Yahoo Demolishes GeoCities 10 Years, $3.6 Billion Later

Yahoo announced that it will shut down GeoCities, one of the company's longer-running units, later in 2009. Yahoo purchased the service, which allows users to create their own Web pages, for $3.6 billion in 1999. In the intervening decade, however, the rise of sites such as Facebook and Twitter presented a more user-friendly alternative for consumers than coding a personal home page, and GeoCities found itself eclipsed.

Yahoo has pulled the plug on GeoCities, which it acquired in 1999 for $3.6 billion in the hopes that millions of users would use the service to create their own Web pages. The shutdown will come later in 2009, although Yahoo declined to specify an exact timeframe.

News reports from 1999 about Yahoo's acquisition of the service clearly show the exuberance of that period's "tech bubble." On Jan. 28 of that year, when the deal was announced, Yahoo traded at $367.75, even as shares of GeoCities sold at $117. Based on stock prices, the deal between the two companies was valued at $3.6 billion.

Near the market close on April 24, 2009, by contrast, Yahoo's stock was trading in the $14.36-$14.94 range. The search engine company reported revenues of $1.58 billion for the last quarter, a dip of 13 percent from the same quarter in 2008.

"The best candidate for focused investment and renewed innovation are those products that generate the majority of our traffic and corresponding economic value," Yahoo CEO Carol Bartz said during the company's first-quarter 2009 earnings call on April 21. "These include the homepage, sports, news, finance, entertainment, mail search and mobile."

It did not, evidently, include GeoCities. The service may have been one of the unnamed ones that ended up on Bartz's co-called "Wall of Shame," where the CEO told investors she placed Yahoo products that were up for examination and possible culling.

The plowing-under of GeoCities can perhaps be attributed to the rise of both blogs and social networking sites such as MySpace, Twitter and Facebook, which offer a user-friendly template for individuals and small businesses to express themselves online without having to resort to hours of Web coding.

GeoCities accounts will continue until the service shutdown later in 2009.

"Existing GeoCities accounts have not changed," said a posting on Yahoo's Help page. "You don't need to change a thing right now-we just wanted you to let you know about the closure as soon as possible. We'll provide more details about closing GeoCities and how to save your site data this summer, and we will update the help center with more details at that time."

Yahoo has been streamlining itself, including planned cuts of 5 percent of its global work force of 13,600 workers, as it continues to battle Google for search-engine market share. Yahoo held 20.5 percent of the core search market in March 2009, according to a report issued by research company ComScore, versus 63.7 percent for Google.

Early in 2008, Microsoft made an unsuccessful bid to buy out Yahoo, which drove Yahoo's stock sharply downward and forced former Yahoo CEO Jerry Yang to step down on Nov. 17, 2008.

The two companies are back in negotiations over an advertising alliance, according to reports, with Bartz and Microsoft CEO Steve Ballmer allegedly meeting to discuss a possible partnership. In Yahoo's most recent earnings call, Bartz has shut down questions about such negotiations with "no comment."