahoo said it was because the senior producer ran around the pool screaming "YAHOO!" Its URL was akebono.stanford.edu/yahoo.[11]
By the end of 1994, Yahoo had already received one million hits. Yang and Filo realized their website had massive business potential, and on 1 March 1995, Yahoo was incorporated.[12] On April 5, 1995, Sequoia Capital provided Yahoo with two rounds of venture capital.[13] On 12 April 1996, Yahoo had its initial public offering, raising $33.8 million dollars, by selling 2.6 million shares at $13 each.
"Yahoo" had already been trademarked for barbecue sauce (and knives (by EBSCO Industries)). Therefore, in order to get the trademark, Yang and Filo added the exclamation mark to the name.[14]
[edit] Growth (1997-1999)
Like many search engines and web directories, Yahoo diversified into a Web portal. In the late 1990s, Yahoo, MSN, Lycos, Excite and other Web portals were growing rapidly. Web portal providers rushed to acquire companies to expand their range of services, in the hope of increasing the time a user stays at the portal.
On 8 March 1997, Yahoo acquired online communications company Four11. Four11's webmail service, Rocketmail, became Yahoo Mail. Yahoo also acquired ClassicGames.com and turned it into Yahoo Games. Yahoo then acquired direct marketing company Yoyodyne Entertainment, Inc. on 12 October. On 8 March 1998, Yahoo launched Yahoo Pager,[15] an instant messaging service that was renamed Yahoo Messenger a year later. On 28 January 1999, Yahoo acquired web hosting provider GeoCities. Another company Yahoo acquired was eGroups, which became Yahoo Groups after the acquisition on 28 June 2000.
When acquiring companies, Yahoo often changed the relevant terms of service. For example, they claimed intellectual property rights for content on their servers, unlike the companies they acquired. As a result, many of the acquisitions were controversial and unpopular with users of the existing services.[clarify]
[edit] Dot-com bubble (2000-2001)
On January 3, 2000, at the height of the Dot-com boom, Yahoo stocks closed at an all-time high of $475.00 a share. Sixteen days later, shares in Yahoo Japan became the first stocks in Japanese history to trade at over ¥100,000,000, reaching a price of ¥101.4 million ($962,140 at that time).[16]
On February 7, 2000, yahoo.com was brought to a halt for a few hours as it was the victim of a distributed denial of service attack (DDoS).[17][18] On the next day, its shares rose about $16, or 4.5 percent as the failure was blamed on hackers rather than on an internal glitch, unlike a fault with eBay earlier that year.
During the dot-com boom, the cable news station CNBC also reported that Yahoo and eBay were discussing a 50/50 merger.[19] Although the merger never materialized the two companies decided to form a marketing/advertising alliance six years later in 2006.[20]
On June 26, 2000, Yahoo and Google signed an agreement which retained Google as the default world-wide-web search engine for yahoo.com following a beta trial in 1999.[21]
[edit] Post dot-com bubble (2002-2008)
Yahoo was one of the few surviving large Internet companies after the dot-com bubble burst. Nevertheless, on September 26, 2001, Yahoo stocks closed at a five-year low of $4.06 (split-adjusted).
Yahoo formed partnerships with telecommunications and Internet providers to create content-rich broadband services to compete with AOL. On June 3, 2002, SBC and Yahoo launched a national co-branded dial service.[22] In July 2003, BT Openworld announced an alliance with Yahoo.[23] On August 23, 2005, Yahoo and Verizon launched an integrated DSL service.[24]
In late 2002, Yahoo began to bolster its search services by acquiring other search engines. In December 2002, Yahoo acquired Inktomi. In February 2005, Yahoo acquired Konfabulator and rebranded it Yahoo Widgets,[25] a desktop application and in July 2003, it acquired Overture Services, Inc. and its subsidiaries AltaVista and AlltheWeb. On February 18, 2004, Yahoo dropped Google-powered results and returned to using its own technology to provide search results.
In 2004, in response to Google's release of Gmail, Yahoo upgraded the storage of all free Yahoo Mail accounts from 4 MB to 1 GB, and all Yahoo Mail Plus accounts to 2 GB. On 9 July 2004, Yahoo acquired e-mail provider Oddpost to add an Ajax interface to Yahoo Mail.[26] On 13 October 2005, Yahoo and Microsoft announced that Yahoo Messenger and MSN Messenger would become interoperable. In 2007, Yahoo took out the storage meters and made the storage limit unlimited.
