Are you aware what business you are in? Lessons from Yahoo!

The story of Yahoo is an amazing story of the Internet and how quickly it moves and how ruthless it really is. 

I had lunch with Lewis Gersh the other day and we talked about the big ones — AOL, MySpace — but also the long list of others — GeoCities, Excite, Altavista, LetsBuyIt, Interworld, Netscape, The Globe, QXL — that crossed industries and have all disappeared.  The question of why is of course different for each one, but here is a very insightful post from someone that was inside Yahoo before Google was founded.

The big lesson I take from below?  Realize that if you rely on a website to succeed, you are a software company.  If you don’t understand how to get the best developers and keep them, you will fail. 

In my world of creative agencies we spend a lot of time understanding how to get and maintain the best creative culture.  How long before we realize we’re in the software business as well?

What Happened to Yahoo

August 2010

When I went to work for Yahoo after they bought our startup in 1998, it felt like the center of the world. It was supposed to be the next big thing. It was supposed to be what Google turned out to be.

What went wrong? The problems that hosed Yahoo go back a long time, practically to the beginning of the company. They were already very visible when I got there in 1998. Yahoo had two problems Google didn’t: easy money, and ambivalence about being a technology company.

Money

The first time I met Jerry Yang, we thought we were meeting for different reasons. He thought we were meeting so he could check us out in person before buying us. I thought we were meeting so we could show him our new technology, Revenue Loop. It was a way of sorting shopping search results. Merchants bid a percentage of sales for traffic, but the results were sorted not by the bid but by the bid times the average amount a user would buy. It was like the algorithm Google uses now to sort ads, but this was in the spring of 1998, before Google was founded.

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