Yahoo! Inc - Strong Brand Helps Ipo Succeed, 1996

STRONG BRAND HELPS IPO SUCCEED (1996)

After its first year of operation Yahoo! was the best known and most widely used Internet guide. The company had attracted an additional $4 million in financial backing from Ziff-Davis Publishing Co. and Japanese software giant Softbank Corp. It generated $500,000 in revenue in its first six months. In January 1996 Ziff-Davis and Yahoo! formed a strategic partnership whereby the magazine ZD Internet Life would become Yahoo! Internet Life and the two companies would publish an online guide for computing resources on the Internet.

At the beginning of 1996 Yahoo! provided links to about 100,000 sites. The company tried to list the most important sites. It worked closely with advertisers and supplied them with demographic information and traffic reports. To broaden its perspective, Yahoo! formed a partnership with the Internet division of Canada's Rogers Communications to develop an Internet search service for Canadian sites. Around this time Rogers also launched CANOE, the Canadian Online Explorer, which enabled users to browse online editions of such Rogers publications as Maclean's, The Financial Post, and the Sun newspapers.

Yahoo! held its initial public offering (IPO) in April 1996, selling 2.6 million shares at $13 per share on the NASDAQ. By the end of the first week shares more than doubled to nearly $33. Search engines Lycos and Excite also had their IPOs that same month. Following its IPO, Yahoo! Inc. enjoyed a market capitalization of more than $1 billion. It gained a $106 million investment from Softbank and together the two companies launched Yahoo! Japan, which was the first major directory service to contain language and content for a non-English speaking audience. Yahoo! Japan quickly became the most-trafficked site outside of North America. Softbank owned a 37 percent interest in Yahoo!

Yahoo! and Ziff-Davis International Media Group partnered to launch Yahoo! Europe in the United Kingdom, France, and Germany, with other countries to follow in 1997. In the United States Yahoo! began forming online alliances with local print and broadcast media companies to create city guides that organized and indexed sites relating to each city. The first cities to be covered were New York, Los Angeles, and San Francisco.

Yahoo! rolled out many new services in 1996, including My Yahoo!, a personalized service that delivered content from a user's favorite Web sites and provided other personalized information based on user preferences.

Although it was the recognized market leader, Yahoo! lost money in 1996, and its stock fell by 44 percent. Yahoo! planned to become profitable by turning itself into a media company. As Yang told Fortune, "The fundamental bet we are making is that we are a media company, not a tools company." The company planned to survive by creating brand loyalty.