Barney Pell's Weblog

Yahoo history

Kara: 10th anniversary of Yahoo's founding. Give us some perspective, look back and get idea then and now, how you're feeling, what's happened.

Jerry: We're happy to be stuck between people wanting to leave the conference and go home...

Kara: What did you envision when you were creating Yahoo? What is your recognition of where you thought it could go?

David: We were trying to build tools and navigation that were useful for ourselves and our friends. We didn't set out to build a billion $ business. We enjoyed doing it, felt a need for it, felt internet had a lot of potential, but we didn't think 10 years out where we would be today. Things have gone faster, and slower, then where we thought they would have gone. But at the very beginning we were just in grad school procrastinating on our Ph.Ds.

Jerry: We were burning the candle at both ends, asked David why we're doing that? David said if the internet becomes big some day, people will need ways to find things.

Kara: What did you think the internet was going to be at that point, from a technical point of view?

David: It started out as universities and research labs connecting to each other. It was a research vehicle, very little commerce. When first browsers came out, people started doing interesting things. Putting out transcripts to Melrose place, stuff you couldn't get anywhere else. We looked at it, thought it was an interesting medium, didn't think about exactly the possibilities were. We looked at commerce, thought about startup ideas around ecommerce. We envisioned a lot of those things, but were primarily focused on creating tools and services to help people find things and make it more usable.

Features: Editorial, Directory, Search, Personalization, Community

Walt: Your first approach was directory, not search. At what point did you decide a human-edited directory wasn't enough and you had to do search? Did you have doubts or regrets or debate about directory vs. search?

Jerry: We always argue, like an old married couple. We felt at the beginning there weren't a lot of quality websites, it was more a novelty at the time. We were trying to approach the problem as a directory in the way we presented, but obviously we had a database behind and a search approach for human editors. We always knew we'd have to a have a table of contents approach for directory, and a back of book index for search. Our first search was Opentext, then Altavista, Inktomi, and Google for a while.

Walt: What % use the directory approach today?

David: Today it's an integrated service. The web index is blended with the directory.

Kara: But people don't think about a table of contents anymore.

David: People start with words, but in the results the directory is there. People have become very comfortable with typing in words.

Jerry: Philosophically, as people want to navigate they may choose to search, choose to browse. As we see more heightened awareness around tags, it brings us closer to a filtered or browse scenario. I think we're just starting to see the back and forth scenarios. Yahoo has that capability. We can do it in a very integrated way. Eventually those two finding metaphors will coexist.

David: Our music property is a great experience. There is a query box. People have a common question: Now what? What was the music I listened to in college? Show me a way I can browse, navigate.

Walt: What artists are similar, recommendations, genres, etc.

Kara: You had opportunity being on the Netscape page. What happened there, as people feel that was your giant break?

Jerry: No question that in the early days, Marc Andreesen and those guys who commercialized the early web. We were the default for a while, over time we had competitors and they started to have multiple providers, and did it themselves. One of the things interesting for us I remember it was Christmas one year and we knew they were going to take us off. It was a true test for the company. We didn't know if we would survive if not part of the browser. When we went into the new year, not on the browser, saw traffic go down, but then a few days later it went back up.

Kara: Were you surprised they didn't do it themselves?

David: They were focused on other things. They wanted to make things more useful. Once they realized how valuable it was they changed.

Walt: We had Bill Gates demonstrating virtual earth, which they invented after Keyhole invented it. Barry Diller talked about maps today. A9 about photographing fronts of stores. How big a deal do you think this is?

Jerry: The feature race is on. Whether satellite imaging, as far as maps go, you can assume everyone will do it. We'll all come at it a bit differently in terms of what's the uniqueness. As a platform in terms of local, we'll not just have satellite feeds and real-time traffic, but local submissions. If you look at the Flickr acquisition or to really use Yahoo local as a platform to submit stuff, we think Flickr photos and places of interest, we can drive this as a point of differentiation. Not just as licensed content, but also having the user community involved. Ultimately how users interact with this, engage and share, is where we think the game will be won.

