The resignation/termination of now-formerly new Yahoo CEO Scott Thompson amid a resume scandal was an embarrassing moment for the once-great internet giant.

For most companies, such a collosal blunder would represent a faux pas of the highest order, but that's not the case for Yahoo, it's just one more in a long line of mistakes. 

Here are the ten biggest mistakes the company has made...

Not buying or licensing Google's technology in 1998

In 1998, Google's two young co-founders approached Yahoo when they were making the rounds for backing in Silicon Valley.

According to a book written by John Battelle, that opened the door to an investment, licensing deal or an outright acquisition of the duo's technology. But Yahoo (and other major players) weren't interested.

Turning to Google for search results in 2000

Two years later, at the height of the first .com boom, Yahoo saw that search was becoming far more important than it had anticipated and it looked to third parties for search technology while it worked on its own.

One of those third parties was upstart Google, which it struck a deal with to power search on That deal, of course, was far more favorable to Google than any deal would have been in 1998.

Paying billions for in 1999

While Yahoo's 1999 acquisition of for $5.7bn didn't kill Yahoo, it is arguably one of the worst-timed acquisitions in tech M&A history, and one has to wonder how the ill-fated acquisition impacted Yahoo in subsequent years.

Not buying Google in 2002.

According to reports, Yahoo had the opportunity to purchase Google for $5bn in 2002. Although that price was high for Yahoo in relation to its own value at the time, it would prove to be the last chance Yahoo would have to acquire Google.

It didn't, and the rest is history.

Failing to take full advantage of its Overture acquisition

Google AdWords may be the king of pay-per-click advertising, but the model was pioneered by Overture, a company Yahoo acquired in 2003 for $1.4bn.

As part of a patent lawsuit settlement, Google obtained a perpetual license to a key Overture patent that would spell trouble for AdWords. The price: 2.2m shares of Google stock.

While there were questions about the legitimacy of Overture's patent, and some suggested it would be found to be invalid, in retrospect, Google got a bargain of a settlement.

Hiring Terry Semel as CEO

Some consider Yahoo's second CEO, Terry Semel, the worst tech CEO in history.

While that may not be entirely fair, one thing is hard to dispute about Semel's reign at Yahoo: with his total compensation pegged at some $500m or more over his tenure, he has done far better than the company he ran.

Botching the Flickr and Delicious acquisitions

While there's no denying that Web 2.0 upstarts Flickr and Delicious wouldn't have saved Yahoo, the company's failure to manage the assets it purchased, particularly given its built-in audience, represented another huge missed opportunity that could have helped Yahoo find its way on the modern internet.

This excellent article from gizmodo looks more deeply into this. The restrictions on Flickr's mobile development is a particular missed opportunity, opening the door for the likes of Instagram. 

Not buying Facebook

If watching as its Flickr and acquisitions stagnated or went south wasn't bad enough, Yahoo's failed attempt at acquiring the social networking behemoth adds insult to injury.

As the story goes, Yahoo was nearly able to acquire the popular social network in 2006 for $1bn but due to a faltering stock price, Yahoo lowered its offer to $850m, allowing Facebook CEO Mark Zuckerberg to walk away from the deal.

This Friday, Zuckerberg and company will take 900m-plus user strong Facebook public at a valuation exceeding $100bn.

Rejecting Microsoft's buyout offer

Yahoo has made plenty of bad moves in acquiring (or not acquiring) other companies, but its crowning failure was its handling of its own potential sale.

In 2008, the Redmond software giant, eager to compete with Google, was willing to pay $44bn for Yahoo, but thanks to what many considered gross incompetence, Yahoo's board rejected the offer.

Today, Yahoo's market cap sits at just below $19bn.

Partnering with Microsoft

Months after having failed to make it to the altar with Microsoft, the worst financial crisis in decades hit. Steve Ballmer, Microsoft's CEO, must have breathed a sigh of relief and he capitalized on his luck by inking a partnership that gave him most of what he wanted without having to buy Yahoo.

While this deal may have been a convenient way to turn back the hands of time for Yahoo, at least partially, it was a far better deal for Microsoft, and didn't help Yahoo answer any of the fundamental questions crucial to its future.

Patricio Robles

Published 17 May, 2012 by Patricio Robles

Patricio Robles is a tech reporter at Econsultancy. Follow him on Twitter.

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Comments (6)

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James Clayton

From a search perspective, one of their biggest failings was allowing the quality of their partner network to plummet from 2005 onwards. Impression and click volumes were massive, but traffic quality was so poor that on some accounts, CPCs couldn't go low enough to justify activity on their network. As CPCs were going down on Yahoo, they were rising on Google.

about 6 years ago


Max Webster-Dowsing, SEO Consultant at RBS Insurance

I find this so frustrating. Yahoo could have been the tour de force Google are today, or at the very least be a decent competitor to them. Whereas now we are stuck with an all empowering Google with no one able to stand up to the plate to compete with them.

about 6 years ago


Christopher Regan

Gosh, thank you, Patricio:

With the storm of work that is Digital Marketing/SEM the reminder/context you provide for Yahoo's current morass is a treat. Terry Semel?...ugh. -- just as awful as its one-time logo. And, Flickr -- perhaps that in itself says it all.

about 6 years ago


Colin McDermott

Yaaah-who? appointing Carol Bartz to CEO post should be in that list somewhere, shiley?

about 6 years ago



VIDEO! This is where Yahoo made the biggest mistake. Everyone has been improving their video experience, while Yahoo just posts YouTube vidz and recycles old stuff. They are a portal so they need to be on top of video news, movies, and etc.

about 6 years ago


Daniel Brown

It is fascinating how many opportunities Yahoo have actually missed out on due to obvious bad decision making, a bit of bad luck and probably a bit of ignorance in the late nineties and early 2000's. Not buying or licensing Google after having two chances to do so is almost unforgivable. However what people must remember is that Yahoo must of been doing something right to be in the position to do so at all.

about 6 years ago

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