Yahoo!

Jerry Yang and David Filo are sitting in a TV studio at Stanford University, in California, waiting to shoot a remote segment for CBS News Up to the Minute. The tired young entrepreneurs slump in a pair of cheap desk chairs set against a blank blue wall, facing an unblinking camera lens. Yang, earphone in one ear, black wires taped down his back, manages a smile; he is, after all, the salesman or the pair, the guy who takes the message of Yahoo! out to the public. Filo, similarly wired and taped, looks utterly trapped, like a downed American pilot in a forced videotape confession.

Out in the ether, anchor Nanette Hansen asks the first question, and Filo, dressed in his customary shorts and T-shirt but for once actually wearing his sneakers, straightens up to respond. “Well,” he starts, “we were happily on our way to getting our Ph.D.s….” And then he launches into the tale that the two have been telling since April, when they took leaves of absence from Stanford and turned their pet project into a company that has the smartest money in the country watching.

Theirs is a fable becoming almost common in Silicon Valley in these days of overheated expectations for the Internet. A couple of guys with pocket protectors and a glint in their eyes invent some garage software, round up some venture-capital financing and go on not only to make millions but also to change the outlines of the world, at least technologically speaking.

The Yahoo! version of the fable began in a trailer at Stanford, where Yang, 27, and Filo, 29, shared a tiny office that contained two desks, two computer workstations, several sets of golf clubs and a sleeping bag they took turns using. In the spring of 1994, Yang began fooling around on the World Wide Web, an electronic network of “pages” linked by hypertext. Like thousands of other grad students, he’d put up his own home page — a picture of himself with a score card from Stanford’s golf course, his name spelled in Chinese characters and links to sumo-wrestling pages.

As anyone who has surfed it knows, the Web is a place of anarchic creativity — and just plain anarchy. So Yang and Filo, who were supposed to be doing research into the computer-aided design of circuits, came up with an idea: a Web directory. They hacked a tool that let them categorize Web pages and link them within hierarchies. They called it Jerry and David’s Guide to the World Wide Web, and they made it available — free on Stanford’s system — to anyone in need of a road map.

“It just required putting time into it,” says Filo, who is blond and thin, and raised in Louisiana but speaks with no trace of a drawl. “And we had enough of that.” Especially once their adviser went to Italy on sabbatical.

To create Jerry and David’s, the two grad students had to write some code — geek shorthand for programming — but they spent the bulk of their time adding pages and figuring out how to link them within an overall structure. They ended up with a system with subcategories like “Hard to Believe,” “Cool Links” and “Interesting Devices Connected to the Net” that might horrify students of library science but made perfect sense to them. “Under Dewey, where would we put the ‘Fish Cam’?” asks Filo.

Sometime that summer — the date is hazy, but it was definitely at 2 a.m. — Jerry and David’s Guide became Yahoo!, or Yet Another Hierarchic Officious Oracle (in part, a hacker’s pun on a Unix program called YACC, or Yet Another Compiler Compiler). Yahoo! was not the only online Web guide, but it was the only one that categorized information in addition to offering a search function and an attitude. And you didn’t have to subscribe to it as you do InfoSeek. The Wall Street Journal and the Times of London raved about Yahoo! By November the Web site was recording 170,000 hits a day, representing some 10,000 users; by February 926,000 hits were being recorded, representing 80,000 users per day.

But the online traffic was overwhelming Yang and Filo’s computers and their lives. That’s when the story goes into fast forward: a buyout offer from America Online, inquiries about partnering with Prodigy and Microsoft, among others (all politely declined), followed by a $1 million investment from Sequoia Capital. In May the Yahoos moved out of their trailer and into a nondescript building of office suites. They printed business cards identifying themselves as Chief Yahoos. Filo left his dorm room. Yang bought an Isuzu Rodeo and a cell phone. They hired a bunch of ex-gradstudent friends and a handful of college interns. They did an executive search and hired a CEO, probably the only person on staff who owns both a tie and a pair of hard-soled shoes.

And on Aug. 1, 1995, they launched the New! Improved! Yahoo!, complete with bright neoprimitive graphics, a streamlined categorization scheme, headline news from Reuters and, oh, yeah, right there under the splashy new logo, advertising. Yahoo! was in business.