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Yahoo! down but not out
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February 7, 2000: 7:55 p.m. ET
Yahoo! says it came under attack; investors shrug off day's outage
By Staff Writer David Kleinbard
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NEW YORK (CNNfn) - The Internet portal Yahoo! Inc., the world's largest Web site, went down for several hours Monday, apparently because of an outside attack that flooded the site with fake traffic.
Yahoo!, based in Santa Clara, Calif., said its heavily trafficked Web site was down intermittently for at least two and a half hours after an attack made mock demands on its systems. Yahoo!'s customer information and site data weren't compromised by the attack, a company spokeswoman said.
Yahoo!'s (YHOO: Research, Estimates) $93 billion market value didn't suffer as a result of the outage, however. The company's stock actually rose 1/2 today to close at 354, apparently showing that investors have come to accept temporary outages as a fact of life on the Internet, as they are with almost every other means of communication.
"These things are going to happen," said Dalton Chandler, an analyst at the securities firm Needham & Co. in New York. "In the television industry, there have been power outages and cable outages, yet TV rolls on. Yahoo! really doesn't have any liability, but they might lose some advertising and commerce revenue."
"Outages are significant only to see how the site's management reacts - how fast they get the news out and how quickly they get the site back up," said Lise Buyer, an analyst at CS First Boston. "There is no technology anywhere that is completely bug free. There are no implications for Yahoo!'s corporate value from this outage."
Investors' lack of concern about the Yahoo! outage shows that attitudes have changed since the electronic auction site eBay (EBAY: Research, Estimates) experienced outages for two days last July and one day last August. When eBay went down on Aug. 6, its stock dropped to $83.25 from $89 on heavy volume.
"There is some precedent here with eBay," Needham's Chandler said. "They have suffered several outages, some at critical times, without losing a significant amount of customer goodwill."
Yahoo! generates revenue by selling banner advertising space on its site, and taking a share of revenue from merchandise sold through its site by outside vendors. Yahoo! typically receives sponsorship fees, as well as a portion of transaction revenue, in return for minimum levels of "user impressions" Yahoo! provides. If the company fails to deliver required minimum levels of user impressions, or "click throughs," its fees can be reduced.
Some of the advertisements Yahoo! sells can run anywhere at any time on the site, while others are targeted toward specific users, such as people looking for a home mortgage or life insurance. Yahoo! charges more per "click" for targeted ads.
"The more targeted advertising is the most valuable online real estate," Chandler said. "If a user looking for a specific product can't access information about it on Yahoo!, he may go elsewhere."
During December 1999, Yahoo!'s global audience grew to more than 120 million unique users, double the 60 million users it served in the same month in 1998. Yahoo!'s users conducted more than $6.7 billion of transactions on the Internet during the fourth quarter, according to research conducted for Yahoo! by InsightExpress. 
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