Failure to understand changes in user behavior, focus on a mission, and build a strong company culture led to Yahoo’s demise

VZ Yahoo logos

One of Silicon Valley’s pioneering internet companies just ceased to exist.

Yesterday, Yahoo announced that it has sold its core business to Verizon for $4.83 billion.

It’s the end of an era for one of the truly influential internet companies, and it’s been a long, painful downfall for what was once the premier portal to the web.

Yahoo was once worth $125 billion, and just sold for less than 4% of that amount.

What happened to Yahoo, and how could its demise have been avoided?

Here are 3 things every business can learn from the downfall of what was once a tech giant.

Capitalize on shifts in user behavior

One of the primary reasons why Yahoo lagged behind rivals like Google and Facebook is that they failed to successfully transition from one of the largest desktop web properties to a strong mobile competitor.

The unfortunate thing was that Yahoo was in a prime position to take advantage of the shift to mobile.

Yahoo attracts a billion visitors each month who read and respond to email, check the weather, read the news, check sports scores, share images, and much more – all the things we are accustomed to doing on our mobile phones every single day.

And although they have had some success with their Fantasy Sports, Finance, and News apps, they have seen declining user numbers in the categories of email (Yahoo Mail), social (Tumblr), photos (Flickr), weather, and more.

Yahoo mobile growth matrix

Yahoo’s mobile growth matrix (Graph courtesy of 7Park)

What may be more important to the company’s downfall are the outdated approaches that Yahoo continued to use to monetize their audience in the mobile age.

On the desktop web, Yahoo made their billions by simply showing display ads to their website visitors. When smartphones became the primary way users accessed information, Yahoo could not build high-quality mobile advertising experiences fast enough.

This impacted Yahoo’s advertising business in a couple of ways.

First, because Google and Facebook were making the transition to mobile much more quickly, Yahoo’s display ad business was losing market share, and fast.

And Yahoo was also slow to create the capability to measure the effectiveness of ad campaigns across multiple devices, and thus couldn’t prove the worth of their platforms to garner the budgets of large advertisers they had courted in the past.

Yahoo was not only slow to recognize the impending shift to mobile, but they also could not capitalize on the move toward social experiences.

They failed to take advantage of their Flickr acquisition, which was bought for the chump change amount of $35 million in 2005. Flickr really could have been Instagram.

And Yahoo tried to go big into social by purchasing Tumblr for over $1 billion, but that acquisition has faltered.

Technology changes at the speed of light. In order to keep up, you have to understand how these changes impact user behavior and how your company needs to adapt.

Whether you’re a technology company, a manufacturer, or a services provider, a deep understanding of your core customers will help you adapt to the changes that occur in their behaviors and help your company endure.

Know your mission and focus on your core capabilities

For the longest time, Yahoo had no idea what kind of company it was.

It still doesn’t.

Is it a media company that pumps out news, finance, sports, and other information?

Is it a technology company that creates technical products that improves our lives?

Is it an investment vehicle, per its hugely valuable investment in Alibaba?

Is social and mobile important to the company?

No one has known for a long time.

Google’s mission is to organize the world’s information and make it universally accessible and useful. And while they have their hand in many different businesses, from self-driving cars to healthcare, their approach to each and every one is data- and technology-driven.

Facebook’s mission is to give people the power to share and make the world more open and connected. Everything they do is related to connecting people with technology.

It’s hard to count how many mission statements Yahoo has had over the years.

The lesson here?

Be clear on your mission and what kind of company you are, and focus on that.

Don’t try to be a copycat and emulate others’ success.

If you know who you are and what you are good at, it will be clear to your customers how you can help them, and you’ll find success.

Form a strong culture with the best people

You can’t forge a strong company culture when leadership isn’t consistent, and of course, if you have no idea what kind of company you are.

And a weak company culture will allow weak candidates to become employees and let them cruise.

No one will love your products when your goal is to ship products you’re not ashamed of. And that mindset has everything to do with the culture of where you work.

Amazon has a culture that may not be for everyone, but it’s a strong culture that clearly focuses on building innovative products at any cost.

Zappos’ culture is solely focused on customer service so much so that it offers customer service reps $2,000 to leave the company after training them.

Southwest Airlines strives to be the most loved airline and gives their employees a lot of leeway to make passengers happy.

Culture is one of those “hand-wavy”, subjective concepts that no one can really put a finger on, but it has such a huge impact on the employees that you hire, how they do their jobs, and the overall quality of your company.

So be sure to understand your mission, align your company around that mission, and let that drive how you do business.

Conclusion

One of the most influential internet companies of our day is gone.

But it didn’t have to happen that way.

If Yahoo had garnered a deeper understanding of their users, focused on a few things they were good at, and forged a strong company culture, the company may still be alive today.

These are lessons that can be applied to any business, regardless of size, industry, or geography. Will you apply them to your business?

What do you think about Yahoo’s downfall? We’d love to hear your thoughts in the comments.

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