RULE MAKER PORTFOLIO

<THE RULE MAKER PORTFOLIO>

Yahoo!'s History

By Rob Landley (landley@flash.net)

AUSTIN, TX (Feb. 18, 1999) -- I'd like to talk about the shiny new toy of the Rule Maker Portfolio, which we purchased 16 shares of yesterday amid some confusion. Personally, I'm used to confusion. I may not know why my week's worth of articles has had a market closing holiday in it for three consecutive months, but I do know that we spent $125.8125 per share on Yahoo! (Nasdaq: YHOO) because that price ends in a sixteenth, and when you buy 16 shares of that it works out to an even $2013. (Plus the $7.95 commission Ameritrade charged us. Yes, we actually bought real stock from a real broker and it's sitting in a real account. Frightening thought, isn't it?) As far as I know, because we bought more than one share we didn't actually receive any .0875 cent coins in change.

I'd like to talk a bit about Yahoo!'s history and what makes it unique. It started in April of 1994 as the hobby of a couple of graduate students at Stanford, David Filo and Jerry Yang, who put their Web browser's bookmark list on their Web page.

While this is a fairly simple act, which lots of people still do today, they were among the first to do it, and their collection of interesting links was not only extremely large by the standards of the time, but it got regularly updated by a pair of college students who spent WAY too much of their time surfing the Web. (As far as I know, neither of them actually earned the Ph.D. in electrical engineering they were going for. They went and formed a multi-billion dollar company instead. One of those tough life choices, I guess.)

Sites back then spread almost entirely by word of mouth (well, word of keyboard anyway), and a regularly updated and coherently organized bookmark list was a valuable resource. People who wanted exposure for their website would simply e-mail Dave or Jerry about it, and soon they had to rewrite the thing as a database just to keep track of all the sites. Luckily, Stanford provided its electrical engineering students with access to work stations connected full-time to the Internet. They put Yahoo!'s Web server on Jerry's workstation, and the searchable database program on Dave's. And together, they started overloading Stanford's connection to the Internet.

In 1995, Netscape co-founder Mark Andreessen, author of the first modern Web browser (the "Mosaic" program) while himself avoiding graduate study at the University of Illinois, entered the picture. He convinced David and Jerry (sounds like an ice cream company, doesn't it?) to move Yahoo! to its own domain hosted on larger computers housed on Netscape's California campus. They added advertising to bring in revenue and hired a professional team of full-time librarians to help them sort through and catalog websites. They also hired a bunch of computer programmers to keep the site running and add other services like classified ads and stock quotes. In short, Andreessen showed them how to turn their hobby and the reputation it had earned into a profitable business, and between them they had the skills and the knowledge to scale it up and do it right.

The advantages Yahoo! had over its competition were many. First, there wasn't much competition when it started, just a bunch of hobbyists and students playing around with this "Internet" thing that had grown out of a serious and prolonged abuse of government funding. Very few people actually thought of organizing it, and the few who did (such as another early search engine, WebCrawler,) tried purely mechanical approaches that weren't as useful as having real people sort and categorize the information.

Not that Yahoo! is bad at the mechanical approaches -- another of its advantages is being run by people who understand the technology and know enough to use open-source Unix (a BSD variant in this case) on servers that must handle heavy loads without crashing. Finally, Yahoo! was started by people who loved to do it long before anybody told them they could make a living at it, let alone become rich. Their competition arrived only after the money did, by which time Yahoo! was firmly entrenched and growing ever stronger.

The best place to go for more on this topic is, of course, Yahoo!'s own category on the subject. That's right here.

- Oak

02/18/99 Close
Stock  Change    Bid
AXP   -  1/8   102.63
CHV   +  5/8   78.00
CSCO  +1 1/16  96.19
KO    +  5/16  64.63
GPS   -  9/16  62.06
EK    -  1/2   63.81
XON   +  1/4   68.88
GM    +3       85.56
INTC  +3 1/2   128.13
MSFT  -4 5/16  145.75
PFE   +1 1/8   131.13
SGP   -  3/16  54.13
TROW  +  5/8   31.06
YHOO  -  3/4   128.88

                   Day   Month    Year  History
        R-MAKER  +0.26%  -5.71%   2.23%  29.36%
        S&P:     +1.08%  -3.31%   0.97%  24.98%
        NASDAQ:  +0.52%  -9.79%   3.09%  36.76%

Rule Maker Stocks

    Rec'd    #  Security     In At       Now    Change
    2/3/98   24 Microsoft     78.27    145.75    86.22%
    5/1/98   55 Gap Inc.      34.37     62.06    80.57%
   6/23/98   34 Cisco Syst    58.41     96.19    64.68%
    2/3/98   22 Pfizer        82.30    131.13    59.33%
   2/13/98   22 Intel         84.67    128.13    51.32%
   8/21/98   44 Schering-P    47.99     54.13    12.78%
   2/17/99   16 Yahoo Inc.   125.81    128.88     2.43%
   5/26/98   18 AmExpress    104.07    102.63    -1.39%
   2/27/98   27 Coca-Cola     69.11     64.63    -6.49%
    2/6/98   56 T. Rowe Pr    33.67     31.06    -7.75%

Foolish Four Stocks

    Rec'd    #  Security     In At     Value    Change
   3/12/98   17 General Mo    72.41     85.56    18.17%
   3/12/98   20 Exxon         64.34     68.88     7.06%
   3/12/98   20 Eastman Ko    63.15     63.81     1.05%
   3/12/98   15 Chevron       83.34     78.00    -6.41%

Rule Maker Stocks

    Rec'd    #  Security     In At     Value    Change
    2/3/98   24 Microsoft   1878.45   3498.00  $1619.55
    5/1/98   55 Gap Inc.    1890.33   3413.44  $1523.11
   6/23/98   34 Cisco Syst  1985.95   3270.38  $1284.43
    2/3/98   22 Pfizer      1810.58   2884.75  $1074.17
   2/13/98   22 Intel       1862.83   2818.75   $955.92
   8/21/98   44 Schering-P   2111.7   2381.50   $269.80
   2/17/99   16 Yahoo Inc.  2013.00   2062.00    $49.00
   5/26/98   18 AmExpress   1873.20   1847.25   -$25.95
   2/27/98   27 Coca-Cola   1865.89   1744.88  -$121.02
    2/6/98   56 T. Rowe Pr  1885.70   1739.50  -$146.20

Foolish Four Stocks

    Rec'd    #  Security     In At     Value    Change
   3/12/98   17 General Mo  1230.89   1454.56   $223.67
   3/12/98   20 Exxon       1286.70   1377.50    $90.80
   3/12/98   20 Eastman Ko  1262.95   1276.25    $13.30
   3/12/98   15 Chevron     1250.14   1170.00   -$80.14

                              CASH    $185.03
                             TOTAL  $31123.78

Note: The Rule Maker Portfolio began with $20,000 on February 2, 1998, and it adds $2,000 in cash (which is soon invested in stocks) every six months.

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