Amazon vs. Yahoo: Customer Service and Innovation in Internet Businesses

Categories: Competitive Advantage

Both Amazon and Yahoo are internet-based businesses that prioritize customer service. They both strive to simplify internet usage by aiding users in locating desired information or products. In the beginning, Amazon's main focus was on conducting online book searches, while Yahoo aimed to streamline website and information searches. Jeff Bezos established Amazon in 1995 with the objective of utilizing his IT expertise to provide a broader range of books beyond traditional brick-and-mortar stores (Hill, 2013).

Originally, Yahoo was created as a hobby by David Filo and Jerry Yang.

It began as a website directory named "Jerry's Guide to the WWW," where they curated a list of the finest and most valuable websites. Their goal was to provide a simple way for individuals to recall and revisit these websites (Hill, 2013). As the internet expanded, adjustments were made to accommodate its growth. Consequently, when they introduced their search engine, they changed the directory's name to "Yahoo!" The name was believed to represent "Yet Another Hierarchical Officious Oracle" (Hill, 2013).

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Both Amazon and Yahoo were successful in providing valuable services to internet users. While Amazon focused on creating a customer-centric online bookstore with a wide range of competitively priced books and a user-friendly interface, which differentiated them from traditional physical bookstores (Hill, 2013), Yahoo initially had an unclear vision when it started as a hobby but eventually shifted its focus towards enhancing the user experience (Harmon, 2012).

Amazon and Yahoo have both faced growth, disappointments, and challenges. However, they have also made significant progress in developing innovative technologies and software.

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One notable achievement is Amazon's creation of the 1-click Internet ordering and payment software, which has given them a competitive edge (Hill, 2013). Amazon prioritizes delivering the best customer experience. On the other hand, Beza at Yahoo empowers his employees to quickly address customer needs in online retail marketing. By utilizing small teams, he fosters a culture that encourages creativity and thinking outside the box to meet customer demands.

Yahoo began as a Web portal and generated revenue through advertising. Recognizing the potential for profit, they offered companies the opportunity to advertise on their directory. To increase earnings, they introduced Pay Per Click advertising. In 1996, Yahoo went public and utilized the funds to establish a robust IT infrastructure that facilitated the expansion of their portal. This infrastructure enabled them to consistently enhance their search engines and content with the goal of improving user experience.

Amazon and Yahoo have a common objective of delivering exceptional customer and user experiences on the internet (Hill, 2013). They both strive to generate value and gain a competitive edge by effectively using their management resources and company assets. Both companies identify themselves as IT and software organizations, utilizing their proficiency in these areas to enhance the user experience. However, and showcase specific strategic differences.

According to Hill (2013), managers utilize strategies, which are interconnected actions, to improve their company's performance. Each company focuses on different aspects, like product development, to create effective strategies that meet the needs of their target customers (Hill B., 2014). Amazon achieved quick growth by entering the specific market of online book sales and providing an unmatched variety at competitive prices.

Amazon's expansion into various retail goods has resulted in significant sales growth, transforming it into a billion-dollar company. Additionally, Amazon has successfully incorporated a service end strategy characterized by quick delivery times, which is commonly referred to as the distribution strategy. This strategic approach focuses on creating favorable conditions for customers to make purchases from the company (Hill B., 2014). Moreover, offers a user-friendly 1-Click system process that allows customers to conveniently buy products online from anywhere in the world and receive them within a matter of days. was originally designed to simplify internet information search. Filo and Yang quickly realized that their search engine was attracting a large number of users and surpassing their initial expectations. In order to meet the needs of their target market, Yahoo employed a marketing strategy that involved recruiting human volunteers to enhance and expand their directory. This approach proved to be cost-effective and enabled Yahoo to reach a growing customer base (Hill B., 2014).

This strategy helped launch Yahoo to the point it was receiving more than 1 million daily hits. Another crucial strategic decision made by Yahoo was in 1996, when it decided to expand its IT infrastructure to handle its growing needs. During that year, Yahoo made a deal with Sequoia Capital, who recognized the challenges faced by many startups. One of these challenges was the lack of business experience and skills in developing effective business strategies by Filo and Yang. appointed Koogle as CEO with the objective of implementing a business strategy that emphasized enhancing marketing and advertising efforts to attract more website visitors. Additionally, Filo and Yang bolstered the search engine by recruiting software engineers who developed cutting-edge technology. These advancements paved the way for to venture into new services such as new media and entertainment (Hill C. &., 2013). Both and strategically pursued gaining a competitive advantage.

