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Yahoo!

Yahoo! began life in a campus trailer. David Filo and Jerry Yang, grad-students in Electrical Engineering at Stanford University started their guide in February 1994 to keep track of interesting sites on the Internet. Soon their list was so long it had to be divided into categories then sub-categories. The Yahoo! directory was born. Originally known by the catchy name of 'Jerry's Guide to the World Wide Web', it was later changed to Yahoo after a trawl through a dictionary. Yahoo's were a brutish tribe in Jonathan Swift's tales of Gulliver's Travels. Yahoo! is said to be an acronym for 'Yet Another Hierarchical Officious Oracle'.

Yahoo! was seeing a million hits by the fall of 1994 and began to attract commercial interest. In March 1995 the business was incorporated and received $2million investment from Sequoia Capital. Yahoo! got in on the first wave of the dot.com craze, launching its IPO in April 1996. Yahoo! shares opened at $13 and lifted to $33 on the day.

Yahoo! Stock Graph
Figure 1: Yahoo's Highs and Lows

By the height of the dot.com boom Yahoo! was trading at over $120 a share. Boosted by online advertising revenues and the craze for Portals, then the next big thing. The tech-stock crash hit Yahoo's advertising revenues hard. By 2002 shares could be had for IPO prices.

As part of its portal strategy Yahoo! initially licensed Inktomi's search technology until replacing it in June 2000 with Google. In the summer of 2002 Yahoo! chose to merely extend its contract with Google rather than renew it. The company was worried that Google was encroaching onto its turf at a Portal with the launch of new services such as News. From the end of 2002 Yahoo! began to acquire a number of interesting search engine technologies through the takeover of competitors including Inktomi and Overture (which already owned FAST, Altavista and AlltheWeb). Perhaps more importantly, Overture provided Yahoo! with its patented context targeted adverting technology.

These developments culminated with Yahoo! dropping Google in February 2004 and switching to its own Overture/Inktomi search engine. Clients of Google's context sensitive advertising technology (Adwords) saw no change as Yahoo! already used Overture for this service. Inktomi also supply results to Microsoft (MSN) Search. Estimates now give Yahoo! around 40% of the search engine traffic but this looks to be temporary as Microsoft is developing its own search engine technology. Currently in trials this will form an integrated part of Microsoft's Longhorn operating system scheduled for release in 2006.

The Overture patent also provided Yahoo! with a windfall in the form of 2.7 million Google shares prior to Google's IPO. Overture had sued Google for infringing on its patent for the auctioning of context sensitive advertising.

Yahoo! claims over 200 million visitors per month and features 25 international sites in 13 languages but faces strong competition from Google and Microsoft. Yahoo!has recently bought Oddpost and Stata Labs which it hopes will help it compete in what is seen as the next big thing: desktop search.

Yahoo!

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