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3 Takeaways From the Biggest Companies That Failed: Yahoo!

Posted by on Jun 7, 2020 4:50:22 PM

Successful companies don’t just happen, they’re born of failure, and from that failure come the lessons. Others’ mistakes can help you regardless of how far along into the process you are -- whether you’re still piecing the idea together, have already secured funding, or even launched to market.

In this series, we’ll look at those believed to be too big to fail; companies that should have succeeded, and had all the potential to do so, but lost that somewhere along the way. Today, we delve into what began as Jerry and David’s Guide to the World Wide Web.

Founded in 1994 by two Stanford students, Yahoo! was before its time — a pioneer, having held the largest tech IPO up to that point in 1996 and, at the turn of the century, valued at over $125 billion. Today, Yahoo! is a shell of its former self, existing as a subsidiary of Verizon after their $4.48 billion acquisition of the business in 2017. Forbes called it the saddest $5 billion deal in tech history, and here are just some of the ways that came to be (and what we can take away from it).

1. They seized all the wrong opportunities. Their pockets were deep and they weren’t afraid to dig into them. Yahoo! made a lot of big purchases through the years: Tumblr for $1.1 billion in 2013, in 2002 for $436 million, and Yahoo! Video predecessor, Maven Networks, in 2008 for $160 million. Their two largest-ever acquisitions were made within two months of each other; they bought in April of 1999 for $5.7 billion (for what became now-defunct Yahoo! Radio), and GeoCities that May for $3.6 billion. In 1998, however, Sergey Brin and Larry Page approached Yahoo! offering to sell their company to them for $1 million. That company was Google. Yahoo! said no, but later sought to buy the company for $3 billion; Google wanted $5 billion. Yahoo! said no again. Two years on, in 2004, Google went public at $85 per share and is worth $980 billion today.

The lesson? You need a vision; don’t try to do it all, but do it properly or someone else will. Yahoo! tried to be a lot of things instead of focusing on what they really were - an indexing site and search portal. Had they poured their resources into that, who knows what the business could be worth today?

2. Nothing lasts forever. In 2008, Microsoft proposed a $44.6 billion buyout of Yahoo!’s entire business -- a deal that would have made them a powerhouse in online services. Yahoo! believed they were worth more and asking for ~$56 billion instead, more than double what Microsoft paid for LinkedIn, their largest acquisition to date.

The lesson? Don’t be too proud; know the market and know you may not be the best because that will allow you the opportunity to find the gaps that need filling. There may not always be a bigger and better offer on the table, whether that comes from investors or your prospective client(s).

3. Try not to get left behind. Yahoo! may have been a driving force at the beginning, but they failed to get on the bandwagon as the market shifted. Yahoo! was overtaken in all the areas in which they were once the front-runner. People moved from Yahoo! Mail to Gmail or Hotmail; Yahoo! Messenger was replaced with Skype and Whatsapp, and we began consuming our news everywhere else, taking traffic away from Yahoo!.

The lesson? Not vastly different from those in the previous two points, it’s important to know who you are and also who you aren’t. Yahoo! was so busy chasing this dream of being the biggest media company in the world, that they forgot to be the biggest and best search portal... until they weren’t anymore.


Some may argue that Yahoo! is not a failure; Yahoo! News remains the top-ranked News and Media site globally according to Similarweb, however, it undoubtedly had the potential to be so much more. It wasn’t all doom and gloom, either — Yahoo!’s $1 billion investment in Alibaba in 2005 was arguably one of the best business moves they made. That said, it takes more than one good call, and oftentimes just as few to mark the beginning of the end.

Keep an eye out for more to come in this series. Join our mailing list so you know when that’s next up, or have a look through our past articles for useful resources on other ways to build a business that can last.

Image: Businessweek, September 7th, 1998

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