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.
Yahoo

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.

Yahoo wants to kill passwords with revamped Mail app

One new Yahoo Mail feature lets you sign in without a password.Yahoo

Yahoo thinks it can make your password a thing of the past.

It's part of a larger effort to revamp the Internet giant's email service into something so compelling and easy to use that that it stands out among other email services like Google's Gmail and Microsoft's Outlook. In Silicon Valley at least, Gmail is considered cool, and most others are passe. Yahoo hopes new features it announced Thursday will help change that.

One of them lets people log into their email accounts without a password. You go to mail.yahoo.com, enter your user name and press "continue." That's where everything changes. Instead of entering an annoyingly complex or easy-to-crack password, the company sends an alert to your smartphone and asks if you'd like to sign in. Hit "yes," and presto.

"We're going to kill passwords altogether," Dylan Casey, Yahoo's vice president of product management, said at a press event in San Francisco on Wednesday.

If Yahoo's tech catches on, it means consumers could eventually live in a world without having to remember passwords. That's a big deal because most security experts agree passwords in general are unsafe. What's more, it doesn't even matter if you are logging into a secure website.

High-profile hacks at places including Sony Pictures, the IRS and Ashley Madison, a dating website for married people, have brought a lot of attention to people's digital vulnerability. One of the problems is too many people use an easy-to-guess password or the same one for multiple sites. The result either way is that if a hacker breaks into one site, it could mean trouble for the rest of your online life.

A 'far superior' way

This isn't Yahoo's first push to end passwords. The company in March released a feature called On-Demand passwords, which lets people sign into their Yahoo accounts with temporary passwords the company texts to users' phones. It's Yahoo's take on a common process for logging into websites called two-factor authentication, where you first enter your own password, then enter a second password the company sends to your phone. Many popular services, including Gmail, do this. You could think of Yahoo's process as two-factor authentication, minus the first factor.

But only 3 percent or 4 percent of Yahoo's 225 million monthly active users implemented On-Demand passwords, Casey said. Yahoo's new tool, called Account Key, is "far superior," to On-Demand passwords, said Jeff Bonforte, Yahoo's senior vice president of communication products. He said Yahoo will eventually shut down On-Demand passwords and move people over to the new feature.

Yahoo Mail is one of the company's most important products.Yahoo

To use the tool, you log into your email with your regular password, turn on Account Key, and register your phone. The catch, of course, is you must own a smartphone and be willing to give your phone number to Yahoo. Bonforte said more than 90 percent of Yahoo Mail users in the US have smartphones, and the majority of users access their mail through their phones.

If people lose their phones or their battery dies, they can still login using traditional passwords or through email. The tool for now is available for Yahoo Mail and Sports but will expand to the company's other services later, a Yahoo spokesman said.

A wider reach

For Yahoo, attracting more people to its email service is critical as CEO Marissa Mayer tries to turn the company around. Since she took the helm of the once-proud Internet pioneer three years ago, she's tried to pull the company into the era of smartphones and tablets. She's revamped each of the company's mobile properties, from Yahoo Weather to Finance, but she still faces flagging revenues and increasing impatience from investors.

"Basically, what they need is a killer product. They need something," said Sameet Sinha, an analyst with the investment bank B. Riley and Co. "Google has search. What does Yahoo have?"

Yahoo hopes the new version of Mail can fill that void. The company also announced other new features for the service, including allowing people to import outside email accounts such as from Outlook.com, AOL and Hotmail. Gmail is not included, though the company is "working on it," Bonforte said. You can also look at attachments side-by-side with messages, among other things.

The company said it made its email search tool more powerful so you could more easily see older emails from people while on the service's mobile app. The iPhone version of the app will be compatible with 3D Touch, a new software feature Apple designed for the new iPhone that lets people navigate through apps differently.

The changes are an attempt to improve a crucial part of Yahoo's business, Bonforte said. "Yahoo Mail has always been the center of what Yahoo is," he said. "The success of the product is very important to the success of the company."