How Yahoo Blew It

You know this story is going to be entertaining when it kicks off with a hotshot executive, brought in to “save” the company. It’s almost textbook, he comes in as a visionary, wants to take bold new initiatives (turn Yahoo into a media company), and makes some “game changing” acquisitions.

Yahoo baffles me – I still remember back in the late 90s/early 2000s when I would use Yahoo all the time. They were my primary search engine. Then one day I started seeing the little “powered by Google” icon appear to the bottom right of the search box. It was like free advertising for the company that ended up destroying them. From that day forward, I used Google. I asked myself why would I use a 3rd party search service when I can go to the source. Yahoo had obviously forgotten what got them to where they were. They were a search company first, but then Google beat them at their own game.

The story of Yahoo’s failures over the past decade are littered with visionary leaders and hot acquisitions, including Flickr and Delicious. It was the place for Silicon Valley startups to be sold to (much like Google and Facebook today). The thing is, it’s this perpetual failure cycle. Those startups sold out because they didn’t have a viable business model to operate on their own. Yahoo bought them hoping to “save” the company (on a broken business model).

It’s almost like they forgot why they were doing what they did. It feels like they sent out their analysts to do research on “hot” web trends and came up with the opportunity to grow as a media company. Yahoo isn’t a media company though – people always went there for search.

It didn’t help that Terry Semel didn’t seem to know anything about technology. He was a movie industry guy. I’m a huge proponent of bringing in people from completely different industries. They can bring a fresh perspective – but he didn’t focus on asking the right questions. He focused on making deals.

On Quora recently, one of the original Flickr architects dove into why Flickr missed out on the mobile photo opportunity that has been seized upon by Instagram and others:

Additionally we fell into the trap of thinking like an incumbent, we spent 6 months off and on talking to Twitter about preferred product placement rather then just shipping the integration we had built.

We also spent years debating whether or not to build iPhone apps/iPhone optimized sites or bet on a HTML5/multi-device strategy. And work like the award winning iPhone optimized Flickr mobile site was viewed ambivalently even within the team as it happened largely as a skunk works and was very much hard coded around iPhone’s limitations.

Lastly, Marco Boerries was the without a doubt one of the most viciously political, and disliked Yahoo! execs and he reigned for 4 years over the Yahoo “Connected Life” team which had universal control over all native mobile experiences within Yahoo.  Several Flickr internal attempts to build and ship native mobile experiences (going back to 2006) were squashed relentlessly.

Real artists ship. Thinking like an incumbent is the first step to failure and irrelevance, especially in technology where there are new startups every day chomping at the bit to steal some market share. This isn’t an industry that requires heavy capital investment to get into. Bloat and bureaucracy will kill a company like Yahoo, and from the outside that seems like where they are today – losing talent and without a vision of where to go with a grossly overpaid CEO.

It truly is a shame, but the failure cycle of tech companies has accelerated dramatically. Yahoo seems to have fallen into a downward cycle that they won’t be able to get out of.

December 31, 2010