Yahoo 1


My last few posts were about the current Pokémon Go phenomenon, and I made a few predictions. We’ll see how it pans out in future Whatever Wednesdays posts.

In the more recent news, Verizon is set to acquire Yahoo for $4.83 billion.

This seems like a lot of money, however, it used to be worth $125 billion.

Forbes

CNN

I wanted to talk about this a little just because I think it is interesting since Yahoo is a company I knew of when it started way back when… and even though I knew it was dying all this time, I never thought it would actually be acquired. For that reason, I am going to talk a bit about Yahoo’s history and how Yahoo is now a cautionary tale, similar to (but lasting longer) than that of Friendster. Oh, I just realized some of you may not even know what Friendster is/was as it might have been before your time.

Friendster was basically the one of the first social networks to show traction. It had a huge head start before Zuckerberg ever coded HarvardConnection, thefacebook, or Facebook. Long story short, mistakes were made, and Friendster, even with its huge head start lost out to Facebook in the end. However, to add insult to injury, Google tried to buy Friendster for $30 million back in 2002.

Now, with all the billion dollar companies that are around nowadays, that may not sound like much. But remember, this is 2003, and, its founder, Jonathan Abrams had only started the company 1 year before in 2002. If Google had paid him in stock $30 million in 2002 would be about $1 billion today. However, hindsight is always 20/20. No one can fault Abrams or Friendster for “going for it”. Reference

The sad part is that Friendster is now the cautionary tale everyone talks about in Silicon Valley.

“Don’t be the next Friendster,” everyone says.

Why did Friendster fail? It had a big head start on Facebook AND MySpace, with a superstar team, at the right time and had basically everything going for it. There have been numerous articles and hypotheses as to what happened, but I think the general consensus is that they did not innovate fast enough or well enough, and there may have been a disconnect between their core age group and what Friendster was doing.

These factors, coupled with the fact that their website had technical difficulties offered a wedge for Facebook and MySpace to drive their stake into. Friendster then tried to their best to reclaim people who split off from them… but to no avail. People, given the opportunity, will always move on to the “next big thing”.

I actually remember this whole ordeal. Friendster was a site I used way back in May 2003 during my first year of medical school. Its major purpose was to help me reconnect with people from high school, college, and friends of friends. Then all of the sudden, it didn’t have a purpose anymore. I’m not sure if it was that summer or that fall, but it just wasn’t something I used anymore. I can’t explain why.

However, I think that is the whole point… Friendster didn’t do anything wrong persay, it just didn’t do enough right to keep me engaged. I then passed on the whole Facebook era as well. I mean I made a facebook account when it was first getting started but dismissed it as another Friendster and canceled my account soon after. All of this was probably in my best interest since I busy with medical school and needed to concentrate on that. I actually only made a  Facebook account this last year because I created this blog.


Ok, enough about Friendster, that was just to give you a bit of background. This post is about Yahoo!

Honestly, I have fond memories of Yahoo…

Way back when I was just a young kid with my SUPER FAST 14.4 kbps modem. I still remember that it was the Practice Peripherals PM144MT II. Man, that thing had as steady of a connection that was possible back in the day. Anyways, back then, Yahoo, AltaVista, and Excite were the web portals everyone used. However, I think if you asked anyone at the time, Yahoo was the most common one everyone seemed to recommend/remember. It was easy to remember the name and the interface (for its time) was pretty easy to use.

Here was this web portal where I could just type in something and it would find stufffor me. This is amazing. It was the place to start anything, you felt like you could do anything and learn anything from this entry point. However, this was probably back in 1994 or so, so pretty much anything on the internet was amazing.

So what happened? I think there a ton of fancy analytics and people much smarter than me who could explain with statistics and fancy graphs.

However, I am a simple man and my simple explanation is:


It became irrelevant.

Let me try to explain, Yahoo was the newest, hottest singer who had a crazy string of hits for a few years… but then a newer, hotter singer came up and took the spotlight, and never left. This newer, hotter singer is/was Google. Simply put, Google’s technology is/was simply better. Their search technology was better and they kept innovating and branching out to get other markets. Google relentlessly continues to chase the perfection of everything.

Remember Mapquest? I used to use it ALL the time.

