Digging Up Yahoo's Graveyard

Is Yahoo's acquisition of Tumblr the latest in a series of bad business decisions?

"Glad we've finally got our hands on #Tumblr – can’t wait to start work on making it more family friendly!" someone from Yahoo tweeted on May 19, the day the company announced it would acquire the micro-blogging platform for $1.1 billion.

Another message from the "Yahoo Staff" blog explained that the company intended to shut down its fandom blogs, saying, simply, “We own you, bitches.”

These statements weren't actually from Yahoo staffers – they were from trolls. And they're not entirely false either, just an extreme and pessimistic forecast for the future: This is what happens when Yahoo buys you. Yahoo’s history is full of horror stories of successful startups that were acquired and destroyed — not to mention some colossal missed opportunities to buy companies at rock-bottom prices.

Oh my God — they killed Flickr!

Flickr, the online photo-sharing community that Yahoo CEO Marissa Meyer is trying to revive, is one of the most visible casualties of Yahoo’s purchase strategy.

A Canadian couple established Flickr in 2004 based on tools developed for Game Neverending, a Web-based, multiplayer online game. Flickr, which also served users who wanted a place to store photos they could post on blogs or elsewhere online, was one of the harbingers of Web 2.0, the Internet’s sharing and social-networking phase.

Yahoo bought Flickr in 2005, a year after it was established, for an estimated $35 million. “Yahoo was a good fit initially,” said Flickr co-founder Caterina Fake in an interview with Gizmodo. “We had offers from various companies, including Google, and I honestly think that Yahoo was a great steward. It was a great steward of the brand. It was allowed to flourish. In the subsequent two years after the acquisition, Flickr blossomed.” Yet both she and her Flickr co-founder Stewart Butterfield left the company a few years after Yahoo acquired it.

One example of Yahoo’s missing an opportunity with Flickr was its mobile app, which came out in 2009, more than a year after Apple launched its app store on iTunes. The Flickr app was slow, not user-friendly and had lots of bugs. A year later, Instagram came on the scene.

The same year Yahoo bought Flickr, it made two other significant acquisitions in an attempt to ride the Web 2.0 wave. These were the social bookmarking service Delicious, established by Joshua Schachter in 2003 and bought for $20 to $30 million, and the social event calendar website Upcoming, founded by Andy Baio, Gordon Luk and Leonard Lin, bought for $1 million. Schachter left Yahoo in 2008, saying, “I was largely sidelined by the decisions of my management.... It was an incredibly frustrating experience.”

In December 2010, after announcing the dismissal of 4 percent of its work force, Yahoo staffers at an internal meeting were shown a slide describing the “sunset” of eight websites and services that it owned, including Delicious and Mybloglog, a social network for the blogging community. Delicious was sold in April 2011 to AVOS Systems for an estimated $1 to $5 million. Mybloglog, which was bought in 2007 for $10 million, was closed in May 2011. Upcoming shuttered last April.

The world’s most expensive radio

Yahoo’s biggest acquisition was Broadcast.com, which it bought in April 2009 for $5.7 billion. The company was split into two services: Yahoo Platinum for video (which was closed) and Yahoo Launchcast, which was merged with Yahoo Music, and continues to provide music, video clips, radio, news and information about musicians.

In 2002, Yahoo outdid Monster.com and bought the job search engine HotJobs for $439 million. It later sold it to Monster in 2010 for $225 million.

In mid-2004, Yahoo bought Kelkoo, a European price-comparison service established five years before, for $579 million. After losing popularity, it was sold in late 2008 to Jamplant, for an amount estimated between $126 million and less than $100 million.

A home for everyone

In 1998, GeoCities was the third most popular website in the world, with more than 19 million users. While this number sounds miniscule in current terms, in 1998, with an Internet population of 147 million (as compared with 2.4 billion today), it meant that one of every eight Netizens had a GeoCities account.

Years before there were blogs or social networks, anyone could build a website with minimal know-how (relative to the time) at GeoCities. It created the feeling that websites belonged to a community and to subcommunities. The websites were divided into “neighborhoods” according to their fields of interest. Technology websites belonged to the “Silicon Valley” neighborhood. Websites that focused on writing and art were in “Soho.” The first website of one of the writers of this article was on GeoCities (the other’s was on Angelfire).

GeoCities was established in 1996 by David Bohnett and John Rezner. In 1999, Yahoo paid $3.6 billion for it. By 2009, a decade later, the Web 2.0 revolution had passed over GeoCities completely. Abandoned by users in favor of blogs and social networks and unable to offer Web-building services to a more professional community, GeoCities closed down.

You snooze, you lose

The founders of Yahoo, Jerry Yang and David Filo, didn't want to do business with Google or buy it when its founders, Sergey Brin and Larry Page, were looking for investors in 1998. In 2001, on the recommendation of Yang and Filo, the new CEO of Yahoo at the time, Terry Semel, met with the founders of Google and offered to buy it. The price is $1 billion and we don’t want to sell, they told him. In further meetings, Semel offered Brin and Page $1 billion, but they raised their price to $3 billion and still didn’t want to sell. That was the end of their negotiations.

In 2006, Yahoo offered $1 billion for Facebook — a purchase that would have gone through if Yahoo had not gotten cold feet at the last moment, changed its mind and offered $850 million, scuttling the deal.

This year, Yahoo failed in its bid to buy a 75-percent stake in Dailymotion, the second-largest video-sharing platform, from France Telecom and Orange for $200 million, to compete with the leading platform, YouTube, which is owned by Google. France is a significant shareowner in the company, and French Industry Minister Arnaud Montebourg vetoed the deal because he wanted to keep the company French. “Yahoo wants to devour Dailymotion, but we told them no and that it had to be a 50–50 split,” he said. “We want a balanced development.”

Yahoo missed two opportunities to be bought – once by Microsoft in 2008 for a sum estimated between $44.6 and 47.5 billion, and in 2011, when Google tried to buy it as well. According to Forbes, Yahoo’s current market value is $24.31 billion.

Reuters
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