A voice for startups

Yahoo! The Upside

A lot of ink has been spilt on the many mistakes made by Yahoo. How the company refused to buy Google or Facebook when the opportunity existed. Yahoo might in fact be a story of many missed opportunities. But those misses did not really define the failure. Yahoo failed because of a series of poor decisions and a company culture that did not permit it to move forward.

The implicit assumption in all of the criticism is that Google would have certainly gone on to become the company that we know today. Yes, perhaps there would have been one less competitor to deal with.

Those of us who adopted and started using Google did so because its simplicity and precision. Do you really imagine that Yahoo! which was always a portal, would have purchased Google and retained a blank white page with a box?

Cultural Deceit

Yahoo failed because of the things that made it successful to begin with. It was launched as a directory service and then went on to adopt the portal model. For whatever it is worth, it worked very well for them in the late 90’s.

The linked post on stratechery which talks about the development of culture.

Culture does not beget success but it is the product of it

When a company does something and it works out for the company, it becomes a formula. The people who join the company hear the same stories and do the same things.

An employee who joins Marriott hears stories of awesome customer service which helped them retain customers, got someone promoted. The formula to get ahead becomes, providing awesome customer service.

Yahoo was a portal and wanted to continue to survive in that paradigm. It was just much easier to sell the idea to advertisers and generate revenues through multiple channels. Google went with income from ‘Search’ only. Honestly, the good boys at Google did not want to do even that! Eric Schmidt had to wrestled them into advertising.

Yahoo’s culture did not allow them to adjust to the changing nature of the web. Much like Google finds it hard to adjust ‘search’ to the demands of smartphones. Facebook by comparison found it extremely comfortable adapting to mobile.

Mergers and Acquisitions

Yahoo may not have bought Google or Facebook, but they bought often and bought a lot. Here is a list of all of the M&A that Yahoo has been engaged in over the years. You may notice that there are a list of 114 companies there. In the space of 18 years, that is an average of 6 per year; or one every alternate month! Number deceive in the absence of context; they made 23 off those in 2013 alone. An additional 19 were acquired in 2014.

Yahoo made big acquisitions in the 90’s that did not pay off. GeoCities, Broadcast.com (founded by Mark Cuban) and Overture Services were all multi-billion dollar acquisitions which went nowhere. Flickr still survives and could have easily been Instagram, but is not.

I am sure had they acquired Google and Facebook, they would have been equally lost in the quagmire that was Yahoo. Throwing everything into a portal and melding it into one was not what was needed, but Yahoo could not help but do that.

Marissa Mayer kept deflecting criticism by acquiring one company after another. She closed 5 deals in Jan 2014 alone. When Steve Jobs went back to Apple he figured out the soul of the company and let go of everything else. Marisa Mayer did exactly the reverse in the case of Yahoo, kept everything and added more garbage.

So what is the upside?

For starters thank Yahoo that they did not acquire Google for $1 Million, you would probably be using bing today! Also, you might have been using Google+ had they ended up acquiring Facebook.

Yahoo redistributed 10’s of Billions of dollars to many startup founders through acquisitions. These founders went on to invest in other startups and created the startup eco-system that exists today. This is by far the most critical contribution that Yahoo made. This alone contributed significantly towards changing the trajectory of investments in startups.

Yahoo by itself might not have been a hugely successful business. A combination of cultural undercurrent and poor leadership ran the company into the ground. Having said that, Yahoo has made contributions that are valuable.

Not buying Google and Facebook are one amongst them.

Vivek Srinivasan

Vivek is a startup mentor who has been working with startups for the past 10 years. He is the founder of Startups Club and engages with startups across the country and overseas.