by Utkarsh Sinha
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What Insiders Say About Yahoo's Problems

Chapter 1 of 4

Yahoo's core internet business was acquired by Verizon in July 2016 for $4.8 billionMany media houses have reported lack of strong leadership, failed attempts to acquire good companies and loosing precious opportunities to itself get acquired at a higher valuation as the possible reasons for the company's downfall. But these were just missed opportunities and rarely highlight the mindset of the people, the working environment, the inside processes that could have weakened the company in holding its ground as a tech giant.

This is a guide to insider insights that shed light on Yahoo's brewing problems early on.

Chapter 2 of 4

Blinding Money
In 1998,  Paul Graham (a popular computer scientist) was meeting with Jerry Yang, the cofounder of Yahoo, to discuss a new piece of technology called 'Revenue Loop' that his company ViaWeb had developed to make sorting of shopping search results better. But as he points out in his essay Jerry Yang didn't seem to care.  

In Paul's own words - 
The reason Yahoo didn't care about a technique that extracted the full value of traffic was that advertisers were already overpaying for it. If Yahoo merely extracted the actual value, they'd have made less.
Yahoo was making a lot of money from banner advertisements on its website and they were getting blinded by it. As they tried to become a hierarchical list of links to websites, they were loosing their game to search (Google), which was becoming the new way to find things on the internet. 

However, that wasn't it. Paul soon got an insider look on Yahoo's operations when he went to work there after ViaWeb got acquired by them. He says - 
One of the weirdest things about Yahoo when I went to work there was the way they insisted on calling themselves a "media company." If you walked around their offices, it seemed like a software company.
From the early days, Yahoo's founders and executives were unable to set a clear company identity and a work culture to go with it. Yahoo was a website which was basically run by software engineers, but a large focus was put on a sales team that would bring million dollar deals from big clients for banner ads. All that, because banner ads made a lot of money. 

In the whole  thing, the executives ignored creating a hacker-centric culture, where real focus is on creating new innovative products, overcoming technological challenges and user growth. As a result, good programmers chose other companies like Google, Facebook, Microsoft over Yahoo to work for. This identity crisis sowed the seeds for a less competitive workforce and no competitive advantage (product-wise) as compared to other companies.

Chapter 3 of 4

Acquisitions For Data, Not Communities
Over the years Yahoo made a number of acquisitions but was never able to leverage their true potential. This seems rather odd when you come to know that they acquired 114 companies in their lifetime including some well known names in recent times such as Tumblr, Flickr, and Upcoming. 

Here's what a senior Yahoo executive had to say on Flickr -  
"By the time we were looking at Flickr, Yahoo was getting the shit kicked out by Google. The race was on to find other areas of search where we could build a commanding lead. That is the reason we bought Flickr - not the community. [...] The theory behind buying Flickr was not to increase social connections, it was to monetize the image index. It was totally not about social communities or social networking. It was certainly nothing to do with the users." (source)
Another Yahoo executive points out - 
"I spent years at Yahoo trying to signal the alarm that Facebook was going to take over the adult market unless we stepped in and used our existing social networks to fight back,"(source)
This highlights two major problems in Yahoo's functioning.
  1. Stifling Innovation: By keeping a narrow approach of acquiring a company just for the sake of monetizing its data, Yahoo stopped paying attention on the growth of the thriving user communities that actually created that data. Flickr's team was kept occupied in integrating their data into Yahoo's instead of working on innovative features that would keep its user base happy and engaged.  This was a downward spiral, because without a happy user base, there was going to be no data. Upcoming ( a social event calendaring site) also saw the same fate when it got acquired only for it's local event data.
  2. Not Valuing Social Networking Enough: A few companies that Yahoo acquired like Flickr, were vibrant communities even before social networking in the Facebook sense caught up. Yahoo did not allocate enough resources for them to flourish. 

Chapter 4 of 4

Lost Direction
Glassdoor, is a company review website, where people can share and discuss their experience of working at a company.
A 2016 assessment of 2200 company reviews for Yahoo, highlighted the following issues -  

It clearly shows that the workforce at Yahoo felt that decision making and lack of direction in the senior management was a huge factor coming in the way of Yahoo's progress. This also supports what Yahoo executives faced with respect to newly acquired companies and stringent resources to build innovative products. 
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