Click Till You Drop

The Internet has become a shopper's paradise, stocked with everything from wine to cars. Business will never be the same

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Their first meeting with a venture capitalist, Michael Moritz of Sequoia Capital, was all they needed. "With no promotion, no advertising and just word of mouth, something was happening," Moritz recalls. "Jerry and David had developed something for themselves that, I think probably to their great surprise and consternation, was as attractive to other people as it was to them." Moritz took a gamble on the entrepreneurs and gave them $1 million for a 25% stake (it turned out to be a good bet--that stake would now be worth around $2 billion). Stanford told them they could keep the venture on campus at least initially, which they did. And they called themselves Yahoo.

One legend about the origin of the name is that it was a playful acronym for "Yet Another Hierarchical Officious Oracle." Yang, however, says they picked it out of a dictionary. "We thought it fit well with what we were doing. It was irreverent, it was reflective of the Wild West nature of the Internet, and a lot of people found it easy to remember, which we thought was probably good." Yang also says that when he asked Moritz if they should change the name to something more serious, Moritz replied that if they did, he'd take back his money.

In the spring of 1995, Yang and Filo put their doctoral theses on hold and moved into their first office, in nearby Mountain View, in the heart of Silicon Valley, near some railroad tracks. It was a relatively big suite, around 1,700 sq. ft., which they needed for the computer servers that would gather and store the data, and the people who would feed and care for them. But by the end of the year they needed more space and moved into a 12,000-sq.-ft. site in Sunnyvale, where they went public. "We thought, 'This is great. We'll never fill this place up,'" recalls Yang. Wrong. Last year, after moving into a 33,000-sq.-ft. floor of a Santa Clara industrial park, they spread onto two additional floors in a neighboring building for a total of nearly 100,000 sq. ft.

The lure of megasites like Yahoo is that in a place like the Net--where people tend to go wherever they want with ease--there are very few locations that attract a mass audience of the sort that advertisers can get through, say, the Superbowl. As a result, search and commerce sites like Yahoo and chief rival Excite have become gateways (the Net buzz word is portals) to the rest of the electronic universe. And owning a portal is looking a lot like owning a toll bridge. Yahoo charges about 4[cents] for every ad it serves up on many of its 115 million pages every day. And those prices will rise as Yahoo develops technology that lets it more closely match advertisers with searchers.

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