SAN FRANCISCO — Internet trailblazer Yahoo explores the next frontier of technology with Scout, an answer engine powered by artificial intelligence. Scout appears to have some insight, based on its response to a question posed by The Associated Press about why one of Silicon Valley’s brightest stars disappeared over the past decade.
“Yahoo’s journey shows how a company with an early opportunity can disappear without continuous innovation,” Scout explained, while providing hyperlinks to other websites that support his thesis.
Scout may have to come up with a different definition if Yahoo CEO, Jim Lanzone, can use AI to grow a global audience of 700 million who have stuck to the company’s financial, sports, news, fantasy and email services, despite a history of folly that almost ruined the same name as the network.
Yahoo “has been the white whale of change for me,” said Lanzone, who has a track record of surviving Internet disasters. “I always thought I could do something with this thing.”
Lanzone, 55, finally got his chance after private equity firm Apollo Global Management paid $5 billion to take over Yahoo in September 2021 — a fraction of the peak market value of $125 billion reached in the heyday of the dot-com boom in the early 2000s. Apollo’s purchase came after Verizon Communications attempted to buy Yahoo. at that time. combine those services with AOL, another Internet pioneer.
Verizon would never have gotten the chance to buy Yahoo’s internet operations if it weren’t for the company’s constant weakness under seven different CEOs over 16 years.
While Yahoo’s past issues have not destroyed the company, it has left a stigma that makes it unlikely that it will ever return to its former glory, said Jeremy Ring, who was one of Yahoo’s first employees when he started selling ads for the service from his New York apartment in 1996.
“While Yahoo isn’t what it used to be, it hasn’t become the story of Blockbuster or Radio Shack,” said Ring, who explored the company’s ups and downs in the 2018 book, “We Were Yahoo!” “What will enable them to compete with all the big companies that use AI? I can’t believe that all the best engineers in the world will suddenly come to work at Yahoo.”
Lanzone’s restructuring efforts initially focused on removing ineffective parts of Yahoo. The teardown included shedding some of Yahoo’s advertising technology, selling publishers like TechCrunch and Rivals and shutting down AOL’s Internet dial-up service in a way that cut off its last 500 users. As it stands, Yahoo is “very profitable” and generates billions of dollars in revenue, Lanzone said, while declining to be specific.
Once he got the cleanup job down, Lanzone began fixing what was left — a process that led to an update to Yahoo’s popular sports section and a major overhaul of its email service that is still the second largest on the web behind Google’s Gmail.
With the recent introduction of Scout to its 250 million users in the US, Yahoo is relying on the AI movement in the hope that its technology will facilitate online research and produce personalized results that match the interests of each user. Lanzone also hopes that Scout will become a flywheel, constantly circulating traffic through its other services.
Yahoo will be competing with a familiar foil to Google, which is still the same nervous force that wrote the company’s bankruptcy 20 years ago and continues to put more AI in its search engine with its Gemini technology. As if that wasn’t scary enough, Yahoo will also be competing with other popular AI chatbots like OpenAI’s ChatGPT and Anthropic’s Claude as well as answer engines like Perplexity.
Quietly behind the scenes, Yahoo uses Scout on AI technology licensed from Anthropic.
Unlike other AI chatbots and response engines, Scout doesn’t simulate human conversations so users can “have a negative relationship with it,” Lanzone said. “The product is very unique, even though we didn’t invent the AI in the first place.”
Yahoo’s plan to search for internet traffic has been a futile operation since the late 1990s, a lineage that began a few years after students from Stanford University Jerry Yang and David Filo founded the company as the first internet directory.
But as the Internet began to play a bigger role in entertainment and business, Yahoo changed its focus from sending traffic elsewhere to creating an all-purpose website that people wouldn’t want to leave. That strategic pivot opened the door for two other students from Stanford University, Larry Page and Sergey Brin, to create a search engine called Google.
After turning down the opportunity to buy Google for just $1 million in 1998, Yahoo poured more resources into creating a single site while paying attention to search that it turned to another company to provide that technology in 2000. Yahoo not only hired Google as its search engine but also promoted its name on its website. In 2002, Yahoo offered to buy Google for $3 billion, but Page and Brin wanted $5 billion. The negotiation dispute launched Google on the path to an Internet empire now valued at $3.7 trillion under corporate parent Alphabet Inc.
Yahoo tapped seven CEOs, including former Google CEO Marissa Mayer, in a search effort before ending 21 years as a publicly traded company with its ill-fated sale to Verizon for $4.5 billion. Along the way, Yahoo turned down a $44.6 billion takeover bid from Microsoft in 2008 before finally agreeing to license the software maker’s Bing search engine.
If Yahoo’s bet on Scout pays off, Lanzone believes it could bring the company back to the stock market more than 30 years after completing the 1996 initial public offering that galvanized dot-com investors at the time. Lanzone believes another Yahoo IPO could still get people excited.
He said: “We still have one of the largest audiences on the internet, and that audience has been very loyal up and down. If we can ‘serve them the best,’ good things will happen.”
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