More than just an online search engine, Yahoo! (Nasdaq: YHOO) offers an array of Web-based services, including news and sports information services, social networking, Internet service, online dating, and more.
In 1994, Stanford University students David Filo and Jerry Yang formed "Jerry and David's Guide to the World Wide Web," a collection of their favorite websites. The lists were separated into categories, which were then divvied up into subcategories.
In April of that year, they changed the name to Yahoo!, which stands for "Yet Another Hierarchical Officious Oracle." But despite the cool acronym, they've said that they mostly chose the name because they liked its definition in Jonathan Swift’s Gulliver’s Travels: "rude, unsophisticated, uncouth.”
The popularity of their online guide spread quickly, and as word of mouth carried it beyond the confines of Stanford to include people throughout the Web, unique visits reached around 100,000 by autumn 1994. Just a few months later, the boys decided to take things to the next level and started to contact venture capitalists. They got a bite.
Sequoia Capital, the same firm that helped launch YouTube, Oracle, and other now-huge tech companies, coughed up nearly $2 million in April 1995 to help get Yahoo! off the ground, while Reuters and Softbank contributed money later that year. In the meantime, Filo and Yang appointed a chief executive officer (Motorola’s Tim Koogle) and a chief operating officer (Jeffrey Mallett, formerly vice president and general manager of the consumer products division of Novell). By the time Yahoo! went public in April 1996, it had 49 employees. Susan Decker, who joined the company as chief financial officer and senior vice president of finance and administration in 2000, became president in 2007.
Yahoo! has come a long way since its transformation from a list of websites to a search engine. In addition to basic search services, its offerings now include its free online Yahoo! Mail, its Yahoo! Messenger instant-messaging service, Yahoo! Groups for acquainting people with common interests, Yahoo! Personals for folks who want to take that a step further, Yahoo! News, Yahoo! Local for finding nearby businesses and services, social networking website Yahoo! 360 Degrees, photo-sharing website Flickr, an interactive Yahoo! Answers service that enables members of the Yahoo! community to answer questions posed by other members, and, of course, the Fool’s favorite, Yahoo! Finance.
The company also offers a barrage of entertainment products, such as Yahoo! Music, Yahoo! Movies, Yahoo! TV, Yahoo! Games, and Yahoo! Video; and it has additional tools for pricing and buying real estate, automobiles, and consumer electronics. You can view the full rundown of the company’s services on its website, Yahoo.com.
Even though Yahoo! burst onto the scene before Google, it wasn’t long before Google zoomed right past the company to become the Web’s No. 1 search engine. And despite Yahoo’s efforts -- it revamped its home page, added video content, installed new features such as the popular celebrity news site, Yahoo! OMG, and reshuffled its organization a few times -- it still hasn’t managed to swim out of Google’s wake.
Rounding out this love/hate triangle is Microsoft. Both Microsoft and Yahoo! were reportedly prospective buyers of the YouTube video website, which Google ultimately purchased. BusinessWeek commented on the transaction, “Microsoft CEO Steve Ballmer, meeting with BusinessWeek editors Oct. 9, said Google could emerge from the YouTube deal an even stronger rival.”
All three companies made headlines again in 2008, when Microsoft offered to buy Yahoo! for $44.6 billion in cash and stock. Microsoft estimated the combined company would save it around $1 billion per year -- but Yahoo! argued that this offer “substantially undervalued” its worth. After an intense negotiation that dragged on for months (including a revised offer from Microsoft, which Yahoo! also rejected) Yahoo! finally settled on a deal -- with Google. The partnership would enable Google to power some of the paid search ads for Yahoo!, and its overall 10-year term included a four-year initial period and two options for Yahoo! to renew for three years.
Call it sour grapes or legitimate concern (or maybe a little of both), but Microsoft instantly voiced its apprehensions, stating that this deal would create antitrust problems, particularly because of the added control and power it would grant to the already dominant Google. In October 2008, news and analysis website TheDeal.com reported, “A proposed joint venture between rival Internet companies Google Inc. and Yahoo! Inc. appears headed for the trash bin, just ahead of an expected U.S. Department of Justice challenge to the agreement, lawyers close to the deal said.” At the time of this writing, it was still under scrutiny.