Yahoo! has faced significant scrutiny throughout its history regarding security, privacy, and corporate governance. The company was involved in several high-profile data breaches that affected its entire user base, alongside controversies related to its cooperation with government authorities and its handling of user data in international markets. These incidents led to numerous legal challenges, regulatory investigations, and a notable impact on the company's public reputation and valuation.

In March 2004, Yahoo! launched a paid inclusion program whereby commercial websites were guaranteed listings on the Yahoo! search engine after payment. This scheme was lucrative but proved unpopular both with website marketers (who were reluctant to pay), and the public (who were unhappy about the paid-for listings being indistinguishable from other search results). As of October 2006, Paid Inclusion ceased to guarantee any commercial listing and only helped the paid inclusion customers, by crawling their site more often and by providing some statistics on the searches that led to the page and some additional smart links (provided by customers as feeds) below the actual URL.

Yahoo! has also been criticized for funding spyware and adware—advertising from Yahoo!'s clients often appears on-screen in pop-ups generated from adware that a user may have installed on their computer without realizing it by accepting online offers to download software to fix computer clocks or improve computer security, add browser enhancements, etc. The frequency of advertising pop-ups for spyware, generated from a partnership with advertising distributor Walnut Ventures, who had a direct partnership with Direct Revenue, could be increased or decreased based on Yahoo!'s immediate revenue needs, according to some former employees in Yahoo!'s sales department.

Yahoo!, along with Google China, Microsoft, Cisco, AOL, Skype, Nortel and others, has cooperated with the Chinese Communist Party in implementing a system of internet censorship in mainland China.

Unlike Google or Microsoft, which generally keep confidential records of its users outside mainland China, Yahoo! stated that the company cannot protect the privacy and confidentiality of its mainland Chinese customers from the authorities.

Critics say that the companies put profits before principles. Human Rights Watch and Reporters Without Borders state that it is "ironic that companies whose existence depends on freedom of information and expression have taken on the role of censor."

In September 2005, Reporters Without Borders reported that in April 2005, Shi Tao, a journalist working for a Chinese newspaper, was sentenced to 10 years in prison by the Changsha Intermediate People's Court of Hunan Province, China (First trial case no. 29), for "providing state secrets to foreign entities". The "secrets" were a brief list of censorship orders he sent from a Yahoo! Mail account to the Asia Democracy Forum before the anniversary of the 1989 Tiananmen Square protests and massacre.

The verdict as published by the Chinese government stated that Shi Tao had sent the email through an anonymous Yahoo! account, that Yahoo! Holdings (the Hong Kong subsidiary of Yahoo) told the Chinese government that the IP address used to send the email was registered by the Hunan newspaper that Shi Tao worked for, and that police went straight to his offices and picked him up.