What are the reasons for downfall of Yahoo!?

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What are the reasons for downfall of Yahoo!?

Internet pioneer Yahoo! sold to Verizon in just $4.8 billion that is much low value as compared to once its market value, that was $125 billion. However, this sale will unite Yahoo! with another internet giant of past days AOL. Almost every internet user, who have an interest in business analysis is shocked to read this news and wants to know the reasons behind that downfall of Yahoo!. In this article, I’ll try to cover some major issues behind the scene.

In the earlier days, I spent hours daily on Yahoo! and its subsites. Yahoo! was famous because it gives a full portal services consists of Business, weather, mail, search, maps, games, website hosting, briefcase, questions, Yahoo! Chat rooms and much more. Even I was much excited when one of my friends built a free website for me using “Geocities”, which was a Yahoo!’s bought asset. I admitted, I spent penalty of time over Yahoo! till 2007. But what changed my interests was Yahoo!’s competitors. Facebook, Google and some other Yahoo! ‘s competitors made their place in web market and throw out the Yahoo! from market.

In these years Yahoo! take some bad steps that resulted in this way. Like in 2008, Microsoft’s Chief-Executive Steve Ballmer tried hard to take over Yahoo! for the bid of $44.6 billion but Yahoo! ‘s official declined because, at that time, they said that offer was “too low”. And very next year Yahoo! gave up its efforts to create its own search engine and signed an agreement with Microsoft to use Bing as search engine. However, this is not a single mistake done by Yahoo, below are some more. Some reasons of Yahoo!’s decline are;

  • Not to Buy Facebook for just $0.1 billion increase in Offer:

In earlier stages of Facebook, Yahoo! once tried to buy Facebook and made an offer of $1 billion, although Mark Zuckerberg declined but Facebook’s board suggested him to sell with a slight increment in offer, of $1.1 billion. But Yahoo! refused to increase the offer.

  • No Proper Planning in Product Development:

Undoubtedly Jerry and David (Founders of Yahoo!) were super smart guys in earlier times but with the passage of time, they became inactive in product decision in Yahoo!. The giant companies over information technology are because of their products and competencies and if founders don’t show their interests in product decision, no one else can do that for them. This is what we see that Mark Zuckerberg (founder of Facebook) and Larry & Sergey (Founders of Google) are still active in their companies as Steve Jobs were in his companies. According to some veterans, there were confusion and no proper planning when it comes to product creation.

  • Afraid to take Bold Steps to do something New:

At the end of time Yahoo! was a company that seems a company which is afraid to take bold steps to develop something new as Google and Facebook always doing. Although Yahoo! hired most brilliant professionals and web engineers but they don’t take steps to develop new experiences for users. I don’t know what were the reasons behind that. I came to this conclusion and wrote this statement because of fearless behavior of Yahoo! ‘s competitors. With respect to Yahoo! Google & Facebook always take bold steps and made some more interesting user experiences to engage their traffic.

  • Rejection of Flickr’s team Idea to build Social Network in 2005:

Before Google Photos, Facebook and Instagram there was Flickr that was a photo sharing website. Yahoo! bought it in 2005. At that time, Flickr’s team presented an idea to start a social network but Yahoo!’s management missed that opportunity and the same mishap happened with GeoCities, Delicious and, most recently, Tumblr.


What kept Yahoo! afloat in its worst time?

According to Forbes, Jerry bet $1 billion on Alibaba in 2005 and that was the resource that kept Yahoo! afloat in its worst time. The investment made at that time was 40% of China’s e-commerce king. Although Yahoo! sold parts of that holding but still its current stake is worth more than $30 billion.


About the author

Muhammad Ahmed Raza

Muhammad Ahmed Raza holds Masters degree in computer science, education and Islamic studies. He is Founder of Help n Guide, motivational speaker, and computer science professional. He is an experienced website developer since 2008 at professional level, as well as web developer of Pakistan’s best and trusted online Urdu newspaper Falak News. Beside this he delivers lectures about computer science topics in different reputable institutions.