What Happened to Yahoo

Summing up:

* The Innovator's Dilemma, and

* Mistaking a key driver of innovation and growth (software development) for a cost center.

I think there's something to be said for focusing on what the market rewards, and clearly the market wasn't rewarding yahoo for having great technology in 1998. Nor did it reward Google for having great enterprise search. You can't fault Jerry and David for not seeing search when the market had clearly supported banners with no basis for search as a viable model yet.

How about the 3rd universal factor: growing too big too soon?

> " You can get programmers who would never have come to you as employees by buying their startups. But so far the only companies smart enough to do this are companies smart enough not to need to."

Yahoo did do this through the Inktomi (Yahoo Search, 2003-2010) acquisition. I've worked in that organization and learned a tremendous amount from the people. At that time the hiring bar had been considerably raised from what Graham describes (I have no idea whether that was the rule or the exception at that time, I was there 8 years later), nobody was shy of rejecting weak candidates. Much of the knowledge did diffuse to rest of the organization and it's important to note that along side the "dot-com-wannabe-millionaire-vesting-in-peace" crowd the essay describes, there was plenty of genuine technical talent (anyone who has worked there can attest to presence and influence of hackers).

Unfortunately, for many reasons, that talent has slowly bled out. There was also a great amount of friction between Search and rest of the organization e.g., resistance (by Search engineers) to dog-fooding of what was often inferior technology. Search was, however, able to maintain a different platform, remaining on Linux, with their own platform/software stack, but were some "wtf" moments like porting and forcing the adoption of a custom user space locking library from FreeBSD when Linux already had futex (on the other hand, the fact there was a custom locking library built in a "media company" does say something).

The other key mistake made is that they would position bright, capable new hires in areas that weren't directly correlated to revenue and treated as cost centers. That just seemed highly illogical to me. It's a mistake that's often difficult to fix: once young graduates are used to working on glamorous projects, it's much harder to get them to work on more mundane, but revenue critical projects such as advertiser systems. Google's strategy of a uniformly high hiring bar (vs. some teams hiring people other teams rejected for roles involving the same skill-set) and assigning hires to business priority projects (while allowing individuals to transfer if the project wasn't their cup of tea, with proper incentives in place for some projects) seems to be (at least from an outside point of view, I've never worked at Google) better.

As far as I was concerned (admittedly I was still a kid at the time), all that mattered was the Yahoo homepage was garish and full of ads, and the results were hard to sift through (because they were full of 'sponsored links' and the page was equally garish). Google was the antithesis of all that, and that's why I used, liked, and rooted for Google.