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Nostalgic Thoughts About the Early Days of Yahoo

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Yahoo as an independent corporation is coming to an end. The core business, as I mentioned in a blog entry last week, will become part of Verizon. Other non-core assets will remain as part of a holding company, but that holding company will change its name, so as not to interfere with the value of Verizon's rights to the :"Yahoo" brand.

Last week's brief comment was about what Verizon sees in the deal. This, as advertised, is a requiem for Yahoo!

Yahoo had its beginnings in 1994, and was first known as “Jerry’s Guide to the World Wide Web”. What Jerry (Yang) and his partner David Filo offered was a web portal combined with a search engine: they offered the keys to the kingdom, letting people play in this new limitless cyberworld. What is more, they did so … for free. You didn’t have to pay anyone a dime to use their search engine, to make their home page your own, or to start receiving email at mail.yahoo.com.

This was for the time revolutionary, and the fact that we're ho-hum about it now, the fact that Google eventually took over the field, much less the fact of Yahoo's decline and disappearance -- none of it should consign to the memory hole the landmark character of Yang and Filo's achievement.
Yahoo!News was one of the key elements of Yahoo’s charm for investors. This itself takes some explaining from a distance of 20 years. But for a long time the defining product in the world of news has been, not a “story,” much less a “datum” or a “document.” The defining product had been a package of news. If you subscribed to a newspaper, then you were letting its publisher and editor package news together for you, from the wars and politics chronicled on the front pages through sections devoted to sports, business, fashion, etc. 
If you received your news, in the pre-internet days, from television broadcasts, you were also receiving a package. You’d sit down and listen and watch as Walter Cronkite and his associates at CBS news brought you the stories they thought were the big ones of that day, in rough order of importance, with film clips and narratives. That's the way it was.

With the spread of the internet, it came to seem possible that the individual story would be the central product of a re-fashioned news business, though it wasn’t immediately clear what sort of menu-selection process would bring that about. Still, it was clear to everyone that change was afoot, and that was scary.
The web portals, including or especially Yahoo, held off that change for a while, because they offered their own packaging of the news. The web hadn’t brought an end to packaging, just a new sort of packager, and that was re-assuring.   

As to its business model, Yahoo borrowed that from the U.S. television networks. Their users got to log in and benefit from Yahoo’s services for free: the only catch was that they had to be willing to expose themselves to a lot of advertising. The term “eyeballs” became a critical bit of business jargon in the 1990s, as in “Yahoo is selling a lot of eyeballs to that sneaker company!”
It was in this period, to, that internet savvy folk began to tell each other, “if you’re getting something for free, you’re not the customer. You’re the product.”  This was generally spoken in ominous tones, as if a deep dark secret were involved – like cluing in a pig to the fact that its free room and board wasn’t the result of an act of generosity. It wasn’t a deep dark secret, though. Most people – certainly in areas where “free teevee” had long been a reality, understood the principle.

There were a couple of problems with advertising as an exclusive sort of revenue for web portals, though. First, people who were visiting a web portal were there to get somewhere else, as the term “portal” implies, and they were quite generally there to get something done. They weren’t there just to kill some time. In that sense, the new medium was not television. The second problem: anyone can do it. I can sell advertising space on my humble blog. The amount of advertising space on the internet is infinite. What does an infinite supply of something seem likely to do to its market value?
The big payday for Yahoo insiders wasn’t its IPO (a rather humdrum affair in April 1996, which raised roughly $3 million.) No, the big payday was the addition of Yahoo’s stock to the S&P 500 in November 1999, at the peak of dotcom fever. The inclusion of a stock in the S&P gives an imprimatur of blue-chip status to that company, and since many institutional funds use that index as their benchmark it predictably increases demand for, and accordingly the price of, the chosen stock. This was true in spades for Yahoo, which gained 64% in its value that week.

I thank you all for sharing with me this trip down memory lane.


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