Case Studies

How Yahoo wrote its marketing obituary, and blew the opportunity to own Google

“When prosperity… and opportunity come, do not waste it.“

Once upon a time, Yahoo was king of the internet, and it was the biggest internet company in the world. In 2000, at its peak, Yahoo was worth $125 billion ($188 billion today). They offered many internet services like music, videos, social media, and photo sharing. But Yahoo had many failures, and sadly did not live up to its expectations, and lost its value very quickly.

What happened to Yahoo and how did the company’s value plunge by over 4000% within a 10-year period? It is a classic PR and marketing case study on squandered opportunities. This is their story:

Going, going…Google

How Yahoo blew the opportunity to own Google

In 1998, Larry Page and Sergey Brin, the founders of Google, approached Yahoo to sell Google for a mere  $1 million. Yahoo refused the offer. That was a huge and incomprehensible mistake.

Google rapidly became successful because of Sergey Brin and Larry Page. Had Yahoo bought it, Google probably would not have been what it is now. What makes Yahoo’s mistakes so disastrous is that they made many of them, not learning from them.

In 2002, Google was much more valuable. Now, Yahoo CEO, Terry Semel must have realized the true potential of Google. Yahoo this time approached Larry and Sergey to buy Google. Yahoo wanted to buy it for $3 billion ($4.32 billion today), but Google wanted $5 billion ($7.2 billion today).

Yahoo dragged their feet and refused the offer again. By the time Yahoo came to their senses, Google’s value had skyrocketed, and Yahoo was completely lost in the new equation. This was another huge mistake.

On January 16, 2020, Google’s parent, Alphabet, became the fourth biggest tech company to be worth $1 trillion. Yahoo never got a chance to buy Google again.

Was that the end of the story? The mother of all blunders was yet to come in this fascinating Financial PR and Marketing case study.

Yahoo rejected Facebook

Yahoo tried to acquire Facebook in July 2006 for $1.1 billion ($1.4 billion today). Facebook agreed to the deal, and they were ready to be acquired.

But wait, Facebook isn’t owned by Yahoo. That’s because Yahoo CEO, Terry Semel, changed his offer to $800 million ($1 billion today). Mark Zuckerberg refused the deal, and Yahoo never got Facebook.

It was one of the most famous mistakes made by a tech company. Again, had Yahoo acquired Facebook, it was unlikely it would be what it is today. But what if they were able to do it? That is the question that will never be answered.

The drama hasn’t ended, and the chapter turns to the pages of another tech megabrand- Bill Gates’s Microsoft.

Yahoo snobs Microsoft

How Yahoo blew the opportunity to own Google

In 2008, Microsoft approached Yahoo to buy it for $44.6 billion ($53.6 billion today). Yahoo CEO, Jerry Yang, rejected it.

Microsoft wanted to create a synergy with Yahoo to compete with Google, a rising player in the tech business.

Yahoo kept rejecting the offer. The deal never happened. Yahoo thought it was being under-valued. Fast forward. About 10 years later, Verizon bought Yahoo for less than $5 billion- an eye-popping difference of almost $50 billion.

Question time

Would Yahoo be worth hundreds of billions if they had not declined these incredible deals? Probably not. Yahoo could probably have flunked after buying Google and Facebook.

In 1999, Yahoo had previously acquired companies like Broadcast for $5.7 billion ($8.8 billion today), and Geocities for $3.6 billion ($5.6 billion today). They failed to convert these businesses to a larger value, and they didn’t amount to anything. Yahoo could have been a great company, but it sold for less than its previous acquisition, Broadcast.

5 PR and Marketing lessons in the Yahoo case study

How Yahoo blew the opportunity to own Google

Lesson #1: Focus or fail

Once a brand loses its laser focus, failure is only a matter of time. This was the case with Yahoo. The internet was just starting to be popular around everyone. Many businesses were trying to get involved and succeed in this new market. While Yahoo was already the biggest player.

Yahoo’s problem was that it didn’t know what to do. It was the biggest internet company at the time, and it tried to get into social media, search engines, photo sharing, video sharing, and many other internet services. In short, it was Jack of all trades, master of none.

Many CEOs came and went, and the vision of the company kept changing. Yahoo’s second CEO, Terry Semel, wanted to make it a new media giant, and its last CEO, Marissa Mayer, wanted to make it a mobile technology company. Yahoo didn’t establish itself as a master of one. It tried to do everything. And ultimately, couldn’t do anything. That was Yahoo’s downfall, and it is the biggest lesson in this PR and Marketing case study.

Lesson #2: Have a bold and scary vision.

Whenever a company is driven by a clear plan to change the world, it has done just that. Bill Gates wanted every house to have a computer with Windows running on it. That’s why he signed a deal with IBM to create MS-DOS and run it on IBM computers. This deal made Bill Gates who he is now.

Steve Jobs had a clear vision to make people his priority. People needed tools, and he gave them tools.

He knew he could help people with his ideas. People can do so many things with technology. That combination is what he always looked forward to.

Apple created a tiny device that can store a thousand songs, a small device that packs more power than previous computers that took an entire room, and so many other great gadgets. Apple succeeded because Steve Jobs had a clear vision.

Lesson #3: Money is the root of all…

How Yahoo blew the opportunity to own Google

The best form of PR and Marketing is where value comes before money. Yahoo did not put money in its proper place. It called itself a media company, though it was more of a tech company. It failed to acknowledge itself as a tech player and stubbornly addressed itself as a media company. It got swayed away by the profit which it earned initially through ads and overlooked the tech involved in it.

Short-term money pressures can sometimes cloud long-range vision and dilute the equity of a brand. Money is the root of all strategic vision loss.

Lesson #4: Strike when your PR and Marketing is hot. 

When your brand is in a leadership position, you must maximize your first-mover advantage and stay ahead of competition. Thanks to its entrepreneurial instincts and strategic acquisitions, Yahoo was well ahead of the curve in nearly every internet category.

But it failed to capitalize on its early leads, leaving the field to be dominated by later entrants. Yahoo Briefcase, for instance, did cloud storage long before the likes of Dropbox, Box, and Google Drive. It did not build on its PR and marketing momentum, and Yahoo allowed the competition to steal its lunch.

Lesson #5: The world doesn’t care about you, but what you can offer. 

The internet is an awesome place, and there are so many ways people can be helped more. In the end, there are very few people that run a tech giant. Skill comes to many, but vision comes to few. And Yahoo failed to get those few people. That’s why this story ended so sadly. The world doesn’t care about you. It cares about what you can do and what value you can offed.

PR, Advertising and Marketing professionals should remember this case study lesson as they craft campaigns for their clients and brands.[1]

The rest is history

Google aka Alphabet is now one of the world’s most valuable companies, with a net worth of over $1.9 Trillion, while Facebook has a market Cap of over $947 billion.[2]

Yahoo could have bought these companies for peanuts. In comparison, Yahoo’s core business is worth just $4.83 billion today. It was dubbed the “the saddest $5 billion deal in tech history.” What a marketing tragedy for the once mighty yahoo and former king of the early internet.[3]

Confucius reminds us once again and offers a valuable PR and life lesson: “when prosperity comes, do not waste it.”

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1 Comment

  1. That’s very insightful.
    Yahoo made a big mistake!
    I think the owners of Yahoo overvalued the company. I guess there was knowledge gap.

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