Yahoo, founded in 1995, had a three-year head start on Google when it was launched as a human-created directory. Google has always relied on software spiders to crawl the Web and create its index. Hard as it is to believe now, Yahoo invested in Google early on and used its engine to power Yahoo search results until early 2004 when it began using its own search technology.
Google founders Larry Page and Sergey Brin were unsure what business model they would use when they started their business. After snubbing merger talks in 2001 with Overture, the first search provider to use ads, Google launched its own pay-per-click model in early 2002. Overture sued for patent infringement and the case was later settled. Yahoo acquired Overture in 2003.
Technology story very similar to IBM/Microsoft deal in the early 1980s. A dominant company outsources service that doesn't make money. Then a new business model is discovered that boosts the upstart. The lesson: check outsourced technology for potentially new business models, i.e. the ability of the component to become the foundation of a new system.
Yahoo was too early in its quest to become a media company. After ten years of development Internet-based content distribution business model has not materialized yet.
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