Yahoo was always one step behind until its final fall

Another week, another internet company bites the dust. This time it’s Yahoo, the Web’s veritable grandfather, that was finally put out of its misery last week through a US$4.8 billion takeover by Verizon.

The US telecommunications company plans to use Yahoo’s various apps, media properties and advertising technology to complement its own existing businesses, but for all intents and purposes the company that was once synonymous with the Web is gone.

Such an ignominious end seems rare, but in the fast-moving technology realm – especially on the internet – it’s more common than not. Only a select few companies have been able to buck the trend for long.


Yahoo’s problems, like so many tech concerns, trace back to its inability to see what was coming next.

Launched in 1994, Yahoo was essentially a database of the most useful sites on the Web. Built and maintained by people, its search engine worked well enough for as long as the overall number of those pages was relatively small.

Its fatal flaw became apparent in 1998, when Google burst on the scene. The newcomer eschewed using human interveners to organise the Web in favour of an algorithm that ranked sites according to how many links they drew from other pages.

The automated approach scaled up better with the exponentially expanding Web. Before long, it was obvious that Yahoo’s search was grossly inferior and the company was left scrambling to catch up.

That pretty much set the tone for the next 18 years. Over that time, eight chief executives – culminating with the well-regarded ex-Googler Marissa Mayer – did their best to get in on the latest trends. Yahoo fielded its own email, photo, video, mobile and messaging services, but in each case found itself at least a few steps behind.

Ms Mayer, for example, made mobile apps a priority when she took the helm in 2012. She boosted the company’s mobile programming staff to 500 from just 50. Yahoo’s many apps, from sports scores to weather, improved as a result. On the surface, her plan worked – the company’s mobile audience tripled.

The problem was that by the time Yahoo had improved its apps, just having good ones was already yesterday’s news. Importance had shifted to how much time users were spending in those applications, which meant that only certain kinds of apps actually mattered.

Messaging, in particular, had by last year become all-important. Yahoo had, at one time, one of the better messaging apps available, but the long succession of chief executives had let it wither. Users defected to the likes of WhatsApp and Facebook Messenger.

Ms Mayer made Yahoo better, but not in any way that mattered. Despite her improvements, the company was still capturing only a sliver of mobile advertising revenue.

Yahoo thus joins a long list of tech titans that were unable to adapt to the future. It’s a club that includes IBM, laid low by its inability to foresee the shift to personal desktop computers, and Microsoft, a shell of its former self thanks to its initial tone-deafness to the internet. At least those two companies are still going concerns, unlike Yahoo.

Two exceptions to the trend, so far, are Google and Facebook. While still relatively young, both have displayed an uncanny knack for anticipating what’s next. They have been able to get in on the ground floor of emerging trends and ride them to success, and to co-opt the growth of new technologies that could ultimately kill their existing businesses.

Google, for one, foresaw the internet’s shift to mobile and wisely acquired the operating system maker Android in 2005. The company also anticipated the rise of video, so it purchased YouTube in 2006. Both could have resulted in someone else stealing users away, but Google instead brought them into the fold.

Facebook has similarly co-opted forces that could have killed it with its purchases of the photo-sharing social network Instagram in 2012 and the messaging service WhatsApp in 2014. Photos and messaging are now among the company’s key pillars.

Both companies believe that machine learning is the next big threat or opportunity to their businesses and are spending heavily on artificial intelligence research. Google is also seeing home automation and self-driving cars as potential disrupters, while Facebook expects big things from virtual reality.

Both are ahead of the curve, which is where technology companies need to be. They can’t always be one step behind, which is where Yahoo always found itself.

Peter Nowak is a veteran technology writer and the author of Humans 3.0: The Upgrading of the Species

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