Birth of Yahoo in 1994

Yang officially co-founded Yahoo, which actually stands for Yet Another Hierarchical Officious Oracle, in 1995 with David Filo. Check out this early logo from 1994.

The company spent the next five years after its incorporation blazing a trail as the premier search engine and Web portal until the dot-com bust brought it back down to earth. Yahoo made a number of high-profile acquisitions, including Geocities in 1998, Broadcast.com in 1999 and Hotjobs in 2001. The company operated Yahoo Search (powered by Google until 2004). Other Yahoo Web services included Yahoo Directory, Yahoo Mail, Yahoo News, Yahoo Groups and Yahoo Answers. While Google passed Yahoo in search more than a decade ago, Yahoo plotted a course in display advertising that was unparalleled until 2011, when Google passed it.

Yahoo also acquired the still No. 1 photo-sharing Website Flickr and snapped up social-tagging superstar delicious in 2005, grabbing some serious Web 2.0 credibility. But Yahoo has been troubled for years because it failed to attract a steady stream of new users and failed to leverage its user population to generate the most advertising dollars. Yahoo executive Brad Garlinghouse lamented as much in his infamous “peanut butter manifesto,” where he fretted over Yahoo’s future: “We want to do everything and be everything (to) everyone. We’ve known this for years, talk about it incessantly, but do nothing to fundamentally address it. We are scared to be left out. We are reactive instead of charting an unwavering course. We are separated into silos that far too frequently don’t talk to each other.” Slumping shares, weak revenue growth, staff defections and messy operations will do that to a company.

Peanut butter manifesto be damned, Yahoo’s board ousted Terry Semel as CEO in 2007.

Yang took over as CEO in 2007 and many expected the co-founder to struggle after being away from the helm for so many years. “We believe there is no better person in the world to run Yahoo now than our visionary co-founder Jerry Yang, who has helped build and run this company over the past 12 years,” said Yahoo board director Ed Kozel in June 2007. “Jerry provides phenomenal strategic, technical, product and market leadership, has developed important relationships with major business partners, and has defined and nurtured Yahoo!’s unique, winning culture. As the public face of Yahoo!, Jerry has been instrumental in attracting world-class talent to the company at all levels.” Remember those words.

Yang doesn’t exactly engineer a turnaround. In fact, things get worse as Google, Facebook and Twitter attract more users with the rise of social media. Investors grow restless and by 2008 Microsoft CEO Steve Ballmer smelled blood in the water. In February 2008, Microsoft offered to buy Yahoo for $44.6 billion, or about $31 a share. Yang said no, concerned that a Microsoft takeover would tarnish Yahoo’s business model and image.

How serious was Microsoft? It was serious enough that Ballmer threatens Yahoo with a hostile takeover bid by taking its offer directly to Yahoo shareholders for a vote. Yahoo’s stock continues to fall. Microsoft ultimately walks away in June 2008, leaving Yahoo more damaged than it was. The clock is ticking on Yang.

Yang announces he is departing from the CEO role in November 2008. In January 2009, he is replaced by Autodesk CEO Carol Bartz, who has a reputation for a foul mouth and great operational skills. She cut a lot of existing acquisitions, such as Geocities, MyBlogLog, Yahoo Go and Brickhouse. Then it sells Zimbra to VMware. In all fairness, she also acquired India’s Koprol and IntoNow, and struck deals to integrate Twitter and Facebook, a move that brings more traffic, even if it Yahoo has to pay to do it.

Knowing Yahoo needs cash, Ballmer comes to Bartz for a second pass at a deal. This time they make one. In July 2009, Microsoft and Yahoo struck a 10-year search deal to have Bing power Yahoo’s search and ad platforms on the back end. Microsoft agrees to pay Yahoo 88 percent of revenues from ads served over the first five years.

Neither the operational bloat cuts nor the search deal panned out or padded Yahoo’s finances. Under pressure, Bartz is ousted in September 2011, just 30 months after taking the helm. “I am very sad to tell you that I’ve just been fired over the phone by Yahoo’s Chairman of the Board,” Bartz wrote on her iPad. “It has been my pleasure to work with all of you and I wish you only the best going forward.” Wall Street cheered the move: Yahoo’s stock price, which hovered around $12.50 before and since Bartz took over, staggered up to $13.72 on Sept. 6. CFO Tim Morse took over as interim CEO.

One month later, at the Web 2.0 Summit, Ballmer is asked whether he was happy Microsoft didn’t succeed in buying Yahoo for nearly $45 billion, considering its market cap had fallen to about $20 billion. Ballmer reflected: “You know, times change … You ask any CEO who might have bought something before the market crashed in 2008 … Hallelujah. Putting everything else aside, the market really kind of fell apart. If Yahoo accepted our bid, we would have accepted it, we would have bought the price or whatever and then we would have closed post-Lehman Brothers. Yeah, sometimes … you’re lucky.” Shareholder Daniel Loeb calls for a jettison of Yang in November.

Thompson, another strong operations leader as the former president of PayPal, is named Yahoo CEO Jan. 4. “His deep understanding of online businesses combined with his team-building and operational capabilities will restore the energy, focus and momentum necessary to grow the core business and deliver increased value for our shareholders,” Yahoo Board Chairman Roy Bostock said in a statement. Thompson inherited a mess. Meanwhile, the company is undergoing a strategic review on whether to sell off its Asian interests and focus on its media assets. Yahoo owns a 40 percent stake in Alibaba and a 35 percent stake in Yahoo Japan.

Yang leaves Yahoo on Jan. 18. He noted, “The time has come for me to pursue other interests outside of Yahoo.” The move comes one week after comScore said Microsoft’s Bing search engine had passed Yahoo for the first time.