Walt: What's the next breakthrough in search and navigation on the web? We had a number of major milestones, starting with you, Altavista, Google caught on for faster, more relevant and simpler searching. What's the next big thing?

Jerry: We didn't go over the past history very long...

Kara: There were feature wars in the past. Mark Cuban is enjoying his life because of the feature wars...

Jerry: We definitely think there were stages. When there were few documents on the web, a guide metaphor worked. We still believe in human-assisted navigation. Then when the number of documents exploded, algorithmic worked. For the next phase, how to personalize search, user-generated content, community, rankings driving search. We believe the next phase will be more related to what users perceive as value to themselves and around what matters. The results won't be the same when I type in as when David types something in. I think everyone pretty much has the same game plan.

Kara: I don't think everyone is the same. You started off more as editorial product, and that's what you're doing again. Google was always a simple "here you go, leave" service, while you were a "stay and enjoy" service. For podcasting on iTunes now, how do you manage it all from a tech and consumer point of view?

David: You have to let users search for themselves. When algorithms don't work, for things like music what you want is based on your preferences. On top of raw searching, you want editorial folks to come in and say this is good or bad, which genre. Above that, leverage community, like Flickr, where other people come in and help tag. All these technologies will happen with different emphasis for different type of content.

Kara: Editorial for podcasts seems very hard.

Jerry: It won't be a one-way editorial process. We think it's helping them sort through reviews and what they're seeing. It may be in the background, or aggregating resources. But it won't be editorial without technology, or vice versa. Jumpstart through editorial ways for people to have discussions, and have interactive experience. Goal is to provide level of filtration and point of view for a user, where it's mind-boggling for them to go to the blogosphere. Make it differentiated and approachable.

Media, Music and Entertainment

Walt: When did you get involved in online music?

David: We acquired launch 4 years ago.

Jerry: Before launch we were talking about licenses.

David: Today we have a whole set of offerings around that.

Walt: You just launched a new subscription music service a little late to the game, but with a big bang for charging 1/3 of what others are charging. Steve Jobs said you're charging below cost. They have a betting pool at Apple which month will you raise the price, and jobs says 5 months. How you can afford to do that?

Jerry: We have a pool, when will Apple offer subscription service! Whether it's download, subscription, or free service (we're the only company with a large free audience), it's business driven by labels and label economics. We really feel the game is not about just the music you access and listened to. We're trying to take the game to help the user engage in the music, make something out of the music. Editing play lists, sharing, instant messaging is built right into it. Create communities of music lovers, public, private, or semi private, and make it something they can be creating and engaging on top of it. That's where we can create sustainable advantage.

Walt: But I have to be using Yahoo at that point, so it turns me into a Yahoo messenger user.

Jerry: There are already 100 million of them, so if a fraction turn into subscribers then it's interesting. We want to have a level above the basic transactions.

Walt: Long-term pricing?

Jerry: We are open that this is intro pricing. We want to get community as quickly as possible. Over time this will drive sustainable stickiness around multiple hardware platforms. We have to charge something because the labels are charging us for this. Not a stable product. Once we launch we can keep on adding things to it. I wouldn't include future ways to monetize.

Kara: In entertainment, you had Yahoo FinanceVision service, like web CNBC. Time to bring it back, I've got khakis.

Jerry: This is back to the future. Stuff that was tried and dropped may now have the right time. Many things coming today are like what Pointcast was in the 90s. Broadcast.com, audio continues to be key. It's one of those content types that in the internet will have a huge value, not just in the head but in the tail.

Kara: Terry cut FinanceVision. Now you have a new CEO well known throughout Hollywood, and he just hired someone director of ops from fox. Also hired someone from wsj online service. Heavy editorial. You did this before and exited. Why did you exit then, what are you doing now?

