The history of Yahoo is really a very condensed version of the "7 steps of business" isn't it?
For you youngsters who don't remember why Yahoo used to be awesome, I'll go through my memories of Yahoo below.
A small team have an idea and start to screw around with it. In the early 90's finding stuff on "the InterNet" was a pain in the ass. AltaVista existed, Gopher was still kicking around, but they were not evolving fast enough.
The idea has merit, starts to build and every penny needs to be watched like a hawk, the idea becomes a business. Yahoo was everyone in my circle's home page by the end of 1995. No Adblock, no noscript, so we saw every fucking ad. getting an ad on the front page of yahoo cost insane amounts of money, but made you a household name. The other amazing thing about the early Yahoo is that most if not all the first results of a search were put there manually. Looking for 15th century French literature in Yahoo guaranteed you a good source of material.
Yahoo exploded. everyone I knew used Yahoo from about 96-99. Even my parents. This is the time that yahoo was trying to be the front page of the internet, the portal to compete with AOL.
By 2000 Yahoo was everywhere, but the search was falling behind as the web exploded at the start of the dotbomb. Yahoo was still my home page, and I used it for mail, but I used a list of favorites that helped me find new stuff online. Friends told me about this new search called "google" or something and that it used code and software to index the entire internet rather than people. We stared using the new search engine right at the dotcom bubble burst and the 9/11 attacks happened. Yahoo was useless on 9/11 by the way, I got most of my info that day directly from the BBC's web services.
Google and the automating of search indexes ate Yahoo's revenue stream; they could not keep up. If you hated AOL's and MSN's home page, Yahoo's was worse. It was too busy, finding new stuff was awefull and I started going there less and less. Gmail in 2004(?) killed the last need I had for Yahoo as a company.
And now, here we are watching Yahoo prepare to sell off its core Internet business. From boom to irrelevancy in roughly 20 years. There is a moral to this story... If you rest on your ass and think that just because you are the biggest kid on the block people will use you? You are doomed. Ask Sears, Montgomery Wards, Barnes and Nobles, Borders, Tower Records, Myspace, etc. how that worked out for them.
Segmenting the core search into its own unit is probably the best thing that Google is doing now. All the other stuff was a distraction from the core business of selling ads on the internet, and why I think Google is going to be around for a while.