A huge part of what yahoo were
was the dotcom bubble. They're like a personification (firmification?).
People could see the internet was a big deal. People could see that oligopolies would be important. They assumed early movers would own the market. Investors and startups were right about a lot of things, but it was enough to be wrong about one or two things... Yahoo did better than most.
No one knew how long it would take for the internet to "get there," and the implications for early movers. In retrospect, I think this was knowable, but everyone made this mistake.
More importantly, no one knew what businesses would be valuable online.
Servers would become amazon's main moneymaker. They achieved (along with others) the goal of becoming a retailer on a scale not yet seen then, but servers are a better business. Go figure.
Search, holiday rentals & distinct categories of social networking became monopolies, and great businesses. The Encyclopedia became better than anyone imagined, but not a business. Retail margins never improved. Free online video never became a business. Online news is barely a business. Email is not a business. ebay would stay exactly the same. Go figure.
Stress on the news point. News was the centrepiece business of almost any other media sector, print, tv, radio, teletex... online, it's a dud.
All this stuff had to be figured out.
Yahoo started from logical premises. You couldn't find anything online, so they made a directory. There wasn't much online, so they published stuff for people to read. They surveyed the two, saw more potential in the latter. Huge mistake.
It just wasn't obvious at the time. The better the directory/search got, the less time people spent there. People spent time looking at news and stocks and stuff. ...That's where the ad money will be, like TV. It was not ilogical, it was just not true.
Who knew that search advertising would be a $100bn blue chip business and "content advertising" would be mostly penis enlargment and diet tricks? Surely yahoo finance would be a premium ad seller? no? really? search & facebook, the online tabloid?
A lot of stuff still doesn't make sense. Youtube. Why isn't youtube a serious business? People watch 1bn hours of youtube per day! TV ads are a thing. A big deal, in fact. They don't pay anything for content. Google already has a massive ad business. For the life of me... youtube should be as bigger business than facebook.. certainly bigger than netflix.
Incidentally, almost every news site tries to force/trick me into watching videos (not even always ads). ...hints at how bad a business news is, that they want a sliver of what youtube have so desperately.
TLDR: Yahoo had to guess a lot of future, and place bets. It turned out that these bets could be placed 5-10 years later, with much better chances of being right and without missing out on much. Hard gig Yahoo.