David: We've been in sports, content in general almost from the beginning. Since a lot of these hires are just going down the same path. Our sports, news, finance site have a lot of aggregating third-party sources. It's just taking what we've been doing for a long time to the next logical step. We have some big plans.

Kara: Can you tell us one or two? What are you doing hiring these Hollywood types?

Jerry: More and more interaction between the creative community (not just Hollywood, but in textual content, journalism, video/audio, bandwidth consuming type content), and huge amount generated by the users. Video content will be the next photo wave. Also the internet is where the audience is, so by having a center of excellence in Hollywood and having people who know how to work with creative energy on the internet. We'll show the world we can do better things with content, and show it through audiences. 50% of an average person's media time is spent on the internet, and most of the people in the creative community want to be involved.

Kara: Does that mean a Yahoo TV channel? Your new CEO has a strong background here...

Jerry: Ideas need to work for this medium.

David: We've taken a less traditional approach to it. So this is just trying to inject what should have been there from the beginning, people who are used to working with this stuff.

Jerry: Two examples of what this group is trying to do are games and music. Music evolution is taking place through these connections. As for games, there was just a big show last week in LA. We're trying to play a big role in the games business, not just casual and parlour games but also in games more generally. We have one of the best news sites on the internet. We're making great advances in search, rss, content integration. How do we continue to mine and discover, with increasingly talented people coming to the internet.

Communications and Mobile Phones

Walt: All your 10 years has been tied closely to the PC, that's how people access some of your services. Somewhere along the way you did work on cellphone. We've been talking here about the cellphone as a hot platform now and in the future.

David: 5-6 years ago we started to invest heavily in the mobile space. In the US it was too early. Today networks and devices are getting to where our products and services play well there. It's one of the key focuses across our company to get their content to work well on these devices. You'll definitely be seeing over 12 months or so. We're starting to release games on cellphones, so you can play chess etc online and play phone vs. PC.

Walt: What other sources? IM on phone?

Jerry: In places where we have a lot of Yahoo and PC users, how to take a Yahoo experience and allow them to be even more empowered and flexible in their mobile devices? How to make Yahoo mail, photos work better on your phone. I heard 70B photos are trapped on your mobile phones...

Walt: They're all crappy...

Jerry: ... You can imagine a world where communications and photo are integrated in a way you can take a picture, go to Yahoo mail or photos and it shows up. We're trying to do that in a very platform integrated way for 100 millions of users.

Kara: What about entering telephony yourself, Skype or MVNO [mobile virtual network operator]?

David: We just launched a PC-to-PC voice service last week.

Jerry: We're partnering with phone companies. Want voice as part of what you do. Even the im2im calling service is great, a way to leverage the notion of internet and voice. Leveraging the data business is going to be big. We're embedding Yahoo software on Nokia phones. So people will see leveraging phones for sustaining content services.

Walt: Don't you have to deal with the "orifices" mobile phone carriers? You can't just ask users, you have to go to sprint or Verizon..

David: You already have mail and IM driving many of the minutes on handsets. We're doing deals around the world for this stuff. Some are cooperative, some not. But once you get in there and show them what kind of usage you can drive, they get interested.

Jerry: As the industry grows, they have challenges. If everyone decided to download video at once they wouldn't make money. We first started our on broadband side with dsl partners and have a whole business built around partnerships. The world has to be more open all the time. You have computing devices in your pockets. They're reluctant to give up control. SBC have industry leading perspective. They're all taking different approaches to this space. These guys learn from each other. We not only work with the carriers but they do have a way for users to download directly from the net.

David: We see a day when these systems are open. In the meantime we have to work with what we can do.

Google and other competitors

Kara: David you were a big proponent of Google, gave them the chance that Netscape gave you.

David: When we made the choice of going with them, it was based on what was the best for our users. That's why we went with so many providers and made changes. At that point we weren't salesforcing that technology and felt they had the best service.

