YAHOO GROUP

Yahoo! Inc.

Fact File:

Founder: David Filo and Jerry Yang.

Distinction: The original online search engine; now profitable

Internet portal.

Primary Products: Web directory, chat, shopping, community

functions

Annual Sales: $588.6 million.

Number of Employees: 2,711.

Major Competitors: America Online Lycos, Microsoft.

Chairman and CEO : Timothy Koogle;

Chief Yahoos! : Jerry Yang, David Filo.

Headquarters: Santa Clara, Calif.

Year founded: 1994.

Website : www.yahoo.com

When the Web was still a primitive but tantalizing novelty for the few

nerds and hackers clever enough to finagle early access, there was just

one way to navigate its already vast and mysterious terrain: Yahoo! The

wonderfully odd (yet strangely appropriate) exclamatory moniker quickly

came to define the Web's first "search engine." It was a straightforward

but artfully complied online directory that attracted experienced as well as

novice visitors. They could easily locate any type of site—or any specific

one—and travel there instantly by means of a single mouse click. This may

sound like standard fare today, but back in the mid1990s,

it was

downright amazing.

Meeting a booming demand as it did, Yahoo! Grew fast. The

company went from a dorm room in 1994, to incorporation in 1995, to

initial public offering in 1996. Regional and other highly focused offshoots,

such as a kid's guide, were added regularly. Customer conveniences,

including news, sports and business headlines,

email

and assorted online

services, chat rooms and message boards, electronic shopping and

auctions, soon followed. Advertisers were signed to pay for it all, while the

continually escalating traffic rapidly made it profitable—and even more of a

standout in its field.

Today, the Yahoo! Brand is one of the most established in

cyberspace. Founders Jerry Yang and David Filo have each realized

about $7.5 billion from the venture. Their firm, in which they retain active

roles, now calls itself "a global Internet communications, commerce, and

media corporation." From headquarters in California and offices in Europe,

the Asian Pacific basin, Latin America, and Canada, it serves nearly 50

million Web travelers each month and contracts with about 5,200

advertisers and partners who foot the bills…and then some.

And yet, as Yahoo! And the Internet both prepare for the new

century, it is still running hard to maintain its place among powerful

competitors, such as AOL and Microsoft. However, that incredibly

extensive, and remarkably effective, Web directory still assembled

primarily by human editors who apply a logic and execution all their own

evolves as mighty new technologies impact its core.

Jerry Yang, born in Taiwan in 1968, moved to the United States 10

years later as part of the first group of immigrants permitted into the

country after diplomatic relations were reestablished with China. He, his

university professor mother, and younger brother wound up in San Jose.

Although the kids were initially at a distinct disadvantage when it came to

the language, they excelled at math from their arrival. In short order they

also conquered English. By the time Yang graduated from high school he

was class valedictorian (as well as student body president). He accepted a

scholarship to Stanford and in four years earned both a bachelor's and

master's degree in engineering.

David Filo, two years older than Yang, was raised in Louisiana before

earning his bachelor's degree from Tulane. The two met in 1989 when Filo

moved to Palo Alto to attend Stanford's graduate school. Much like Yang,

he pursued a Ph.D. in electrical engineering. Learning they shared a

passion for sports, in addition to a few more technical pursuits, the pair

became more friendly three years later while on a sixmonth

academic

exchange program in Japan. Upon their return, the campus was abuzz

over the newly available World Wide Web and a software application called

Mosaic that offered rudimentary access to a seemingly endless sea of

computer files. Captivated, Yang and Filo decided to do some work in the

new medium.

Their first effort combined Mosaic and a software program they

concocted to amass and sort statistical data on players in the National

Basketball Association. Yang also designed some early Web sites, including

one dedicated to sumo wrestling. After about a year, the two were among

those noticing how difficult it had become to negotiate the evergrowing

online world. So, starting with a purely academic goal—locating research

papers at universities around the globe—they built a program to organize

Web sites into appropriate categories. The site they developed to

showcase them, originally called Jerry's Guide to the World Wide Web,

went online in April 1994. It was soon renamed Yahoo!, which, according

to corporate lore, stands for "Yet Another Hierarchical Officious Oracle."

Just as likely, though, the name was picked because it sounded goofy and

had plenty of antiestablishment

connotations.

