On March 14 a ripple of rumors swirled around Yahoo, the Santa Clara, Calif.-based Internet media portal. Sparked by a news story on CNBC, a cable news network, reports hinted that Yahoo was discussing a possible merger or alliance with eBay, the online auction giant. As is typical in such situations, both companies politely declined to comment. One thing, though, was clear: Even it the rumors were untrue, anyone who was even remotely interested in the Internet paid very close attention to Yahoo’s moves.

And why not? As one of those rare dot-com companies that actually makes a profit—in fiscal 1999 Yahoo earned $143 million on revenues of $589 million—its market capitalization stands at nearly $90 billion, despite a stock price that has declined from its peak of $250 and closed at $168.75 on March 13. The company has also been growing aggressively overseas; it already has 22 non-U.S. versions of its site, and this week Yahoo Argentina opened for business. Yahoo also is charging full-tilt into innovative new services. On March 13 it launched FinanceVision, the first live financial news network to originate in Silicon Valley.

So amid all these moves, where is Yahoo headed? In the constantly shifting dynamic of the new economy, where does it see its opportunities and threats? What is Yahoo’s vision, and what is its strategy? Tim Koogle, the company’s chairman and CEO, answered some of these questions recently at the Wharton Media and Entertainment conference.

Koogle says that Yahoo’s fundamental strategy is to establish a global branded network. This was the founders’ original hypothesis, and it was reinforced by their directory’s swift rise in popularity, which told them that their service was meeting a real need.

Koogle points out that Yahoo fills the space between the "changing stuff" on the Internet and changing needs of consumers by linking its directory, navigator and technology platform. Yahoo allows customers to select categories based on their preferences and then establishes partnerships aggressively in the areas its users select. As a result, Yahoo has gone far beyond being a simple search engine: It has evolved into a media network delivering content, merchant services and communication. "Initially all the search engines competed on technology," says Koogle, "but consumers do not care about that." Other portals have since changed their strategy and are now trying to play catch-up with Yahoo by trying to become global networks.

In its battle with other search portals, Yahoo sees its technology platform as a core strategic weapon. With that platform in place, the company has been able to enter market after market by quickly cloning its technology and adding the local language and links, says Koogle. Yahoo began establishing its international presence in 1996. Today most of the non-U.S. versions of Yahoo are in their second or third generation of staff and market-building strategies. Koogle claims Yahoo’s market reach is 70% to 80% and the company is either No. 1 or No. 2 in every location. "There is huge value in building a consistent technology platform and cloning it around the world," notes Koogle. The company is now working with the World Bank to allow people in developing countries to form local business that operate on the Yahoo platform.

Looking to the future, Yahoo is leveraging voice technology by offering it for free and embedding the option in chat and instant messaging. While Koogle believes that wireless instruments will become global communication devices, he cautions that "consumers will be very price sensitive because the same information is free on their PC." Yahoo is also moving heavily into broadband, as is evident from its acquisition last April of Broadcast.com.

Koogle, in addition to discussing Yahoo’s vision, also spoke about his personal views on success. He connects the company’s strategy and profit to basic underlying standards intrinsic to success in life. "As a child, I was taught to live life based on fundamental values and I believe that business should be done in the same manner."

Koogle says some of his principal beliefs are:

  • Profits matter. When profits are not considered relevant today, you create a company culture that will have difficulty making profits in the future.
  • Everything should stand the light of day. You have to respect others, including your customers, and you must speak up when others in the organization are off base.
  • If you want to build something that lasts, it can’t be based on money or ego. Koogle confides, "I’m always happy when I run into competitors motivated by money or ego, because at some point they will make a decision based on those priorities and it will compromise the long-term health of their organizations."
  • Avoid the possum syndrome. Possums smell trouble but fail to act. "You must do something. Fail fast and change," declares Koogle. In order for a company to be equipped for speed, it cannot tolerate "bozos." It must hire the best people it can find, but also be very clear about company goals and religiously push decision-making out into the organization and give employees full authority to experiment. "The only way to scale a business without limits is to run a variety of experiments at the same time," Koogle says.

In light of the AOL/Time Warner deal, is there a partnership for Yahoo on the horizon? (CNBC’s report about the alliance with eBay raised the same question.) "Business mergers can often slow a company down more than speed it up," reflects Koogle. He says Yahoo doesn’t need to own traditional off-line media companies and will likely continue just to form relationships with content providers.

So how should companies measure success with or without profits? Koogle believes that while measurement is different for every company, organizations must decide upon a set of dashboard metrics to track if they are succeeding or failing. Businesses can fail without a weekly review of these metrics, because they make decisions based on poor information—sometimes even when the correct information is available within the company.

When asked whom he fears, Koogle smiles. "Any company with a large scale and resources, that is or needs to be in Yahoo’s space-especially if its core distribution is organic to its business model," he replies. And whom does he admire? Cisco Systems CEO John Chambers, Koogle says, "because he’s never had to fundamentally change his business strategy."