It would be silly for anyone to claim they could have predicted how these two businesses would compare today, but we can still learn something from examining what sent their fortunes in such different directions.
I began working for Google in 2003, at a time when the two tech giants were competing vigorously to dominate the rapidly growing territory of World Wide Web. So many factors influenced the ultimate outcome, but one in particular — the way Google and Yahoo differed in their approach to core infrastructure — seems especially telling.
Perhaps my perspective is affected by the fact that I worked closely on the underlying Google File System, but I still believe Google’s sharp contrast with Yahoo on infrastructure offers powerful lessons about building a sustainable business, especially in the rapidly transforming technology landscape.
Building fast and building to last:
At the beginning of the new millennium, Google and Yahoo started down very different paths to attain the enormous scale that the growing size and demands of the Internet economy (search, email, maps, etc.) required. For Yahoo, the solution came in the form of NetApp filers, which allowed the company to add server space at a dizzying rate. Almost every service that Yahoo offered ultimately ran on NetApp’s purpose-built storage appliances, which were quick to set up and easy to use, giving Yahoo a fast track to meet market demand (and soon made the company NetApp’s largest customer).
It took four years of ongoing development, and enormous amounts of engineering resources, before the Google File System reached the point where the company used it for mission-critical operations. Meanwhile, Yahoo had been able to add NetApp filers almost immediately to keep up with growing demands for its services. In the race to dominate the Internet landscape, it appeared Yahoo had pulled far ahead.
However, Yahoo’s rapid go-to-market approach also began to show some cracks. As demand continued to expand and diversify, downsides to the appliance-based infrastructure emerged in the form of redundant engineering work, increasingly complex and inefficient environments and finally, mounting vendor costs. When Yahoo added a new service, it needed to re-engineer the NetApp platform for that specific use case.
As a result, identical challenges for separate services, such as Yahoo Search and Yahoo Mail, had to be solved multiple times on different infrastructures. The fragmented infrastructure also exposed greater resource inefficiencies, as each use case required separate server space and compute power that couldn’t be shared across the platform. On top of that, the cost to run NetApp appliances grew as fast as Yahoo did, taking a significant bite out of the company’s revenue.
On the other hand, Google built its file system in anticipation of these challenges, so that adding new use cases or fixing underlying architecture challenges could be done efficiently. After the purchase of YouTube, for example, Google could simply say, “throw away your back-end and we’ll put you on our platform.” Engineers could make upgrades to the underlying architecture once, and the solution would apply across all of Google’s services.
Finally, the flexible platform allowed resources and compute power to be shared across different use cases, so that when servers weren’t busy on search they could be used to process email. It didn’t hurt that all this was built on commodity hardware, which offered costs that decreased in line with Moore’s Law.
As the cost and complexity of Yahoo’s underlying infrastructure mounted, the company simply could not afford to match Google’s pace in developing and deploying major new applications.
It is crazy to think Yahoo was on top of the world, but these days there just struggling to survive.