Verizon sale puts end to Yahoo's decline

Verizon Communications' purchase of Yahoo will mean the end of a protracted sale process. Photo...
Verizon Communications' purchase of Yahoo will mean the end of a protracted sale process. Photo from Reuters.

Yahoo was, for some years, the first site internet users turned to for their mail and online communication through the chat application.

But the web pioneer has been left behind in the last 10 years or so, overtaken by Google and Facebook.

The news Verizon Communications will buy Yahoo will put an exclamation mark at the end of a troubled run which began with success and ended with a string of blunders.

The purchase will boost Verizon's AOL internet business, which it bought last year for $US4.4billion, as it gains access to Yahoo's advertising technology tools, BrightRoll and Flurry, and search, email and messenger assets.

Yahoo was started in a Stanford University dorm room in 1994, and spent its first decade building scale as the internet's portal. Then as Google and Facebook, two companies it nearly acquired, built lucrative footholds in search and social media, Yahoo fell behind the fast-moving internet economy it helped create. Visitors and revenue dwindled as it strained to innovate across its services.

A former Yahoo executive, Brad Garlinghouse, wrote in 2006 the "Peanut Butter Manifesto'', an internal memo criticising the company for spreading itself too thin. The company never solved its core identity crisis and the fluctuating strategies often confused employees.

Yahoo grew from having six employees and no revenue in 1995 to being among the most-visited websites two years later. It sorted 735,000 sites, offered free email, news and chat rooms and attracted 25million unique users monthly.

Soaring internet usage pushed growth to 100million users, 2000 employees and about a $US125billion market value by 2000. Yahoo was also profitable, partly because it pioneered online advertising.

However, another pair of Stanford graduate students were building a computer-powered search engine they called Google. It would prove to be Yahoo's undoing.

By 2007, Google's sales were more than double Yahoo's at $US7billion.

In response, the company brought back founder Jerry Yang in 2007, with his promise of an overhaul. In early 2008, Microsoft made an unsolicited offer to buy Yahoo for about $US45billion, about a 60% premium. The bid was rejected by Mr Yang and the board, causing anger among investors.

Yahoo returned to its roots in 2012 by hiring Marissa Mayer, a product manger at Google, generally delighting investors and employees who hoped for a fresh start.

Ms Mayer focused on improving products like mail and the photo-sharing website Flickr, at the same time boosting investment in mobile software, online video and search. But commentators say even she struggled to define Yahoo.

Ms Mayer argued Yahoo should be central to people's daily habits, whether searching the internet or checking mail. The strategy failed to stop the departure of talented executives or stem the fall in revenue.

Some former employees say the root of Yahoo's slow decline was simply failing to grasp the phenomena of search, social media and mobile.

Yahoo will continue as an independent company until the deal receives shareholder and regulatory approvals, Verizon and Yahoo said. The deal is expected to close in early 2017. The plans are for Yahoo to change its name and become a publicly traded investment company.

 

 


At a glance

 

Verizon Communications Inc says it will buy Yahoo Inc's core internet properties for $US4.83billion ($NZ6.9billion) in cash to expand its digital advertising and media business, ending a protracted sale process for the fading web pioneer.

 


 

 

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