Yahoo!'s Rise to Fame

This case traces Yahoo!’s amazing rise to fame, from its 1994 beginning as a simple website directory to its 2006 success as the world’s best known interactive web portal in 2006, with 11,00 employees, half a billion regular users, an average of  144 million page views per day, and annual earnings $2 billion on $6.4 billion revenues.  The case details the many changes that occurred in those 12 years, including technological changes in internet access, the growth of competition, economic challenges and Yahoo’s internal responses through strategy and structure. 

It seems that Yahoo! Management was very aware of the importance of monitoring the environment. The company itself was only founded after Filo and Yang (the founders) realized how popular their original website directory was. Once under professional management, the company appeared to be continually studying the environment, especially competing companies, to make needed strategic changes and adjustments.

a. Key Factors: Economic, technological, and social forces were the 3 forces that played a key role in Yahoo’s environment. The central force was the rapid development of the WWW and the exponential growth in people’s use of the web, in addition to continual changes in the technology itself including how people accessed the web. 

As access became easier and cheaper, economic gains through advertising became greater, shaping Yahoo!’s strategic growth strategy.  Advertising was and continued to be Yahoo!s major source of income and along with ongoing expansion, this shaped its strategy throughout the decade to come. 

However, during the dot.com bust in the late 1990s and the subsequent economic recession, both factors of this strategy had very negative consequences. Competition became fierce, including competition from newcomer Google, a search engine company that pioneered a totally new way to search the Web. 

Yahoo! developed its original, hierarchical directory of websites through human...