Of all the western world’s internet giants (Google, Amazon, Facebook, Microsoft), Yahoo has had the most chequered history. It was founded in 1994 by two Stanford graduate students, Jerry Yang and David Filo, as “Jerry and David’s Guide to the World Wide Web”, which was basically a hierarchically organised, human-curated directory of websites. After a few months and a frantic search through dictionaries, the founders renamed it Yahoo.
It grew rapidly in the late 1990s, riding the crest of the first internet boom and metamorphosing into a “portal” – a gateway to the web. By 1999, Yahoo had 4,000 employees, 250 million users and $590m in annual revenues – much of it from advertising by dotcom firms. In March 2000 its market cap peaked at $128bn.
And then came the crash. The dot-com bubble burst, the laws of economic gravity reasserted themselves and ever since then Yahoo has been struggling to find its raison d’etre. The question that has always bedevilled it is the classic one from children’s books: Mummy, what is that company for? For its competitors, the answer is generally straightforward: Google is for search; Facebook is for social networking; Amazon is for online retail, and possibly world domination; Microsoft is for Office and desktop computers. But nobody really knows what Yahoo is for – what its unique selling proposition is.
This USP-deficit is largely a product of the company’s history. Its co-founders are genial hippie types who weren’t even sure they wanted to found a company. Their “Guide” was just a fun project that mushroomed as people flooded on to the internet after the launch of Netscape, the first big browser. Filo and Yang found themselves besieged by advertisers seeking “eyeballs” and so the money rolled in – and was used to buy other little companies that rose quickly as the internet bandwagon rolled. Yahoo grew, in other words, by acquiring start-ups. But it failed to integrate many of them into its operations and so became a poorly coordinated corporate mess.
Since neither Filo nor Yang really wanted to run a company, they hired other people to do it for them. The result was a succession of more or less disastrous CEOs – mostly technological illiterates recruited from the media industry who enriched themselves while making one disastrous strategic mistake after another. What none of these turkeys understood is that there is a vast difference between normal companies and internet enterprises: the former merely create and market products; internet companies do continuous innovation, and if they stop doing that then they wither and die. Under the clueless supervision of its technophobic CEOs, Yahoo more or less gave up on technological innovation, and in particular (like Microsoft) failed to make the transition from desktop computers to mobile devices.
Nicholas Carlson’s book is essentially a biography of both a company and its current CEO. The corporate biography is a dismal tale of how, for most of its corporate life, Yahoo tried to pretend that it was a media company rather than a tech one and how – at the 11th hour – it finally tumbled to the fact that if you want to run a successful technology company then you have to have a leader who actually understands the stuff.
Which is why they eventually hired Marissa Mayer from Google in 2012. At first sight, she seems an unlikely geek: a stunning blonde with expensive tastes in haute couture. But in fact she had studied computer science at Stanford and was one of the early Googlers, rising to become a vice-president with stock options to match. Nobody thought that Yahoo would be able to tempt her, but what they hadn’t realised was how she had been undermined at Google by envy, sexism and resentment of her personal, control-freakery managerial style. So when the Yahoo offer came, she readily jumped ship.
Mayer has now been in charge of Yahoo for two years. During that time she has done many of the things that any tech-savvy CEO would have – strengthening mobile development; pruning the company’s range of products to a more coherent number; changing the pathologically relaxed working culture (many Yahoo employees worked from home); introducing a performance-monitoring scheme (with mixed results); cutting costs; and so on.
Carlson portrays Mayer as an interesting blend of contradictions. In public, she comes across as glamorous, confident, fluent and approachable. In one-to-one situations, however, she is portrayed as a steely, calculating, inquisitorial individual who avoids eye contact. On this account she also suffers from one classic Yahoo failing – an inability to make good hires: some of the senior appointments she made in her first months have turned out to be expensive mistakes.
Nevertheless, on her watch Yahoo’s share price has risen steadily – from $15 in 2012 to $50 now. Some observers think that the rise might owe more to the fact that it has a 15% stake in the Chinese e-commerce giant Alibaba (which had its spectacular IPO in September) than to Mayer’s managerial skills. Yahoo is committed to holding on to its Alibaba stake until next September at least, so it may be that the current share price reflects investors’ hopes of a big payoff. But whatever happens, in the end the success or failure of the Mayer regime will be determined by whether she comes up with a convincing answer to the question: what is Yahoo for? At the moment, the jury’s out.
