Yahoo Inc.’s proposed sale to Verizon Communications Inc. puts an exclamation point on a tumultuous two-decade run that began with success as the web’s organizer and ended with a string of failed leaders and strategic blunders.

The internet company’s prolonged decline could serve as a classic case study in defining a business whose many chief executives struggled to answer: What is Yahoo?

Begun...

Yahoo Inc.’s proposed sale to Verizon Communications Inc. puts an exclamation point on a tumultuous two-decade run that began with success as the web’s organizer and ended with a string of failed leaders and strategic blunders.

The internet company’s prolonged decline could serve as a classic case study in defining a business whose many chief executives struggled to answer: What is Yahoo?

Begun in a Stanford University dorm room in 1994, it spent its first decade building scale as the internet’s portal. Then, as Google Inc. and Facebook Inc. —two companies it nearly acquired—built lucrative footholds in search and social media, Yahoo fell behind the fast-moving internet economy it helped create. Visitors and revenue dwindled as it strained to innovate across its myriad services.

“If you’re everything, you’re kind of nothing,” said Brad Garlinghouse, a former Yahoo executive who in 2006 wrote the “Peanut Butter Manifesto,” an internal memo criticizing the company for spreading itself too thin. “The sad reality…is it never solved its core identity crisis.”

Mr. Garlinghouse said Yahoo’s fluctuating strategies often confused employees. He recalled asking managers at a retreat in 2006 the first word they thought of when he named a company. Google, eBay and others yielded clear answers—“search” or “auction.” Yahoo didn’t. Managers said “mail,” “news,” “search,” and other things.

Verizon Communications Inc. on Monday announced plans to buy Yahoo Inc.’s Web assets for $4.83 billion in cash, ending a drawn-out auction process for the beleaguered internet company. WSJ’s Ryan Knutson joins Lunch Break with the details. Photo: AP

A parade of CEOs over two decades amplified the confusion, seesawing its emphasis between tech and media.

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Co-founders Jerry Yang and David Filo initially built their index, called “Jerry and David’s Guide to the World Wide Web,” while procrastinating on a thesis project.

Their first CEO, a silver-haired former rocker named Timothy Koogle, said he joined a company in 1995 with no revenue and six employees that a recruiter told him “were in desperate need of adult supervision.”

Two years later, Yahoo was among the most-visited websites. It sorted 735,000 sites and offered free email, news and chat rooms, attracting 25 million unique users monthly.

Skyrocketing internet usage fueled growth to 100 million users, 2,000 employees and a roughly $125 billion market value by 2000. Unlike early peers, Yahoo also was profitable, partly because it pioneered online advertising.

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Then the dot-com bubble burst. From a peak price on Jan. 3, 2000, Yahoo’s stock plunged 93% over 20 months. Mr. Koogle resigned in 2001, and the company embarked on its first turnaround effort.

The next chief, former Warner Bros. executive Terry Semel, pushed Yahoo further toward becoming a media company. He aimed to collect more fees for premium services, including an astrology hotline charging $14.95 a question. Yahoo stopped investing in search as the internet’s sprawl became too much for a human-curated index.

Meanwhile, another pair of Stanford graduate students had built a computer-powered search engine they called Google. It would become Yahoo’s undoing.

Yahoo hired Google in 2000 to power its searches, branding its search box with Google’s logo. Mr. Semel discussed buying Google with founders Larry Page and Sergey Brin for $1 billion, but they couldn’t agree on price.

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By 2002, Google’s greater sway over internet commerce sent its revenue soaring.

Mr. Semel shifted strategies. Yahoo paid $1.9 billion for two search-technology firms and began powering its own searches in 2004. Mr. Semel also missed another acquisition, which would have given Yahoo a flagship social-networking property and a coveted young audience. In 2006, Yahoo discussed paying $1 billion for Facebook, but talks again ended over price. Facebook’s market value today is more than $340 billion.

But Yahoo never caught up. By 2007, when Mr. Semel resigned, Google’s sales were more than double Yahoo’s $7 billion.

Mr. Semel and other Yahoo ex-CEOs declined or didn’t respond to requests for comment.

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Yahoo next turned to Mr. Yang as CEO. The co-founder vowed an overhaul, saying “there will be no sacred cows.”

In early 2008, Microsoft Corp. made an unsolicited offer to buy Yahoo for about $45 billion, a roughly 60% premium. Mr. Yang and his board rejected Microsoft’s advances for months. Angry investors, including Carl Icahn, tried to oust Mr. Yang and eventually won three board seats.

Asked at a Wall Street Journal conference that year to define Yahoo, Mr. Yang struggled with a simple answer. “I think of Yahoo as, we have to be incredibly relevant and meaningful to consumers,” he said. “And we’ve defined that around a starting point. We want you to start your day at Yahoo.”

That November, Mr. Yang resigned.

His successor, former Autodesk Inc. chief Carol Bartz, swung Yahoo back toward media. She invested in news, sports and finance, hiring journalists and buying a company that produced cheap, clickable content.

The moves disappointed. A series of executives left and revenue began a long decline. Ms. Bartz was fired by phone in September 2011. Rumors of a sale soon swirled again.

The next hire, PayPal President Scott Thompson, emphasized e-commerce. But before he could carry out his turnaround plans, he resigned in 2012 over discrepancies in his academic record.

Yahoo returned to its tech roots in 2012 by hiring Marissa Mayer, a fast-rising product manager at Google, generally delighting investors and employees hopeful for a fresh start.

Ms. Mayer focused on improving products like mail and the photo-sharing website Flickr, while boosting investment in mobile software, online video and search. To replenish Yahoo’s talent, she also spent over $2 billion acquiring more than 50 startups.

But even she struggled to define Yahoo, Ms. Mayer argued that Yahoo should be central to people’s “daily habits,” whether searching the internet or checking email. The strategy failed to halt the talent departures and revenue declines. If anything, it laid bare a truth about Yahoo: It remains an ambiguous internet portal.

Some former employees said the root of Yahoo’s slow decline was simpler: It missed the phenomena of search, social media and mobile.

“What Yahoo is going through today is not because of decisions they made three years ago,” said venture capitalist Andrew Braccia, Yahoo’s former search chief. “It’s because of decisions they made 10 years ago.”

Write to Jack Nicas at jack.nicas@wsj.com