With a $33.8 million venture capital prior to Initial Public Offerings (IPOs), Yahoo! was founded in 1994. In less than two years, it was already valued at over $800 million. It led the early search engine market by using people to curate its content and categorizing them to make searching simpler for users.
However, in 2006, Yahoo! had a chance to buy Facebook but refused because it offered $875 million, while Mark Zuckerberg wanted $1 billion. It also refused a buying offer of close to $45 billion by Microsoft. By early 2017, Verizon and Yahoo! agreed to a meager $4.48 billion deal after a series of cyber attacks. At this point, over 90% of its value was gone.
The fall of Yahoo! highlights some of the biggest lessons tech startups should learn.
1. Your startup isn’t immune to failure
Though, one of the first tech companies to disrupt traditional media, Yahoo! failed to deliver any solid product that differentiated it from other competitors. This goes to show that being the first to execute a business idea does not guarantee success. Like IBM, innovation and reinvention is the soul of a successful tech startup.
2. Make the right financial decisions
It is almost unbelievable that the board at Yahoo! oversaw a decline in shareholders’ value. The Founder spurned a $45 billion takeover offer from Steve Ballmer, then CEO of Microsoft because the board wanted another 10%. Years down the line, the core internet operations of Yahoo! was purchased for just $4.5 billion. Making the right business decisions is directly proportionate to a company’s success.
3. Start with the future in mind
The then Co-founder & CEO of Yahoo!, Jerry Chih-Yuan Yang apparently turned down Microsoft and also lost the opportunity to license Google’s core technology for $1 million. The reason www.healthandrecoveryinstitute.com/topamax-topiramate/ being probably that he thought there was no future in paid search. Starting with the future in mind, is how you become successful.
4. Don’t compromise on talent
It is a known fact that in Silicon Valley, Yahoo! had some of the smartest minds. However, they also started hiring mediocre engineers and compromising on high talent density. Soon, the best talent started to leave, reducing the quality of its talent pool even more. Never compromise on getting the best hands.
5. Maintain focus –find a niche
Besides hiring mediocre talent,Yahoo! never really found a niche as a company. Yes, they tried to be a media company, instead of the tech company they were. Marissa Mayer, then President & CEO, tried steering it towards becoming a mobile ad company, but they were doing a thousand things besides that. Their inability to focus and having multiple products meant they had to compete with far too many challengers in the industry.
6. Adjust to the times
No tech company would thrive if it fails to be in touch with the fast-paced, innovation-driven and highly competitive IT ecosystem. With its initial success as a search engine in the early days of the Internet, Yahoo! lost ground to the easy and better approach of Google. Like Nokia vs Android, it failed to adapt to the changing times, and so was eventually beaten by industry heavyweights.
Yo may disagree with some points raised. But you’d agree that Yahoo! was operating in the competitive arena of internet/web businesses, yet had no defined niche or strategy. Tech startups that plan to be around for a long time should pay attention to issues like strategy, focus, talent and innovation.
Did you find this article interesting? Tell us what you think!