Yahoo continued acquiring companies to expand its range of services, particularly Web 2.0 services. Yahoo Launchcast became Yahoo Music on February 9, 2005. On March 20, 2005, Yahoo purchased photo sharing service Flickr.[27] On March 29, 2005, the company launched its blogging and social networking service Yahoo 360°. In June 2005, Yahoo acquired blo.gs, a service based on RSS feed aggregation. Yahoo then bought online social event calendar Upcoming.org on October 4, 2005. Yahoo acquired social bookmark site del.icio.us on December 9, 2005 and then playlist sharing community webjay on January 9, 2006.
On August 27, 2007, Yahoo released a new version of Yahoo Mail that makes it possible for users to send instant messages to the largest combined instant messaging (IM) community including users of Yahoo Messenger and Windows Live Messenger, to send free text messages to mobile phones in the U.S., Canada, India and the Philippines.[28]
On January 22, 2008, it was reported that Yahoo was planning to lay off hundreds of employees out of its work force of about 14,000. The company has suffered severely in its inability to effectively compete with industry search leader Google.[29]
On January 29, 2008, Yahoo announced that the company was laying off 1,000 employees. The cuts represent 7 percent of the company's workforce of 14,300. Employees are being invited to apply for an unknown number of new positions that are expected to open as the company expands areas that promise faster growth.[30]
[edit] Failed acquisition attempt by Microsoft
Microsoft and Yahoo pursued merger discussions in 2005, 2006, and 2007, that were all ultimately unsuccessful. At the time, analysts were skeptical about the wisdom of a business combination.[31][32]
On February 1, 2008, after its friendly takeover offer was rebuffed by Yahoo, Microsoft made an unsolicited takeover bid to buy Yahoo for US$44.6 billion dollars in cash and stock.[33][7] Days later, Yahoo considered alternatives to the merger with Microsoft, including a merger with internet giant Google[34] or a potential transaction with News Corp.[35] However, on February 11, 2008, Yahoo decided to reject Microsoft's offer as "substantially undervaluing" Yahoo's brand, audience, investments, and growth prospects.[8] As of February 22, two Detroit based pension companies have sued Yahoo! and their board of directors for breaching their duty to shareholders by opposing Microsoft's takeover bid and pursuing "value destructive" third-party deals.[36] In early March, Google CEO Eric Schmidt went on record saying that he was concerned that a potential Microsoft-Yahoo merger might hurt the Internet by compromising its openness.[37] The value of Microsoft's cash and stock offer declined with Microsoft's stock price, falling to $42.2 billion by April 4.[38] On April 5, Microsoft CEO Steve Ballmer sent a letter to Yahoo's board of directors stating that if within three weeks they had not accepted the deal, Microsoft would approach shareholders directly in hopes of a electing a new board and moving forward with merger talks.[39] In response, Yahoo! stated on April 7 that they were not against a merger, but that they wanted a better offer. In addition, they stated that Microsoft's "aggressive" approach was worsening their relationship and the chances of a "friendly" merger.[40] Later the same day, Yahoo stated that the original $45 billion offer was not acceptable.[40] Following this, there has been considerable discussion of having Time Warner's AOL and Yahoo merge, instead of the originally proposed Microsoft deal.[41]
On May 3, 2008, Microsoft withdrew their offer. During a meeting between Ballmer and Yang, Microsoft had offered to raise its offer by $5 billion to $33 per share, while Yahoo demanded $37. One of Ballmer’s lieutenants suggested that Yang would implement a poison pill to make the takeover as difficult as possible, saying "They are going to burn the furniture if we go hostile. They are going to destroy the place."[9][42]
Analysts say that Yahoo’s shares, which closed at $28.67 on May 2, are likely to drop below $25 and perhaps as low as $20 on May 5, which would put significant pressure on Yang to engineer a turnaround of the company. Some suggest that institutional investors would file lawsuits against Yahoo's board of directors for not acting in shareholder interest by refusing Microsoft's offer.[43]
On May 5, 2008, Microsoft's withdrawal sent Yahoo's stock spiraling 13% lower to $23.02 in Monday trading and trimmed about $6 billion off of its market capitalization.[44]
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