Both and have established strategic business models to guide their daily operations. These companies utilize planned and unplanned strategies, with the latter serving as spontaneous reactions to unexpected situations, as explained by Hill (2013). Amazon has a competitive edge over other online and offline retail stores because of its diverse range of products. Despite being primarily an online platform, Amazon acknowledged the importance of physical facilities for storing their extensive inventory. Consequently, they underwent several relocations in their early years to facilitate growth and meet the demand for large warehouse space.

Amazon realized early on that in order to finance the cost of warehouses and employees, they needed to find a way to generate funds. In 1997,'s stock began trading on the NASDAQ stock exchange (Hill C. & ., 2013). As Amazon expanded its product lines, it recognized the need to enhance its convenience in order to compete with brick and mortar retail stores. To achieve this, Amazon forged alliances with B&M companies such as Toys“R"Us, Office Depot, Circuit City, Target, and others. This allowed customers to purchase products from Amazon's website and have the option to pick them up immediately from these retailers' local B&M stores (Hill C. & ., 2013). In addition to these successful strategies, Bezos implemented a strategy called "Stop Talking So Much", which may seem unconventional to many.

Bezos believes that promoting communication between teams restricts team autonomy and encourages excessive agreement, which hinders the emergence of creative conflict (Baer, 2014). This belief in the innovation potential of small teams helps maintain competitiveness through a deliberate strategy. In contrast, Yahoo initially had no intentions of their small website directory being utilized beyond their own usage and that of their friends. As a result, the decision to offer advertising space shortly after their website gained popularity was an unforeseen strategic move that propelled them to new heights. They subsequently implemented a new business plan focused on generating revenue through renting advertising space on the rapidly expanding Web pages of their search engine (Hill C. &., 2013). The idea of entering the ecommerce sector was not part of Filo and Yang's original plans when they launched their site.

As the company grew, it needed another source of revenue. Ecommerce was selected as the solution to enable online transactions between internet users (Hill C., 2013). Currently, Yahoo is undergoing a transformation led by CEO Marissa Mayer. Mayer has implemented a new business strategy that incorporates behavioral science to comprehend user habits and convert Yahoo into a habitual platform (Business Editor, 2014). and possess distinct strengths and competencies.

Distinctive competencies, as defined by Hill C. & (2013), are the unique strengths of a company that allow it to differentiate its products from competitors and/or achieve cost advantages. When Jeff Bezos established Amazon, their distinctive competency was their online bookselling business. Over time, Amazon has broadened this distinctive competency by offering a wide range of products through a user-friendly website with fast delivery services.

Both Amazon and Yahoo have their own strengths and advantages in the online market. Amazon is known for its competitive prices, wide variety of products, and convenient shopping experience across different electronic devices. It stands out with its diverse product line, user-friendly interface, and efficient delivery process. On the other hand, Yahoo started as a basic website directory but has evolved into a leading search engine that offers numerous services like news, entertainment, e-commerce, and email. Its standout feature is being an all-inclusive platform where users can find almost any information or service they need. This shows how both and follow a functional level strategy.

Functional level strategy, according to Hill (2013), seeks to enhance the efficiency of various operations within a company including manufacturing, marketing, materials management, product development, and customer service. serves as an exemplary illustration of functional level strategy owing to its ongoing growth and expansion. This is evidenced by their persistent innovation and acquisition of new market shares through research and development.

Amazon could enhance its offerings by incorporating voice-assisted search capabilities and informative videos to improve user navigation and decision-making during online shopping. Similarly, has the potential to boost its functionality by developing a vibrant social media platform that encourages regular visits from users seeking updates on their online communities. This platform could resemble well-known platforms like Facebook or Twitter, surpassing the current features of Flickr.


  1. Baer, D. (2014, March 17). 5 Brilliant Strategies Jeff Bezos Used to Build the Amazon Impire. Retrieved from
  2. Business Editor. (2014, March 31). 7 Brilliant Strategies Marissa Mayer Used to Shake Up Yahoo. Retrieved from Harmon, S. (2012, February 04).
  3. Jerry Yang and Yahoo's Humble Beginnings.
  4. Retrieved from Hill, B. (2014). Key Business Strategies.
  5. Retrieved from Hill, C. &. (2013).
  6. Strategic management: An intergrated approach (10th ed.). Independence, KY: Cengage.
Updated: Feb 21, 2024
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Amazon vs. Yahoo: Customer Service and Innovation in Internet Businesses. (2016, Apr 23). Retrieved from

Amazon vs. Yahoo: Customer Service and Innovation in Internet Businesses essay
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