Yahoo! vs Microsoft

Jerry Yang and David Filo were Stanford PhD students in 1994 when they began maintaining a directory of websites they found interesting — initially called "Jerry's Guide to the World Wide Web." They organised the links into categories, then categories within categories. The directory was renamed Yahoo — an acronym they claimed stood for "Yet Another Hierarchical Officious Oracle," though they admitted they mainly liked the word because its dictionary definition included "rude, unsophisticated, uncouth." By 1995, Yahoo was receiving one million page views per day.

In 1998, Larry Page and Sergey Brin approached Yahoo and offered to sell the Google search technology for $1 million. Yahoo declined — they were concerned that a better search engine would send users away from Yahoo's portal too quickly, reducing advertising revenue. Yahoo later had multiple opportunities to acquire Google at larger but still manageable prices. Each time, Yahoo declined. Google went public in 2004 at $85 per share.

Yahoo offered to acquire Facebook for $1 billion in 2006. Mark Zuckerberg was initially interested — he was 22 years old and the offer was extraordinary. He put the deal to a shareholder vote. It failed. Yahoo subsequently reduced its offer. The negotiation collapsed. Facebook was valued at $104 billion at its 2012 IPO and over $1 trillion at its peak.

Microsoft offered to acquire Yahoo for $44.6 billion in February 2008 — a 62% premium to Yahoo's market price. Yahoo's board, under pressure from CEO Jerry Yang, rejected the offer as inadequate. Microsoft withdrew its offer. Yahoo's stock, which had been trading at $28 before the offer, fell to $10 by the end of 2008 as advertising revenue declined during the financial crisis. Yang resigned under shareholder pressure. The rejection of Microsoft's offer is widely regarded as one of the worst decisions in corporate history.

Yahoo sold its core internet business to Verizon Communications in June 2017 for $4.48 billion — approximately one-tenth of Microsoft's 2008 offer. The sale was complicated by the disclosure of two massive data breaches: one affecting 500 million accounts in 2014 and one affecting all 3 billion Yahoo accounts in 2013 — the largest in internet history. Verizon reduced its acquisition price by $350 million following the breach disclosures. The company that had turned down $44.6 billion from Microsoft sold nine years later for less than $5 billion. Yahoo Finance, Yahoo Mail, and Yahoo Sports survived under new ownership. The search engine that had turned down Google had been replaced by it.

In January 1975, Paul Allen showed Bill Gates an issue of Popular Electronics featuring the Altair 8800. Neither of them had written a BASIC interpreter for it. But Gates called MITS and told them Microsoft had a working version ready. They then had eight weeks to actually build it. It worked. Gates was 19.

IBM approached Microsoft in 1980 to write an operating system for its new PC. Microsoft didn't have one. Gates bought QDOS from a Seattle programmer for $50,000, renamed it MS-DOS, and licensed it to IBM — while retaining the right to license it to other manufacturers. IBM thought hardware was the business. Gates understood it was software. The decision made Microsoft the most powerful company in computing for the next two decades.

When Satya Nadella became CEO in 2014, Microsoft was widely regarded as a company that had missed mobile, missed search, and missed social. Nadella pivoted to cloud computing, transformed Microsoft's culture from internal competition to growth mindset, and repositioned Azure as the foundation of the enterprise. The market cap tripled in his first five years. The transformation is studied in business schools as one of the greatest corporate turnarounds in history.

Microsoft invested $10 billion in OpenAI in January 2023, securing exclusive access to GPT-4. Within months, "Copilot" had been embedded in Word, Excel, Teams, GitHub, and Bing — repositioning Microsoft as the leading AI company in enterprise software. By early 2025, Microsoft's AI business had crossed $13 billion in annualised revenue, growing 175% year-over-year.

By Q3 fiscal 2026, Microsoft's AI business had surpassed $37 billion in annualised revenue — growing 123% year-over-year. Azure revenue grew 40%. Microsoft 365 Copilot had over 20 million paid seats, with the number of enterprise customers deploying more than 50,000 seats having quadrupled year-over-year. Cloud revenue crossed $50 billion in a single quarter. Microsoft had extended its OpenAI partnership, securing a 27% stake in the company and cementing its position as the most important distribution partner for large language models in enterprise software.