Yahoo! Inc - Formation Of Yahoo!

Yahoo! began in 1994 as a database for finding Internet resources. The online directory of Web servers was developed by two Stanford University graduate students, Jerry Yang and David Filo, who had Master's degrees in electrical engineering. Their Web search engine was initially made available to the public on Stanford's Web site, where it was an instant hit. Unlike other search engines that would come along, Yahoo! used hierarchical menus to organize Web sites. Yang and Filo soon took a leave from their doctoral studies to devote themselves full-time to Yahoo!.

Yahoo Corp. was formed in April 1995. Tim Koogle, a Stanford graduate in electrical engineering and mathematics, joined as CEO, and the company had 14 employees. By April 1995 Yahoo had about 200,000 daily users who accessed its search engine. The company obtained $1 million in financial backing from venture capital firm Sequoia Capital. Users could search 40,000 Web pages, a small percentage of the 5 million then in existence.

Yahoo hoped to generate revenue by selling advertising space. Web design firm CKS Partners of Portland, Oregon, was hired to redesign Yahoo!'s interface. On July 31, Yahoo was relaunched as an advertising-supported directory. Five advertisers paid $60,000 each for a three-month contract. They included telecommunications giant MCI Communications Corp., a San Francisco-based startup called Worlds Inc., the Internet Shopping Network, MasterCard International, and online retailer NECX. The only competition at the time was InfoSeek, which began in January 1995. InfoSeek also gained revenue from ads, charging $15 for every 1,000 times an ad appeared on someone's computer screen. Yang expected that competition would soon become fierce.

Analysts noted Yahoo's new commercial look and predicted it would become the model for future services on the Internet. The site displayed a newly designed company logo. "Extra!" news tag added to some headings suggested more informational depth. Computer Weekly predicted, "Eventually, the company may become a one-step site for all the services an Internet user might want."