It’s no more news that American mobile company giant Verizon has acquire almost business core of one of Silicon Valley pioneer company Yahoo! for a chump prize of $4.83billion.
The latest decline of Yahoo in the new internet era has led to several thinkers and tech geek on what went wrong for the foremost tech company that was to be acquired by Microsoft for whooping prize of $44 billion in 2008.
Few days ago, Yahoo announced that it will sell its core assets to Verizon for a mere $4.8 billion. This is only slightly more than Verizon paid for AOL — another washed up dot-com-era company — last year. Yahoo’s market capitalization reached $125 billion in 2000. Over the next 16 years, it steadily tumbled — mostly due to inaction and missed opportunities.
You could fill an entire MBA course with case studies of all the strategic blunders Yahoo has made. I’ll save you some student debt and give you the skinny right here, in just 5 minutes.
Mistake #1: Yahoo confused being in the right place — at the right time — with being smart.
If Yahoo had launched a year or two later, they probably would have been irrelevant. They rose to dominance in large part by benefitting from what Y-Combinator cofounder Paul Graham — who worked there — called a “de facto ponzi scheme”: “Investors were excited about the Internet. One reason they were excited was Yahoo’s revenue growth. So they invested in new Internet startups. The startups then used the money to buy ads on Yahoo to get traffic. Which caused yet more revenue growth for Yahoo, and further convinced investors the Internet was worth investing in.”
The growing revenues from this runaway feedback loop tricked Yahoo’s management into thinking that they were smart, when really they were just lucky.
As the dominant web portal, money came easy for Yahoo. They never bothered to build a strong engineering culture, like Facebook and Google did. After all, why should Yahoo invest in its underlying technology when they could just hire more sales people to sell banner ads?
Yahoo’s initial success gave them the hubris they needed to start acquiring other companies, thinking that they could run those companies better than the companies could run themselves.
Here are some companies that Yahoo bought:
Geocities ($3.6 billion)
Tumblr ($1.1 billion)
Mark Cuban’s Broadcast.com ($5.7 billion)
