When they returned to California the internet was hatching from the chrysalis of academia to become a kind of underground communication network for personal computer nuts. What really got the buzz going was a browser developed at the University of Illinois's National Center for Supercomputing. The new application was explained as "a new way of looking at information on the internet". Yang and Filo thought it was an awesome way to keep track of important data like stats on NBA teams and sumo wrestlers. Their biggest gripe was the difficulty of having to rely on hit-or-miss grassroots referrals to locate information sources.
There's a fairy tale quality to the events that began in late 1993 when Yang and Filo were PhD students studying computer-aided chip-design. They were also awakening to the internet's commercial possibilities, thanks to some venture courses. Their first crack at a useful tool was a web page put up by Yang containing his name in Chinese characters, his golf scores and a list of his favorite internet sites. Six months later he and David Filo hit on the idea of Yahoo!, a name suggested by a slur tossed at them by Filo's dad. The yahoos turned it into an acronym by reverse-engineering the mock-sonorous "Yet Another Hierarchical Officious Oracle." Whatever, it worked. By early 1995 the site was bookmarked on every browser in cyberspace.
"Through most of 1994, even though we were playing with Yahoo as a hobby," Yang recalled, "we were looking for another startup idea. We really didn't think Yahoo could possibly be it. There was no real business model that fit it. For example, we knew we had to keep it free because everything on the Internet was free. So there was no way to charge people for using it or even to charge people for their sites to be listed on it. And besides, we were just two guys slaving away on the technology. What did we know?"
The pair practically lived in the trailer that housed the university servers on which Yahoo was based. Its mushrooming traffic was putting a strain on Stanford's computer network. At the end of 1994 irate officials demanded they find another home, forcing the duo to recognize that it was time to fish or cut bait.
"David had it in his gut very early on that Yahoo could ultimately be a consumer interface to the Web rather than simply a search engine or piece of technology," recalled Yang. "We weren't really sure you could make a business out of it though." They neglected their PhD work to pump all their energies into Yahoo, but when it came to starting a commercially viable business, they were still leaning toward starting a site to sell college textbooks.
What ultimately convinced them to try to turn Yahoo into a business was their first call from a venture capitalist, Mike Moritz of Sequoia Partners. Among the investors Moritz lined up were Masayoshi Son, a young Corean Japanese who had founded Softbank, Japan's most successful digital publisher. Son had the instinct to snap up a 20% stake in Yahoo! By mid-1995 the duo held in their sweaty hands a check for their first million in venture capital. A few months later Yahoo! issued its initial public offering (IPO). Son snapped up another 17.02%, making himself controlling shareholder.
By then the stakes of Yang and Filo had been cut to about 12% apiece. Son had the sense to stay out of the public eye in order to preserve the company's freewheeling American flavor and image. A seasoned professional management team was installed to hold down the CEO, COO and CFO spots but Son kept the young founders in place as Yahoo!'s heart and soul under the title of Chief Yahoos. Their unofficial portfolio was to ooze irreverent inspiration. Yang was the more outgoing and better suited to carrying an empty briefcase while schmoozing on the cellphone. Filo took on a behind-the-scenes role with the subtler responsbility of keeping the company from getting ahead of its technological and financial resources. To clearly delineate his authority and responsibilities in Yahoo terminology, he carved himself the title "Cheap Yahoo". PAGE 5