However, now I use Google Maps, simply because it’s better. Google keeps taking the things I use most and making them better and in their ecosystem. I have a yahoo email account and I will probably never get rid of it, unless they close it down. However, I also have a gmail account, and I keep using it more and more… because it’s better. 

Yahoo understood this, but instead of trying to go head to head with Google in terms of technology and refining their applications, they instead branched out into other things, too many other things. More so than that, Yahoo kept BUYING other companies for tech and talent instead of developing new stuff in house. The Yahoo! I used back in 1994 isn’t all that much different from the Yahoo! today. Maybe a better interface and more news, but the original idea of being a “web portal” is unchanged.

Nowadays, I don’t think there is even a need for a “web portal” anymore. I think many users either: 1) open their browser with google as their home page, 2) open their browser and go to google, or 3) open their browser with 3-5 pages already preset to load in different tabs (including google). See the trend here?

Adapt or Die.

Another bit of sad news was that Yahoo previously turned down an offer to be bought by Microsoft for $47.5 billion back in 2008. Once again, hindsight 20/20.

However, it’s not all bad news. Yahoo’s saving grace is that they bought stake in Alibaba which is basically a Chinese Amazon. Here’s the important part: The part(s) being sold for a total of $4.83 billion to Verizon does not include that stake, which is worth about $30 billion. The current owners of Yahoo will see that money in some way, shape, or form, although it is unclear exactly how much that will be.


Umm… ok… so why did Verizon buy Yahoo?

I think there are a few reasons. But first, it’s probably important to explain that Verizon already bought America Online (AOL) for $4.4 billion back in 2015. In case you didn’t know, America Online owns Huffington Post, TechCrunch, and Engadget so they do have an online media presence. America Online also has some advertising technology as well. By buying Yahoo, they are acquiring a large consumer base.

I’m not a gambler, but if I was, I’d bet that Verizon is going to try to push harder into the media market and try to steal a bit of Facebook’s and Google’s ad revenue. By last count, for every $1 spent on advertisements, 85 cents goes to Facebook and Google, with all the other players jumping for the last 15 cents. Reference

If Verizon wants to try to enter that market to face off against Facebook and Google, they will, at the very least, want a large consumer base (Yahoo) and some media clout and ad technology (AOL).


Oh, so Verizon is going to try to compete with Google and Facebook for advertising? Interesting.

I’m not Verizon, and I am sure they are much smarter than me.

However, I don’t think they will try to compete with Google and Facebook just yet. I think Verizon is trying to get all its chess pieces in place before they do anything rash. You don’t want to wake the sleeping dragons. Let this whole acquisition of Yahoo blow over. Let some new headline get everyone’s attention. Just hang out in the background sharpening your swords, and wait until the sleeping dragons are sound asleep again. Then maybe poke their toenails a bit while they’re asleep and see if you can bring down that 85 cents of every dollar to 80 cents of every dollar, carving out a bit of the market for yourself… then maybe 75 cents, then 70, then 65…

Hopefully they won’t notice until it’s too late and your market share is 30%…


What about Marissa Mayer?

Marissa Mayer, was supposed to be the savior of Yahoo. She would descend from Google, as its 20th employee, take the helm at Yahoo, right its course and sail off into the sunset.

Unfortunately, that didn’t happen.


However, you can’t blame Marissa Mayer. If a ship is going down, it doesn’t matter who the captain is.

She may be disappointed, but I don’t think she has any reason to be. I believe she will take this as a learning experience and move on to something else.

Personally, I think she would thrive in a smaller environment, such as a younger start-up tech company (<50 employees, and then having it grow into a billion dollar company under her watch). However, such a thing may not be worth it to her anymore. $219 million would almost certainly make me want take a vacation, or 2, or 200.

If she felt like still being in the loop, perhaps being an angel investor might be something that could interest her. Her financial backing, advising, and Rolodex could certainly help young start-ups succeed.


TL;DR

Hindsight is 20/20.

Don’t be another Friendster.

Stay Relevant. Adapt or Die.

Verizon may eventually be the third big player in the advertising market. Only time will tell.

 

-Sensei

Agree? Disagree? Questions, Comments and Suggestions are welcome.

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About Sensei

A young attending physician trying to navigate the mine field that is life after medical school…


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