Yahoo turns to AI-powered answer engine Scout to lead it back to online search roots

SAN FRANCISCO– Internet pioneer Yahoo is exploring the next technological frontier with Scout, a response engine powered by artificial intelligence. Scout seems insightful, given his response to a question posed by the Associated Press about why one of Silicon Valley’s brightest stars disappeared a decade ago.

“Yahoo’s journey illustrates how a company with an early advantage can disappear without continued innovation,” Scout explained, while also providing hyperlinks to other websites supporting his thesis.

Scout may have to offer a different interpretation if Yahoo CEO Jim Lanzone can leverage AI to expand his global audience of 700 million users who have remained loyal to the company’s finance, sports, news, fantasy and email services despite a history of madness that nearly destroyed a brand once synonymous with the Internet.

Yahoo has “always been the white whale of turnarounds for me,” said Lanzone, who has a proven track record of recovering from Internet outages. “I always thought I could do something with this thing.”

Lanzone, 55, finally got his chance after private equity firm Apollo Global Management paid $5 billion to buy Yahoo in September 2021 — a fraction of its peak market value of $125 billion reached during the heady days of the dot-com boom in early 2000. Apollo’s acquisition came after Verizon Communications bought Yahoo’s online operations in 2017 and later failed in its attempt to merge these services into AOL, another Internet pioneer.

Verizon never would have had the chance to buy Yahoo’s online operations if not for the company’s perpetual mistakes under seven different CEOs in 16 years.

Even if Yahoo’s checkered past hasn’t destroyed the company, it has left a stigma that makes it unlikely it will ever come close to what it once was, said Jeremy Ring, who was one of Yahoo’s first employees when he began selling ads for the service from his New York apartment in 1996.

“Even though Yahoo isn’t what it once was, it also hasn’t turned into a Blockbuster or Radio Shack story,” said Ring, who delved into the company’s ups and downs in a 2018 book, “We Were Yahoo!” “What is going to allow them to compete with all the big companies using AI? I’m not convinced that all the best engineers in the world are suddenly going to come work at Yahoo.”

Lanzone’s renovation efforts initially focused on removing dysfunctional elements of Yahoo. The breakup included abandoning some of Yahoo’s advertising technology, selling publishers such as TechCrunch and Rivals, and shutting down AOL’s dial-up Internet service, cutting off its last 500 users. As it stands, Yahoo is “very profitable” and generates billions of dollars in revenue, Lanzone said, while declining to be more specific.

Once the cleanup job was complete, Lanzone began overhauling what was left — a process that resulted in an upgrade of Yahoo’s popular fantasy sports division and a major overhaul of its email service that still ranks second on the web behind Google’s Gmail.

With the recent introduction of Scout to its 250 million users in the United States, Yahoo is tapping into the AI ​​movement in hopes that the technology will simplify online search and produce more personal results tailored to each user’s interests. Lanzone also hopes Scout will turn into a flywheel, continually spinning traffic through its other services.

Yahoo will be competing against a familiar competitor, Google, which remains the same formidable force that brought the company to its demise 20 years ago and which has gradually incorporated more AI into its search engine through its Gemini technology. As if that wasn’t intimidating enough, Yahoo will also compete with other popular AI chatbots such as OpenAI’s ChatGPT and Anthropic’s Claude, in addition to response engines such as Perplexity.

In a tacit admission that it’s behind the times, Yahoo is running Scout on AI technology licensed from Anthropic.

Unlike other chatbots and AI response engines, Scout doesn’t simulate human conversations so users can “have a fake personal relationship with it,” Lanzone said. “The product is very unique, even though we didn’t invent AI in the first place.”

Yahoo’s quest to increase online search traffic has largely been an exercise in futility since the late 1990s, a descent that began just a few years after Stanford University graduate students Jerry Yang and David Filo founded the company as the Internet’s first comprehensive website directory.

But as the Internet began to play a larger role in entertainment and commerce, Yahoo moved away from sending traffic elsewhere to focus on creating a multipurpose website that people wouldn’t want to leave. This strategic pivot opened the door for two other Stanford University graduate students, Larry Page and Sergey Brin, to create a search engine called Google.

After turning down an opportunity to buy Google for just $1 million in 1998, Yahoo devoted even more resources to creating a unique destination while paying so little attention to search that it turned to another company to provide that technology in 2000. Yahoo not only hired Google as its search engine, but also promoted its brand on its website. In 2002, Yahoo offered to buy Google for $3 billion, but Page and Brin wanted $5 billion. The impasse in negotiations launched Google on the path to an internet empire now valued at $3.7 trillion under parent company Alphabet Inc.

Yahoo went through a revolving door of seven CEOs, including former Google executive Marissa Mayer, in a quixotic quest to catch up in search before finally ending its 21-year run as a publicly traded company with its ill-fated sale to Verizon for $4.5 billion. Along the way, Yahoo rejected a $44.6 billion takeover offer from Microsoft in 2008 before ultimately agreeing to license the software maker’s Bing search engine.

If Yahoo’s bet on Scout pays off, Lanzone admits it could lead the company to return to the stock market more than 30 years after completing a 1996 IPO that intensified the dot-com fever that gripped investors at the time. Lanzone thinks another Yahoo IPO could still get people excited.

“We still have one of the largest audiences on the Internet, and that audience has been pretty loyal despite many ups and downs,” he said. “If we “super-serve” them, good things will happen. »