Yahoo’s drawn-out and dutifully-harangued-by-Kara-Swisher sale process finally came to a close on Monday with a $4.83 billion cash purchase by Verizon. It’s a fun deal by Verizon for a few reasons, which I’ll cover in a separate post, but today, Yahoo.

What Yahoo could have been

Close to $5B in cash is by no means a shabby exit, but many are left pondering what Yahoo could have been. And for good reason. Yahoo went public in 1996. They were the inaugural consumer web portal for many – the first way consumers interacted with the web and found content. In the twenty years that followed, Yahoo failed to see the new content discovery mechanisms (e.g. search and social) that would dislocate their own directory-based method. By the time Marissa Mayer took over, it was too late. Not for modest success, which activist investors have pleaded for (more on this below,) but for monopoly-level success. Google success. Facebook success.

First, a quick note on the last four years under Mayer. Even though Yahoo had already missed out on search and feeds by the time Mayer started, there were improvements that could have been made to the core business and to the Yahoo organization as a whole. These are probably best chronicled in hedge-fund investor SpringOwl’s 99-page shellacking of the business from late last year, a document which outlines a lack of product focus, a plummet in core business earnings, an excessive headcount, the list goes on. Though much of this could have been fixed by the right leader (when it wasn’t fixed by Mayer,) these were problems woven into the Yahoo culture long before she came on the scene.

So where did Yahoo go wrong? It helps to start at the beginning.

What Yahoo was all about

When Yahoo started*, their core value proposition centered on one thing: enabling users to find stuff on the web. Forget everything else -- the mail, the fantasy sports, the classifieds. Yahoo was all about finding content.

Here’s an overview of Yahoo’s business as stated in its first 10-K (emphasis my own):

“Yahoo! Inc. ("Yahoo!" or the "Company") offers a family of branded online media properties, including its flagship property YAHOO! (R), that are among the most widely-used sources of information and discovery on the World Wide Web.

The Company's principal offering, YAHOO!, provides a comprehensive, intuitive and user-friendly online guide to Web navigation and aggregated information content. YAHOO! includes a hierarchical, subject-based directory of Web sites, which enables Web users to locate and access desired information and services through hypertext links included in the directory. … Users can browse the directory listings by subject matter through a rapid keyword search request that scans the contents of the entire directory or any subcategory within YAHOO!. The basic Web site listings are in many cases supplemented with brief descriptive commentary, and a special symbol is used to indicate listings that, in the view of the Company's editorial staff, provide unique presentation or content within their topic area.”

For a long time (roughly four Internet years – like dog years, they amount to much more in their own special way), Yahoo and its directory of web sites was the best way for users to find content on the web. This idea of everything on the web indexed within a single-site directory is hard to imagine for a younger subset of millennials.

Part of the reason it’s so hard to imagine the Yahoo directory working is because we know what content discovery on the web eventually became: Google and social. When you compare the present to Yahoo’s initial solution, it’s pretty clear that there was some missing of the proverbial boat that happened here.

Missing the boat

As with many proverbial boats, Yahoo missed theirs because of a lack of focus on their user’s core need: finding content. Yahoo found initial success in their directory model, but they must have known better than anyone that the impending scale of the web would soon outstrip their current method for content discovery. And yet, Yahoo didn’t focus on improving content discovery itself, they just tried to show users more content.

Part of this is because The Innovator’s Dilemma (and all the jacked-up talk of disruption theory that it brought) didn’t come along until 1997, when Yahoo was already an established company with a culture that was difficult to shift. The result being that, in its core growth phase, Yahoo was never trying to disrupt itself. Compared with today, where leading companies speak in Christensen-ese and are constantly looking for the new tech that will make them irrelevant, it’s clear that late-90s Yahoo wasn’t actively seeking a replacement for their front page.

This became the first issue for Yahoo. They were focused on the wrong thing. While Larry and Serg were seeking the fastest way to get a user to a specific piece of desired content, Yahoo was seeking ways to present the user with more generalized content -- a pursuit that was, at its core, the anti-thesis of a focused product strategy. The result was a Google home page with a single search bar, asking the user what they were looking for, and a Yahoo home page asking the user “how about all of this stuff?!”

Next, came the peanut butter manifesto.

Peanut butter

As Yahoo brought more content and services into their site, they continued to broaden the scope of their business and the number of problems they were attempting to solve for the user. After a spree of projects and deals, Yahoo was no longer the content discovery company, they were the “what exactly does Yahoo do again?” company.

This resulted in the famous “Peanut Butter Manifesto” from senior Yahoo executive Brad Garlinghouse. The whole memo is great and something I recommend wholeheartedly, but the excerpts below highlight the issues I’ve mentioned thus far.

“We lack a focused, cohesive vision for our company. We want to do everything and be everything -- to everyone. We've known this for years, talk about it incessantly, but do nothing to fundamentally address it. We are scared to be left out. We are reactive instead of charting an unwavering course. We are separated into silos that far too frequently don't talk to each other. And when we do talk, it isn't to collaborate on a clearly focused strategy, but rather to argue and fight about ownership, strategies and tactics. … This forces decisions to be pushed up - rather than down. It forces decisions by committee or consensus and discourages the innovators from breaking the mold... thinking outside the box.”

As we know, the changes Garlinghouse appealed for in his peanut butter manifesto never came to fruition – many of the issues he addressed are all over last year’s SpringOwl analysis. Change is hard.

If there’s a lesson to learn from Yahoo, it’s that focus is everything. (Note that this doesn’t mean focus on everything.) Identify what it is that you're providing to your users. What it is that they keep coming back for. Then keep doing that. And keep other people from doing it better than you.

Do not spread your peanut butter too thin when a well-placed dollop will do.

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*That link jumps to a very entertaining CNet interview from 1995. Please watch it.