Yahoo! Inc.

FOUNDED: 1994

Contact Information:

HEADQUARTERS: 701 First Ave.
Sunnyvale, CA 94089
PHONE: (408)349-3300
FAX: (408)349-3301
EMAIL: yahoocc@yahoo-inc.com
URL: http://www.yahoo.com

OVERVIEW

Yahoo! Inc. is an Internet company that provides a wide variety of services to more than 200 million consumer and business customers. It can be accessed at www.yahoo.com, which is the company's U.S. address on the World Wide Web. The site was designed to make the Internet user-friendly, even for individuals with little computer or technology experience. Yahoo! offers directories of other sites along with a description of the content. The company has moved beyond its modest beginning as a search engine and now offers news, shopping, e-mail, chat rooms, and media services.

Yahoo! was created in 1994 by two graduate students at Stanford University. Within two years of the company's development, the founders, David Filo and Jerry Yang, had abandoned their academic careers and were working full time as managers of this fledgling venture. Yahoo! became a publicly traded company in a 1996 initial public offering that was a success by any standard. The stock opened at $13 a share and ended its first day of trading up 154 percent at $33 a share.

Yahoo! is a member of the Standard & Poor's 500 Index and operates a global network of 24 international sites produced in 13 languages. The company offers services in the following areas: listings, media, finance and information, commerce, communications, enterprise solutions, and access and distribution. Yahoo! has entered into partnerships or agreements with numerous corporations and media outlets that provide content and listings for the site. This comprehensive network of strategic alliances has transformed Yahoo! from a simple search engine to a full-service Internet portal placing a multitude of information at the fingertips of the public.

COMPANY FINANCES

The company reported profits soon after its launch and was widely regarded as the first bona fide Internet success story. In 2001 Yahoo! posted annual revenues of $717.4 and a net loss of 92.8 million dollars compared with __BODY__,110.2 million in revenues and a net income of $70.8 million in 2000. Investors did not focus on the daily activities of the start-up. Stock prices for the company were astonishing. In 1997 the company grew 242 percent and the stock rose 500 percent. By the following year, the price had jumped 584 percent. In 1998, almost to the disbelief of Wall Street firms, Yahoo! stock was trading at a whopping 745 percent increase from its original price on the day of the 1996 IPO.

ANALYSTS' OPINIONS

Analysts are applauding Yahoo!'s efforts to diversify and generate new sources of revenue. The recent addition of HotJobs.com and the completion of several other deals are considered a solid beginning for recovery. John Corcoran, an analyst with CIBC World Markets Inc. is quoted as saying, "Things are improving for them. We think the stock is more than halfway back to where it should be." Holly Becker, an analyst for Lehman Brothers is more cautious in her review, "Yahoo! is dependent on new business initiatives, which are just beginning to impact the bottom line and remain somewhat uncertain." Fred Moran an analyst at Jeffries & Co. States, "Yahoo is in a transition. They have maintained a course of adding new revenue, such as subscription-based services, but the revenues from these services is materializing very gradually." Expectations for the company are positive for 2002 and beyond.

HISTORY

Yahoo! was developed by two Ph.D. candidates enrolled in Stanford University's electrical engineering program. David Filo and Jerry Yang were both computer programmers, but the creation of Yahoo! had little to do with programming or technology. It began life as a list of favorite sites entitled "Jerry's Guide to the World Wide Web." They published this list on the Internet to serve as a navigation tool for other users. Prior to 1994 the Web was not browser capable, which severely limited the number of users to those who possessed enough technical expertise to manipulate the required codes. In 1994 a program named Mosaic, which would later be renamed Netscape Navigator, was released. This new browser allowed nonscientists to view information on the Web with ease. Filo and Yang provided the public with a neatly organized address book of the best sites to visit.

The single most pivotal event in the history of this young company may have occurred the day the founders' Ph.D. advisor ordered them to move the extracurricular project off-campus. The site had become enormously popular, receiving hundreds of thousands of visitors daily, and the incredible growth was placing a strain on the university's computer network. When both AOL and Netscape offered the partners jobs at their respective organizations, the two grad students began to consider a future as entrepreneurs. When venture capital dollars were offered in February 1995, they couldn't resist. Sequoia Capital fronted them more than __BODY__ million dollars to turn their pet project into a business. In return, Sequoia would acquire 25 percent of the operation. Filo and Yang left Stanford University six months short of completing their degrees. A management team was formed (including new CEO Tim Koogle), staff was hired, and a business strategy was hatched. Yahoo! generated its first revenues in 1995 by selling advertising space on its pages. The company adhered to its user-friendly policies and did not overload its site with a multitude of banner ads or pop-up ads, which required users to click through to access a listing.

