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There are a few companies that might have made as greater mistakes, in terms of potential lose in dollars, as Yahoo has made till this day. The first Golden opportunity that Yahoo got was when Google co-founders (from Stanford) went to Yahoo co-founders (who were also from Stanford) asking them to buy Google for $1 million back in 1998. Shocked as you may be at the amount the Google couple was asking, the answer from Yahoo team was even shocking, they asked them to go built it on their own and come back when they have something substantial and some users willing to use it. It were those days when we were used to of search engines like Alta Vista, Excite and Lycos.

The opportunity sprung up once again in 2002 when Yahoo offered Google $3 billion, which was rejected this time by the Google co-founders who wanted to have something in the north of $5 billion. Terry Semel, Yahoo CEO was pissed off at this because he thought $3 billion was a fairly reasonable price. Buttomline, Yahoo let it go and today Google is worth $146.48 billion, while Yahoo is struggling to maintain its existence as a separate company with a market capitalization of around $43.22 billion.

Another major managerial blunder was the undecided attitude towards Project Panama, Yahoo´s answer to Google Adsense. After the disappointment with Google, Semel decided to pursue other options and bought Inktomi, which many believed to be the second best search engine for $257 million and Overture, the search ad pioneer for $1.4 billion. Now all Yahoo had to do was integrate Overture and Inktomi and have what Google had i.e. Search and Search targeted ads. The management remained reluctant to do this for many reasons including Microsoft which was a major client of Overture. An integration of Overture would mean that Microsoft will take Yahoo as a direct competitor to its Search ambitions, much like Google and will leave the table. When Yahoo started negotiations to buy Overture in 2002, it dominated search related ad market with revenues double that of Google, but by the time the deal was made the differences were evened out. In 2005 Google´s revenues were 2.5 times that of Overture, and one does not need to make a comparison of the current state. Today Project Panama, Yahoo´s integrated search related ad software, has finally shipped but the battle has already been lost.

As if all of this was not enough, Yahoo did it once again and this time the company was facebook. Yahoo was offering facebook $1 billion last fall, where as the company was demanding $2 billion. Some say that Yahoo was willing to pay as much as $1.62 billion, but the talks broke off after and initial deadlock on the valuation. Today facebook is the second most “in” thing among undergraduates, second only to Apple´s iPod according to a survey by Student Monitor. Facebook now has 21 million registered users and generates 1.5 billion pageviews per day, that is twice the number of pageviews Yahoo estimated it would generate. According to a report (pdf file) published by Needham´s Mark May is now worth in excess of $3 billion, but some are putting the price tag to be around $8 billion.

If all this teaches us one thing it is the lesson that “Top Management is absolutely essential and central to a company´s success“. Another important fact is that you should have Technical people at the top of Technology companies, ever thought why Google is so successful. Here’s a hint, its run by a Phd (CEO Eric Schmidt) and 2 Phd drop outs (Larry Page and Sergey Brin, the co-founders).