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Digging in the dust of AOL and Yahoo's lost internet empires

They were once worth nearly half a trillion dollars. Now they're stuck in a losing game of hedge fund hot potato.

​A worker carts away a piece of a Yahoo billboard in San Francisco in 2011.

A worker carts away a piece of a Yahoo billboard in San Francisco in 2011.

Photo: Justin Sullivan/Getty Images

Where did half a trillion dollars go? AOL and Yahoo have been sold once again: This time private equity firm Apollo Global Management is buying them from Verizon for $5 billion. It's a paltry sum for a pair of companies that were once valued at more than $475 billion combined.

The story of how a series of inept managers made strategic missteps and wasted opportunity after opportunity has been told in pieces over the years, as the two one-time internet empires retrenched and diminished. But it is still staggering to contemplate that the remaining entity, now simply called Yahoo, has surrendered nearly 99% of its value over the course of two decades.

It's a cautionary tale that shapes the thinking of major internet companies to this day: The urge to stake out territory and match rivals' features and products is still here, but there is more rigor around shutting down ventures that aren't finding an audience. No one wants to replicate the hubristic sprawl of the dot-com boom's web portals.

A pair of founders at a Mountain View company put it simply: "Google does not do horoscopes, financial advice or chat."

Yahoo and AOL did. And much, much more.

To understand how big Yahoo once was — why the internet company was once worth more than $125 billion — it helps to know the company that made its name cataloging the web had its own page dedicated to tracking all of its own websites. It would eventually be called Yahoo Everything.

The Internet Archive didn't capture what Yahoo's homepage looked like on Jan. 3, 2000, the day its shares peaked at $118.75. But records from around that time show a sprawling digital empire: You could log on to Yahoo Bill Pay, where you might pay your Yahoo Visa bill, after shopping on the Macy's Yahoo Store. You might listen to Yahoo Radio while playing on Yahoo Games. Or if you were trying to get work done, you might check your Yahoo Mail, since access to corporate mail outside the firewall was still difficult; download files from Yahoo Briefcase (Dropbox wouldn't exist for another 7 years); read news on Yahoo Finance; and see if colleagues were online via Yahoo Messenger.

A week after Yahoo's value peaked, AOL said it would acquire media company Time Warner in a deal that valued the combined operation at $350 billion. One reason Time Warner was eager to sell was the fear that an internet company like Yahoo might launch a takeover.

Freshly enlarged by acquisitions of digital companies like MapQuest and Moviefone, AOL now had assets like cable systems, networks and movie studios. It even got Warner Music's CD and DVD manufacturing plants, handy for churning out more subscription discs. It had AIM, the instant-messaging system that helped inspire a generation of social networks.

Remember those AOL CDs? Remember those AOL CDs?Photo: Julia Thurston Photography/Getty Images

But far from being a triumph of corporate synergy, the AOL-Time Warner deal was a well-documented disaster. The Time Warner divisions refused to bow to their new overlords from Virginia, and in 2003, the company's board dropped AOL from its name.

Yahoo had its own woes. By 2006, a company executive wrote a memo called "The Peanut Butter Manifesto," saying Yahoo was spreading itself too thin over too many products and missing opportunities to double down on what was working. At the dawn of the social media age, the company bought a host of Web 2.0 startups such as Flickr, Upcoming and Delicious — but it botched a chance to buy Facebook, the one deal that turned out to really matter.

AOL rotted away within Time Warner, its dial-up customer base dwindling as users switched to broadband. The AOL brand was spun off in 2009, then worth around $3 billion, and its independence came to a second end in 2015, when Verizon bought it for $4.4 billion.

Yahoo, meanwhile, had a short-lived renaissance under CEO Marissa Mayer, a former Google executive. At first, she applied Google-y rigor to Yahoo's lineup of properties, shutting down a number of projects that were going nowhere fast. But she also furiously acquired startups, most famously spending $1.1 billion on Tumblr in 2013.

By 2017, activist investors were circling and Mayer stepped down. Verizon bought Yahoo and merged it with AOL, a combination investors and bankers had been talking about for years. Then-CEO Tim Armstrong even had a name for it: Oath. That name had an even shorter run than AOL Time Warner.

Over the past two decades, AOL and Yahoo have left a trail of discarded brand names, products and hopes. Some were sold off, like HuffPost, Tumblr and MapQuest; others were shuttered. Netscape, the once-famous internet browser whose purchase beefed up AOL's web presence, still exists as a necromantic portal. Yahoo still has an Everything page, which is … something.

But the dream of the web portal, a place to start your internet journey and stay for more, the notion that a brand like "Yahoo" or "AOL" could be slapped on just about any topic and turned into a gold mine of advertising, is long gone. The closest analogy is Mark Zuckerberg's widely derided relabeling of Instagram and WhatsApp as being "from Facebook." With Big Tech's reputation growing ever more toxic, discretion seems the better part of branding.

Yahoo's new owners are bullish about what they've just purchased, pointing to the 900 million monthly active users still visiting AOL and Yahoo websites. Apollo's Reed Rayman said his firm would "unlock the tremendous potential of Yahoo and its unparalleled collection of brands."

That may be exactly what weighs most heavily on the new venture: its history of launching and acquiring brands, spreading itself thin like peanut butter over slice after slice of the internet rather than letting its ideas bake.

"Do you, uh, Yahoo?" the company asked in a 1998 ad. If Apollo can figure out an answer that escaped CEO after CEO for the past two decades, it might have some hope of restoring those lost billions.

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