In 1996 SOFTBANK of Japan invested $100 million dollars in the start up company. Despite the large infusion of cash, Yahoo! registered to make its initial public offering (IPO) in April 1996. In most cases, the goal of an IPO is to generate enough cash to finance the continued growth and expansion of the company. Yahoo! did not need the money. The offering was rooted in its desire to gain respect as a leader in this new field. The initial offering was a success, due in part to the very small amount of stock actually released to the public. As a result, demand for the stock was high, supply was low, and the price climbed dramatically.

The company actively developed new features for the portal, which promoted the feeling of community among users. Geographically themed sites were introduced for members in Los Angeles, Chicago, New York, and Washington DC. International expansion was also a priority in 1996. Using the funds and expertise provided by the investors at SOFTBANK, Yahoo! Japan and Yahoo! Europe were launched.

Beginning in 1997, the company increased its presence in cyberspace through strategic acquisitions. Internet directory firm Four11; Viaweb, an e-commerce software organization; and Yoyodyne Entertainment, a marketing company, joined forces with Yahoo! Growth continued for the next several years, and the popular sites Broadcast.com and GeoCities were purchased as part of the growing Internet consolidation trend. Smaller firms were being swallowed by stronger competitors as market conditions began to slow down. When the dot-com bubble burst in 2000, Yahoo was able remain in business, but revenues and investor goodwill disappeared quickly.

In 2001 CEO Tim Koogle left his post and was replaced by former Hollywood executive, Terry Semel. Semel had no experience in the field of technology, but his personal connections, and skill in navigating the entertainment industry, made him an attractive candidate. As the World Wide Web embraces new media services, such as music and video streaming, Semel can be a valuable asset to the firm. He faces this challenge without the help of longtime Yahoo! executive Jeff Mallett. Mallett stepped down from his position in April 2002. Despite the changes in the executive offices, Yahoo! continues to move forward with ambitious plans to offer new features and revitalize the flow of revenue.

STRATEGY

Yahoo!'s goal is to be the home page for every Internet user. A home page is the first page that a browser opens to whenever a user logs onto the Web. Once the user has entered cyberspace via the Yahoo! portal, the goal is to keep all "eyes" on related company sites, filled with company-provided content and services. In 1996 Yahoo! was reporting 20 million page views a day and, by June 2000, this number had multiplied to 685 million pages a day. The number of pages viewed on an Internet site correlates directly with the amount of revenues generated. Sustained profitability is the ultimate challenge of any company, but it is particularly important for Internet firms.

From its inception, Yahoo! realized that it was necessary to be more than just a search engine to be successful. It wanted to provide useful, quality content to its users in a simple and understandable manner. The company forged agreements with respected business and media firms, thus avoiding the high costs and risks of producing content in-house. It then hired employees known as "surfers" to personally review and categorize all Web sites that requested inclusion in the Yahoo! directories. The management of the company did not want the site to be automated and impersonal.

Current strategies address the needs to expand services offered domestically, develop in depth information about current user preferences, create Yahoo! online properties in international markets, and identify new methods of producing revenues.

INFLUENCES

Yahoo! pioneered navigation on the World Wide Web and is arguably the most dominant company formed strictly as an Internet venture. Ironically, the efforts of traditional media and technology companies may be exerting the greatest influences on its operations. The merger of Time Warner and America Online, as well as the evolution of Microsoft's MSN have created formidable competitors for the startup. Together America Online and Time Warner possess an enormous customer base drawing from both AOL's Internet customers and Time Warner's subscribers from cable networks and publishing ventures. In addition they have already established a fee-paying relationship with these customers and have collected demographic information for targeted marketing. Time Warner also provides AOL with content, global distribution networks, and vast financial resources. Yahoo! recognizes the advantages in this model and will adapt its strategies accordingly to remain competitive.

CURRENT TRENDS

Yahoo! has been able to post profits by charging advertising and sponsorship fees for site placement. However, faced with stiff competition and a soft economy, the company is moving quickly to establish fee-based services. It is exploring the possibility of subscription-based streaming media, which would offer audio and video programming at a fee. Sporting events, news, and movies on demand would be offered for a monthly fee or on a pay-per-view basis. Yahoo! is also considering tacking on user fees for its previously free e-mail, data storage, and photo-sharing services. The company is also working to expand its business to business products and enterprise information solutions.

