Yahoo: What Could Have Been

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yahoo_headquartersYahoo was recently sold to Verizon, a telecoms company, for $4.8bn, which seems quite impressive, but isn’t. Years ago Yahoo was one of the most successful companies in the world but in recent times it has been quite the opposite, and over the last decade the value of the business has plummeted from around $50bn to its sale price—ten times less.

The company’s most recent CEO, Marissa Mayer, has been criticised greatly for an inability to change the company’s fortunes, although it would be unfair to direct all the blame towards her – even before her arrival the company had made a number of fatal errors that led to its demise.

The first was a chronic lack of focus. The firm adopted the strategy to branch out and produce a wide variety of products rather than to focus on core strengths. By 2001 the firm had 400 different products and services which slowed decision-making and made it much more difficult to organise the firm’s transactions.

A second problem at Yahoo concerned its deal making. Some of its acquisitions paid off: its stake in another web giant – Alibaba, a Chinese e-commerce business – increased far beyond its own. Others didn’t do well, such as its acquisition of Tumblr, a social networking platform which it bought for $1.1 billion despite being just about to run out of money. Over the past years Yahoo have also missed a number of incredible opportunities. It decided against buying Google for a paltry $1 million and a potential deal to purchase Facebook for $1 billion fell through when Yahoo grew overanxious about the price. A company’s success depends as much on the deals it doesn’t do as on the ones it does.

Furthermore, Mr Yang, the founder and CEO of Yahoo rejected the opportunity to sell to Microsoft for $45 billion, being too attached to the business to make the right strategic decision. A few years down the road and the eventual sale has come as a blessed relief – a sad end of independence for one of  Silicon Valley’s most riveting success stories.