As one of the early pioneers in the search space, Yahoo! was a high-flying company in the mid-nineties with a cool brand and hip TV commercials. If things had turned out differently, Yahoo! might have turned into the industry leader, but that wasn’t to be. A series of missteps – including the rejection of takeover offers from Microsoft – contributed to its decline and the company has seemed to be going uphill ever since.

Last year Yahoo! went through a painful reorganization and hired a high-profile CEO in a year that saw the company cede second place in the search space to Bing. This is the second in the Search Engine Series that looks at other companies that compete with Google in the search space.

Boom and gloom

Yahoo! dates back to 1994, when Stanford doctoral candidates Jerry Yang and David Filo sought a way to keep track of their personal interests online. The company’s name refers to a hierarchical sort of wisdom and the company was a hot brand during the nineties tech boom – branching out to become a content aggregator (sports, finances, you name it) while a hot young company named Google focused on search and continued to grow as tech companies all around it went bust.

In the early 2000s, Yahoo! used Google search technology for several years before dumping Google in 2004 in an attempt to regain its early search mojo. As the decade progressed the two companies also battled in their email offerings.

Rejected suitor

Then Microsoft came into the picture with unsolicited offers to buy Yahoo! for a whopping $44.6 billion in an attempt to unite against Google, which had solidified into the dominant force in search. But Yahoo! rebuffed Microsoft’s offers in a move the company likely regretted, as its value several years later was much less.

Marissa MayerMaybe Mayer is the Answer?

Last year, Yahoo! underwent a painful restructuring during which some 2,000 employees were laid off. A few months later, Yahoo! made headlines again with the announcement of a high-profile new CEO: top Google executive Marissa Mayer. The hire was touted by many observers as a coup for Yahoo! and caused many to think that it could put Yahoo! on an aggressive acquisitions path.

One thing we did see last year was the introduction of Yahoo! Axis, which the company described as a personalized game changer that involves “supercharging the browser with a visually rich search experience and seamlessly connecting that experience across all of your devices.”

Despite the innovations of Axis, Yahoo! continues to have serious challenges in gaining leadership of the search market. Data from comScore shows that Yahoo! has suffered significant year-over-year declines as Mayer and other executives court top advertisers. Another challenge relates to the security of Yahoo! Mail as some have alleged that vulnerabilities have at times opened the door for hackers.

Still, Yahoo! has a mighty ally in Bing in what’s been coined the “Search Alliance,” with the two tech companies complementing each other with their respective strengths. So the war wages on in a fast-moving industry where innovations occur by the hour. Working together, can Bing and Yahoo! one day dethrone Google as the King of Search, or will the might of Mountain View continue to prevail?

We’d love to hear your opinions about Yahoo! or market share trends in the search space. Leave your comments below.

To see how Google and Bing really stack up, check out our CTR study: A Tale of Two Studies: Establishing Google & Bing Click-Through Rates.

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