Thursday, September 8, 2011

Yahoo Might Become Yah Who?

I once made a really good investment in a stock. I bought Yahoo (YHOO) on the day it launched its IPO way back in the 90's. I had been following the company sensing they had something new and unique to offer. In those days one could have referred to the world wide web as the wild west web where you pretty much had to know the URL or specific name of a web site to access information.

The internet was very young and provided a wonderful conduit for information. It was the information super highway but you needed maps to get anywhere. Services like Prodigy and Compuserve (which my millennial friends will have only read about in history books) organized content into specific categories of information and offered functional areas like news, financial data and discussion boards. You could 'search' for information by keyword but you would only find what these services included in their catalogs. It was like going to the supermarket where products are grouped into aisles so you know where to find cereal or laundry detergent. But you would only find products the store had in stock.

Yahoo had a different model. While they also provided a landing page with news, sports, stock prices and other content, they took on the seemingly impossible task of scanning the entire internet and building an index which allowed you to find any web site that might be relevant to your search. Their technique involved "crawling" all of the web sites, taking note of the content on each page and following every link on each page to find other pages and other sites. Their process was designed to be continuous and never ending.

Anyone who could achieve some level of organization around this monstrous mass of information would surely be successful, provide immense value to its customers and therefore be rewarded in some way.

Although I almost missed getting in, my buy order went through on the afternoon of the first day of trading. I was delighted to have gotten in on the ground floor. My optimism waned a bit when the stock price dropped and I realized I bought in at the high for the day which was more like the fifth floor. I was in the basement and underwater for almost a year before the company gained traction and suddenly the stock price soared. The rest as they say is history.

Yesterday the news broke that Carol Bartz, Yahoo's CEO, was fired and the Board put a for sale sign on the front lawn. Yahoo, a true pioneer and front runner in the search game for many years succumbed to the superior search capabilities of Google and was squeezed out by the evolution of social networks and mobile computing. My good friend Mike Voellinger wrote a brilliant analysis of the situation and suggested the steps necessary for their recovery.

With all due respect, Mike, I am glad I sold most of my shares years ago. I think it t is going to be cold and damp down in the basement this time and frankly, I am not sure they will ever get out.

Captain Joe

Follow me on Twitter @JPuglisiLLC