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March 3, 1999

Motley Fool Radio Interview With Yahoo! Co-Founder Jerry Yang

by Tom and David Gardner

Yahoo!, now one of the Internet's leading portals and search engines and a multi-billion dollar business, had its beginnings in 1994 as the hobby of Stanford University graduate students Jerry Yang and David Filo, who put their Web browser's bookmark list on their Web page. The company recently became a holding in The Motley Fool's Rule Maker portfolio. Tom and David Gardner interviewed Jerry Yang on the Motley Fool Radio Show on February 6, 1999.

David: Okay, his job title is Chief Yahoo. He was born in Taiwan, and raised in San Jose, California. He went to Stanford University. Got his BS and MS in electrical engineering, but he went into the Ph.D. program, and at a certain point he decided, "I'm not going to keep doing this Ph.D. thing." He went on to found Yahoo! in 1995, and today Yahoo! is worth over $35 billion dollars [at the time of this interview] and is one of the biggest brand names on the Internet. Jerry Yang, welcome to The Motley Fool Radio Show.

Yang: Thanks for having me, guys.

Tom: Jerry, can you take us back a couple of years. Yahoo! was really incorporated in 1995, but prior to that you'd moved from Taiwan -- at age 10 you came to the U.S. and were raised in San Jose. Can you talk about the move in your education career towards developing an Internet service like this. Take us back to how you progressed to the point that you just bagged your Ph.D.

Yang: Well, you know, obviously personally for me it's a dream come true and in many ways it's what America is all about: being an immigrant and leaving a place where obviously I think nowhere else in the world where people like me could do something like this, could even be possible.

Tom: You mean, when you're talking about nothing could be possible, bagging a Ph.D. like you did?

Yang: Right, exactly. Yeah obviously, David Filo, the other founder, and I have been friends for a long time and when we started to do our Ph.D.s together, we obviously found every single possible way of distracting ourselves from writing the thesis. We played golf and played rotisserie fantasy basketball leagues, and through all that experience we were using the Internet to do a lot of our research, and not only for real research, but also for our fantasy basketball and things like that. David has always been the technical guru that realizes the power of everything.

Late 1993, I think the first unified browser, which was Mosaic, came out. Before that there were various other versions, but Mosaic was the one that sort of revolutionized the way people thought about multimedia and the Internet -- and we were just like everybody else, totally blown away with the fact that you could now be multimedia-enabled through the Internet. We started to collect a database of sites in 1994, and before we knew it we had people from 90 countries using this little thing that we created...

David: Now Jerry, let me break in. I had read -- and I was using Yahoo! back when it wasn't cool -- but I don't think I was quite going back this far because I read the company began as quote: "Jerry's little guide to the Web," end quote. Is that right?

Yang: It started as "Jerry's Guide to the World Wide Web" and it was like that for about three months in early 1994.

David: When did you set on the name Yahoo! and where did it come from?

Yang: Well, It came through a couple of ways. First was the fact that I felt that David was doing all of the work and I was getting all the credit, so I changed it to David and Jerry's Guide to the World Wide Web. And David -- I'm glad we didn't keep that name -- hated the fact that his name was on there so one night he said we gotta find a new name for it that's easy to remember, that's shorter to type, and we worked off of having an acronym that started with "Yet another" because at the time, believe it or not, there were tons of directories and searches. So, there weren't too many words with "y-a" in the beginning that stood out and Yahoo! was one that kind of really stood out for us, and in many ways it's very similar to The Fool's name in the sense that, you know, it's a little bit self-deprecating and making fun of ourselves -- you know. Yahoo! means people who are very uncivilized and rude, and if you get to know us you certainly know that's true.

Tom: Now, Jerry, I want to turn it to those who are investing in Yahoo! today or thinking about investing in the company. Could you give us some metrics that they might use to assess... whether or not Yahoo! is succeeding over the next couple of years? What should they be looking at in studying this company?

Yang: Well, I have to be careful and not talk about Yahoo! too much because we are in a quiet period, but the way I always look at the industry, and certainly companies that are involved in our space, is market share. There is no way that I think anybody in the industry such as myself -- running companies and helping companies to grow -- are ignoring market share for anything else. In fact, you know, our number one goal is to continue to get audience because, quite frankly, now there are about 100 million people on the Web world-wide. That number's expected to double, triple in the next five years, and I'll be penny-wise and pound-foolish if we didn't go after the new audience as well as the existing one.

So, the number one thing is market share, and by that you can reflect it through page views, reach points, and how much time is spent and the number of registered users. All these things are derivative measures for market share. Then it obviously matters to bring value, and I think that no matter how aggressive people are they also should look at whether there is a pot of gold at the end of the rainbow here. And I think the business model and profitability of the business model plays a big role, and already you're beginning to see all kinds of different business models emerging on the Web.

David: Let me ask you about the business model. Some people, and by the way we only have about two minutes, some people see Yahoo! as still primarily a portal and others see Yahoo! as a new type of media company. How do you see Yahoo! and who do you regard as your primary competition?

Yang: I think that we are inventing a new business model here where it involves a little bit media, a little bit of commerce. We begin to see people who aggregate audience on a massive level being our competitors because that's what we aim to do and there are a number of people out there. Everybody includes Lycos and @Home and Excite and AOL and obviously Microsoft, but anybody who wants to have a branded audience aggregator strategy is competitive.

David: Yes, and to that extent, I know that you're building alliances -- the Fox announcement a couple of weeks ago. Saw your Super Bowl ad and the alliance with Fox. Do you expect this industry to continue to consolidate along these lines?

Yang: I think that the industry will go in two directions. One is consolidation by people taking equity ownership of each other, and also you continue to see people doing good business deals with each other like what we've done with Fox and Gateway last week. All of these things, I think, are creating value in a way that hopefully can benefit the consumers down the line.

Tom: Now I know that you're in a quiet period here, but Jerry, can you talk a little bit about where you think the business overall is going, what Yahoo! might look like five or ten years from now?

Yang: I think it's very clear we have a very brand-centric and customer experience-centric strategy. By that I mean we will absolutely have to stay ahead of what our users want and be able to continue to bring them services and products that make sense. So, as evidenced by our pending acquisition with GeoCities, we intend to continue to bring more and more products and services like publishing and personal and community to our audience. And we see ourselves expanding along those lines and remaining a very pure Web-based applications services company.

David: Okay, now the payoff question, we need a one word answer here: Jerry, the whole Ph.D. thing, you haven't finished yet. We are a little concerned by this. We are wondering if you are trying to send a message to America's young people -- that if they found a multi-billion dollar corporation they can just blow off their dissertation.

Yang: No! Stay in school. Absolutely, stay in school.

David: Okay, you know, that was supposed to be funny, but Jerry actually was quite serious, and I think that's a good message.

Tom: Jerry, thanks a lot for taking some time out on Saturday to join us.

Yang: Oh, thanks so much for having me, guys.

David: Best of luck.

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