As usage increased, Yang and Filo worked day and night to convert

their system into a customized database that could be accessed by even

more people. It originally resided on their own workstations—Yang's

"akebono" and Filo's "konishiki," (both named after sumo wrestlers).

Before long their traffic was straining Stanford's electronic infrastructure.

The two began looking for someplace to relocate, and in early 1995

accepted an offer from Netscape Communications cofounder

Marc

Andreessen to move their files to larger computers housed at his

company's nearby Mountain View headquarters. To further emphasize that

Yahoo! Was now a serious business, the company incorporated on March 5

of that year. Along with employee number three, another student named

Tim Brandy, the founders also put together a business plan and began to

seek funding.

One key to Yahoo!'s success, then as now, has been its incorporation

of a human touch into the otherwise mechanical process of selecting and

categorizing site listings. Another has been its longstanding

decision to

skip complicated (and computercrashing)

graphics in favor of simple (and

quick loading) basic text interrupted only by the banner ads that pay the

bills. Yang and Filo also suspected from the start that Yahoo! picked up $1

million to put its plan in motion. Tim Koogle, who graduated from Stanford

about 15 years before Yang and Filo and then ran a $400 million company

called Intermec, met with the pair for a Sunday night interview at a

brewpub in Mountain View. He accepted their offer on the spot to become

Yahoo!'s CEO.

The team, which remains intact to this day, immediately set about

making their company profitable. Nobody knew then whether an

advertisingbased

business was even feasible on the Net, but they tried it

for a quarter and it worked. In response, they decided to go public and

prove that what they were doing could be very profitable indeed. On April

11, 1996, the company completed its initial public offering and raised an

astounding $35.043 million.

Now it was time see what Yahoo! really could do. Working with a

disproportionately small staff—much like most Internet companies—they

created features that drove more and more visitors to the site. They added

regional and specialized guides stock quotes and sports scores, recipes,

and shopping. They acquired GeoCities, a company that lets individuals

create personalized Web sites; Broadcast.com, a broadband

technology

that allows Yahoo! to transmit original shows such as FinanceVision (a live

business program that delivers market news throughout the day); and

Online Anywhere, which enables cell phones, Palm Pilots, and other

electronic gadgets to access the Web.

As the founders predicted, Yahoo! has indeed become a top Internet

portal. Every month, twothirds

of all online visitors click over to the site.

Yahoo! has astutely leveraged these visitors by matching the banner ads

they see with their personal interests and general demographics. Through

such tactics, it has remained profitable since the fourth quarter of 1996.

But even as investors clamor for a piece of the action, and its market

capitalization tops $90 billion—higher than that of Ford or General

Motors—Chief Yahoos! Yang and Filo, and CEO Koogle, must constantly

seek new ways to keep it atop the cyberheap.

The new millennium brought new challenges to Yahoo!, not the least

of which accompanied longtime

archrival America Online's blockbuster

announcement that it was acquiring Time Warner Inc. and thus creating

the world's largest entertainment and communications conglomerate. But

even as other online competitors like Infoseek also teamed up with other

traditional media companies such as The Walt Disney Company—providing

access to deep economic and content resources, as well as a huge

customer base—Yahoo! continued its strategy of partnering with many

companies instead of buying a big one. In 1999, for example, it enhanced

its etailing

capabilities by teaming with Kmart to create BlueLight.com

and offer online shopping and free Internet access to the brickandmortar

chain's millions of shoppers.

Having come somewhat late to online shopping, Yahoo! now pursues

it aggressively. Rather than selling merchandise directly, however, it

teams up [with others (such as Kmart) and charges a fee for all

transactions originating from its site. It has also hooked up with Ford to

provide online services for the automaker's future models, and with four

specialized firms to tackle the potentially huge arena of businesstobusiness

sales.

The tactics seem to be working, as earnings continue beating

analysts' expectations and share prices remain healthy. The company

reported a record 680 million page views per day on average during June

2000, while the number of registered users worldwide passed 156 million.

It has moved into new headquarters in Santa Clara, Calif., where the

cubicles are splashed with purple and yellow. A classic Ford Fairlane in the

same colors sits parked out front, and the conference rooms are all named

for flavors of Ben & Jerry's ice cream.

Like it has throughout its brief but influential history, Yahoo!

continues reaching boldly for the future while keeping one foot planned

firmly in its goofy, antiestablishment past.