There is some poignancy to the emergence of Yahoo, of all companies, as the target of ringmaster rage, since both WebRing and Yahoo grew out of the same experimental spirit of the mid-'90s Internet.

Of the initial portal companies -- Lycos, Excite, AltaVista -- Yahoo flourished, largely by capitalizing on grass-roots Net culture.

Today, that's a business strategy that sounds positively hokey in its utopian earnestness, but it worked -- for a while. From a side project of two Stanford grad students, the company grew to $1.1 billion in revenue last year, 90 percent of it from advertising, by focusing with laser intensity on a strategy of capturing the best of what bubbled up on the Net, polishing it up and then giving it away for free.

Gobbling up the most popular hits on the Net, from GeoCities' free home pages to eGroups' mailing lists and obscure oddities like WebRing, Yahoo built an ever bigger audience, trading its bloated stock to buy more treats to give away, while advertisers paid the bills. According to Nielsen/NetRatings, in October of this year, slightly more than half of the Net's entire population used Yahoo.

But the double whammy of the stock-market bubble bursting and the advertising drought have hammered Yahoo. The company's stock hovers around $16, down from a January 2000 high of $237 a share. Its projected revenues for this year are down to $700 million.

The company is now obsessed not with aggregating the best of what the Net has to offer, only to give it away, but instead with charging for what they used to give away, and building new services that will require an admission fee. Even the deal maker kingpin, Ellen Siminoff, whose acquisitions drove the company's old buying-spree strategy, is gone.

Now Yahoo is cutting deals with ISPs to offer high-speed Internet access, and selling prominent placement for paid listings on its directory pages. There is also an ever-increasing set of expanded premium services, in which users are charged for everything from souped-up games and music services to personal ads.

Elizabeth Blair, vice president of Yahoo's business and local media group, explains Yahoo's new pricing plan for personal ads this way: "It's free to list, it's free to look. But if you see this person, and you think they're right for you, we're going to make you pay for it. That's just the way life is these days."

CEO Terry Semel projects that by 2004, just 50 percent of the company's revenues will come from advertising, whereas today it's some 80 percent, down from 90 percent last year. But so far, it's the loss of advertising revenue, not the growth of premium services, that appears to be changing relative percentages. In the third quarter of this year, Yahoo's revenue from sources other than advertising increased just three percent from the second quarter to $34 million.

It's hard not to conclude that in a bid for survival the new Yahoo is turning its back on what drove its popularity in the first place. One view on what made Yahoo a survivor, unlike Excite and other imitators, it that it avoided the crasser commercial excesses of its race-to-the-bottom competitors. While other sites loaded up their home pages with bulky images favored by advertisers, Yahoo kept it simple and idiot-proof, always catering to the most humble home user on a slow connection. While other sites sold out the editorial integrity of their directory listings, Yahoo's hands remained clean. (Although it has long had a service in which businesses could pay to get their Web site listed in Yahoo's directory pages on an expedited basis.)

Executives defend the new moves, as not only necessary, but consistent with what Yahoo stands for: "What we find is that the Yahoo brand is associated with personalization, innovation, community and connections," says John Costello, the company's chief global marketing officer. He doesn't think that charging for some content will alienate Yahoo's huge audience: "The Yahoo brand does enjoy tremendous loyalty from customers, but the research does not suggest the inability to provide premium services."

Imagine if a Yahoo spokesperson had mouthed such new economy platitudes in the early days -- it would have been laughed off the Net. It's a world away from the Yahoo that thrived on rounding up Net phenomena under one great banner called Yahoo! -- effectively underwriting the hobbies of millions of webmasters through the good graces of advertising.

Still, it's too simple to cast the old Yahoo as some early-Net halcyon ideal, fallen from grace in a bitter struggle to survive. Buying up the best of the grass-roots Web brought with it its own problems, namely Soviet-style centralization that was anathema to the distributed culture that had created those so-called Web properties in the first place. The citizens of the Unified Republics of Yahoo did not always take kindly to their new leaders.

Recent Stories