PRODUCTS

Yahoo!'s products include search and directory tools that allow users to browse listings for real estate, automobiles, and even careers. It became a major factor in the online job search market with its acquisition of HotJobs.com in 2001. Web surfers can also find information on books, movies, investments, health, and weather by accessing personalized pages. Media services allow consumers to download music, videos and even concert feeds with a personal computer. Commerce and shopping services are also popular Yahoo! destinations. Yahoo! offers online shopping, auctions, and travel planning. Communication is a premier benefit of the World Wide Web, and Yahoo! offers some of the most popular systems. E-mail, instant messaging, calendars, and chat rooms are heavily trafficked applications. Enterprise Solutions focuses on the business and corporate community. Yahoo! provides platforms, which allow companies to integrate content into their own intranets or extranets. Other business tools include conferencing and meeting capabilities and online training classes.

GLOBAL PRESENCE

The Internet is rapidly gaining users around the world, and Yahoo! has plans to greet them all in every language. The first international sites were launched in Japan in 1996, and the company now boasts the largest worldwide community of users. Yahoo! is aware of the risks of entering global markets but has confidence that it will be successful in its quest for worldwide acceptance. The company places a great deal of importance on global citizenship and attempts to respect and comply with local cultures, customs, and laws in any market it enters. The network of Yahoo! sites now extends to 24 countries with many custom-built sites. The company maintains offices in Europe, Asia, Latin America, Australia, and Canada. Sunnyvale, California, remains Yahoo! central.

CORPORATE CITIZENSHIP

Yahoo! employees are encouraged to volunteer time to local community causes. Each year the company organizes opportunities for the staff to participate in special events as a group. Yahoo! staff members have pledged time to the environment by working to beautify the California coastline as well as local elementary schools. Commitment to children is also a priority. Volunteers have signed up to be classroom buddies in elementary schools, leading activities such as reading, sports, and computers. Other projects centered on the need for animal rights, assisting elderly citizens, and participating in career and employment mentoring days.

EMPLOYMENT

You don't have to be a technical genius to be a Yahoo! employee, or Yahoo!, at least not according those who have made the commitment. Candidates are encouraged to search for their dream job in the Yahoo! database of open positions. It is even possible to become an international Yahoo! and see the world. Employees are encouraged to be innovative, creative, fun-loving, and dedicated. The Silicon Valley offices are very casual and boast foosball and video games. The "team" theme is evident throughout the corporate headquarters, which are bathed in the company colors: purple and yellow. Parties are scheduled regularly for holidays including a Halloween party day nicknamed YaBoo!. The downturn in Internet fortunes has been felt at the Yahoo! headquarters, and management has been forced to institute a company-wide lay off impacting hundreds of employees.

SOURCES OF INFORMATION

Bibliography

Barlas, Pete. "Analysts Cheer Yahoo's Efforts to End Reliance on Advertising." Investor's Business Daily, 10 April 2002.

Beckett, Jamie. "Making Meetings Merry." The San Francisco Chronicle, 30 July 1998.

Boardman, Bruce. "Yahoo—185 Million Users Served." Network Computing, 30 October 2000.

"Do You Believe How Yahoo! Became A Blue Chip: A tale of how Wall Street and the rest of us learned to stop worrying and love an insanely valued Internet stock." Fortune, 7 June 1999.

Hoovers Company Profiles, 2002. Available at http://www.hoovers.com.

Lardner, James. "Search No Further: Its Share Price May Be Crazy, But Yahoo! Remains Sane." U.S. News & World Report, 18 May 1998.

Noglows, Paul. "Taking Stock of the Internet Phenomenon." Interactive Week, 25 October 1999.

Yahoo! Home Page, 2002. Available at http://www.yahoo.com.

"Yahoo Tacks Fee Onto E-mail, Storage." CNETNews.com, 21 March 2002.

"Yahoo Tests Paid-Programming Waters." CNETNews.com, 18 March 2002.

For an annual report:

on the Internet at: http://docs.yahoo.com/info/investor/invinfo.html

For additional industry research:

Investigate companies by their Standard Industrial Classification Codes, also known as SICs. Yahoo! Inc.'s primary SIC is:

7373 Computer Integrated Design

Also investigate companies by their North American Industry Classification System codes, also known as NAICS codes. Yahoo! Inc.'s primary NAICS code is:

514191 On-line Information Services