Why Yahoo faded: The Internet changed, but it didn't

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For many people years back, Yahoo was the Internet. It's since been overshadowed by companies better able to keep pace with the times.
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Yahoo and I go way back.

I was one of the early adopters who embraced Yahoo as my main email service back in 1998 and who set up a custom My Yahoo page (remember those?) so all of the pertinent weather reports, stock quotes and headlines were at my fingertips.

Seventeen years later, Yahoo isn't even on my list of sites to check in on. There's my (non-Yahoo) email, and Facebook, of course, as well as a handful of news sites. The idea of an all-encompassing portal just doesn't appeal to me anymore.

I'm hardly alone. Yahoo said Wednesday that it plans to hollow itself out, spinning off its core business and leaving the company as little more than a way for shareholders to keep Yahoo's stake in Chinese e-commerce giant Alibaba Group.

The move underscores the profound change in how we interact with the Internet and how Yahoo failed to adapt. The company's key approach has been to package online content into a convenient jumping-off point. But now people are more likely to go to email, social networks or apps on their smartphones. Somewhere along the way, Yahoo got lost in the shuffle.

"At one point, AOL and Yahoo seemed like they were the Internet," said Brett Sappington, director of research for Parks Associates.

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That was a different time. In 1995, as Yahoo was starting out, the Web was in its infancy, and people would check out the Cool Site of the Day recommendation to find sites like the Froggy Page andFluffy's World. Yahoo soared to success when co-founders Jerry Yang and David Filo built an online directory to help people find websites in categories like government, science, news, entertainment and business.

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Use of social networks in the US has surged in recent years, according to the Pew Research Center. That's helped Facebook fly past Yahoo.Pew Research Center

What's stayed the same is our need for help reducing the immense breadth of the online world into something productive, entertaining and informative. What's changed is the tools that do that job for us, and of course the companies that provide those tools. Hint: It's not Yahoo.

Shifting sands

The first big challenge to the portal business was search, which more than a decade ago provided a quick way for people to find exactly what they want. Next came social networking, which blended more sophisticated interactions into our online existence. The arrival of smartphones is changing our online activity still more with home-screen apps and an unceasing stream of notifications.

That's not to say that portals have disappeared. Yahoo remains a top site, with 210 million users in October, according to analytics firm ComScore. That's behind only Google and Facebook.

But it has lost much of its relevancy.

"We've seen behavior shift," said Andrew Lipsman, a vice president at ComScore. "Social media became big, and a key thing in the last couple years has been mobile."

Yahoo's base of users actually grew over the last 10 years, but much of the action took place elsewhere as people gravitated toward Google to find answers and Facebook to keep tabs on friends.

Too little, too late

It's not that Yahoo didn't recognize these trends. It was big in search before Google surpassed it. Its Flickr and Tumblr sites have a social element, though one that's far short of Facebook, the billion-user social network. And it's worked to modernize its mobile apps, especially during the last three years, under the leadership of Chief Executive Marissa Mayer. All, alas, too little, too late.

While Yahoo concentrated on its core ideas, newcomers like Facebook pioneered new online businesses and competitors Google and Amazon bet big on experiments. "Some failed spectacularly, and some succeeded," Sappington said. "Because they placed so many bets, the ones that paid off really benefited them."

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Yahoo was early to offer a search engine, but Google, and more recently Microsoft, surpassed it.ComScore

Google and Amazon date back to the dot-com boom, but they now look radically different. Google expanded beyond search to build successful smartphone software, services for email and word processing, and a widely used Web browser. Amazon has grown beyond e-commerce to become a streaming-video provider and the power behind a tremendous amount of Internet infrastructure other businesses pay to use.

Ironically, the very smartphones that have proved so vexing for Yahoo also duplicate some of the all-in-one experience Yahoo offers.

"When I get up in the morning I go to my phone," said Bobby Cameron, a principal analyst at Forrester Research. "It has a mashup -- anyone who texted me, what's in my calendar, what's the email situation. All these things are there as a queue of notices."

Lee Rainie, director of Internet science and technology research at the Pew Research Center, takes the long view when it comes to the changing cast of characters who help us get the information we want. Yahoo was just the latest tool when it arrived 20 years ago, and new tools will come when the Internet of Things spreads computing and network smarts even further.

"The first books didn't have chapters, tables of contents or indexes," Rainie said. "All those were added because people wanted better ways to navigate this information-abundant environment. You put that on steroids in the digital era."

Google, Facebook and Amazon survive the brutal pace of online change in part because they're helping drive that change themselves. Yahoo has made plenty of history on the Net, but recent years have spun away in a pattern of being reactive.

In 1998, I might have heard momentous news about a tech pioneer through Yahoo itself. Today, it was over Gmail, Twitter and a jingle on my phone.