Walt: Do you regret it?

David: They earned their success, and would have done it without us.

Walt: You don't feel you sent traffic to them for too long?

Jerry: Hindsight is always perfect. But you have to remember we were in a tough time for our industry in late 2000/01. Having Terry join us, management team focus on how do we make money and turn ourselves around as a business was the only focus at the time. That's also the time when Overture and Google found business models. We don't kick ourselves too much because today we have a business. I take my hat off to their whole company. They did something where there was only ashes.

Kara: Who do you consider your biggest competitors?

David: We've had broad competitors like AOL, Microsoft, and folks like Google hitting certain areas. Obviously Google is continuing to expand.

Walt: Were you shocked when Google invented the idea of customizing the homepage last week?

Jerry: Bill probably is right when he said he's been in satellite a long time. Prior ownership isn't what's important, it's can you be successful. We talked about personalization when we started. We are extremely competitive. Where we may differ is we'd rather just go out and do it, launch things for 100M of our users, prove that business models really work for our users and leave you two to write about it.

Kara: What is your role right now? What do you both do?

David: We haven't run the company for a while. I've stayed focused on the tech side, everything from tech operations to future architecture. I tend not to do these kind of things.

Jerry: Our roles as founders always evolved. We're still active. David prevented me from writing software a long time ago. Today I think about how we should evolve our products and platforms, how our users will take this notion of convergence which seems to be actually happening now, see how to take advantage of it with our assets. There's no job spec for what we do, but we obviously love it and hope we have a few years left.

Q&A

Question: (Esther Dyson): Personalization of medical and health info is an opportunity: What are you doing with the health part of your site?

David: We have an area devoted to health. We haven't invested a huge amount but it's under renewed focus. You should see good things to come, it's a big potential area for us.

Kara: Privacy?

David: Privacy across the board

Jerry: We've been astounded when we allow people have Yahoo groups and discussions, it's about them finding each other more than us doing anything specific. They connect and support each other with info about infectious diseases and really personal issues. A lot of other stuff around using community and health as a way to drive content and interaction is where we can do more.

Question: (Jim Breyer from Accel): If you were to start a new consumer media business, what might it look like?

Jerry: I'd get my $ from Accel partners. David: This is the only thing we ever started.

Kara: Jerry: This was your first job after college, what next? Jerry: Being a father...

Jerry: If I knew I would be doing it. Offline I'll give you some ideas.

David: We're still at Yahoo trying to execute the things that do come to mind. Convergence of video, TV, and computers is certainly interesting. What happens when TV comes over IP and all the implications that has.

Question: (Tim O'Reilly): Thinking about websites as components of cooperating applications. There's been activity around Google maps as it's easy to hack. Someone did a mash-up of Google maps and Yahoo real-time traffic but you forced him to take it down. What do you think about hackers building new apps on top of what you do?

David: A focus for us in the future is opening up Yahoo. Open APIs for people to build on top of us. Another is to let people get access to info elsewhere on the net within Yahoo. For content that we don't own the rights, we have to control that. But for things we do own and control we are thinking about how to make open. Being a platform for developers to use is exciting for us. We acquired Flickr related to this purpose.

Jerry: We're drinking the kool-aid from you. Yahoo music engine is an example. We have a modest but growing developer network. We're amazed by people's creativity and will support it within the rights we have.

Question: How did you take the company to the next level when you didn't have the business experience?

David: Luck. We were fortunate to be in the right place at right time and hit something that turned much bigger. Early on we made decisions to get people into the company that had done this before and step away and focus on where we had value. Bringing in people on business and tech side from all over. It was interesting for us to go through the process and learn how to build a company, but didn't want to get in the way of being successful.

Jerry: Echo that. The only thing we were able to do well was get other people who were better than we were to be passionate about the company. We had a "no bozo" rule where the only two bozos were the founders. You don't create companies by individuals but through teams.