Yahoo Case Study

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“Did we want to do the deal? Yes!”

This case is based on adapted highlights from date-consecutive articles about Yahoo! by the following journalists, in The Times, The Sunday Times and Times Online:

Suzy Jagger and Mike Harvey, along with Murad Ahmed, Amanda Andrews, Holden Frith, Jonathan Richards, Dominic Rushe , Dan Sabbagh, Christine Seib, Susan Thompson, ‘Tempus’ and John Waples


Jerry Yang was doing a PhD at Stanford when he and fellow-student, David Filo, created a website directory. In 1984, they founded 'Jerry and David 's Guide to the World Wide Web ', renamed Yahoo! in 1985.

Terry Semel, Yahoo!’s former executive chairman, calls Yang Yahoo!’s " heart and soul.” Yang was ‘Chief Yahoo’ until he succeeded
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would keep most of the revenue generated on its sites, but pay Google commission.

AOL, a prospective partner of Yahoo! has approached Microsoft about a possible alliance, while Yahoo! has snubbed a revised Microsoft offer, $47.5bn ($33 a share), Yang insisting that Yahoo! shares are worth $38. Yahoo! is talking with both News Corporation and AOL, too, trying to forge a strategic alliance against Google.

In a letter to Yang, Steve Ballmer, CEO of Microsoft, said: “I am disappointed. [Our offer] remains the only alternative that provides, for your stockholders, full and fair value. You have left significant value on the table.” Yang now has to prove he can boost Yahoo!’s share price and justify his board’s decision. Ballmer wrote: “Our discussions led us to conclude that you would take steps to make Yahoo! undesirable. We regard with particular concern your plan to respond to a hostile bid by outsourcing to Google key paid internet search facilities currently offered by Yahoo!” Sir Martin Sorrell, CEO of WPP, an advertising agency, who wants to see a stronger rival to Google, commented: “Microsoft showed self-discipline by not bidding higher. Microsoft is a $300bn company with plenty of other ideas. The people who have lost most are agencies who were looking for a better balance in the marketplace.”

Over half the $40bn spent advertising online is on ‘search ads’. Google captured 77% of the market in the fourth quarter. Yahoo!’s share was 18%;

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