What Can The Tech World Learn From Yahoo?

yahoo-bad-acquisitions

Imagine it is 1999. While I am sure you’d be shaking your booty to the Prince song of the same name as the year, there was a lot of booty shaking in the stock market and tech industry as well. Ruling the roost were the giants of Web 1.0: Amazon, Ebay, AOL, and Yahoo.

Yahoo stood out from the roster of early dominant Internet brands because it was a purely content play.¬†Positioning itself as a ‘portal’ the company sought to be the ‘start page’ of the Internet. For a while, it worked. Yahoo had the Yahoo directory and users used this technology to trawl through the huge amount of web pages available.

Interestingly enough, for a technology that wasn’t very scalable, it worked-until Google came along. Ever since the rise of Google, the renaissance of Apple, and the flowering of Web 2.0 and social networks and media, Yahoo has remained on the sidelines. A former high flyer stuck in neutral.

Far from setting trends, Yahoo, like Microsoft, is forced to play defense and catch up. Hardly a dignified role for a once highly respected online property that set the rules of the Internet game. Here are some key lessons the tech industry can learn from Yahoo.

Acquisitions Don’t Mean Success

Throughout its corporate life, Yahoo made a whole lot of acquisitions. A lot of them didn’t amount to much. In fact, being acquired by Yahoo seemed to ensure the acquired companies will stagnate then eventually die. Broadcast.com, founded by famed NBA impresario Mark Cuban, was acquired by Yahoo amidst market hopes for Yahoo domination of streamed media.

The grand vision didn’t become reality because Yahoo didn’t integrate this service quite deep enough nor did it seriously convert it into an independent revenue base. Cuban walked away with a huge pile of Yahoo stock which he had the good sense to cash in before the Dot Com crash torpedoed Yahoo shares.

If that white elephant purchase made your head spin, just check out Yahoo’s blunder with GeoCities. Yes, Geocities-the pioneer of free user-created web space. I have to admit, at the time, the value proposition Geocities offered was quite compelling. You have to remember that hosting was quite expensive back then and website making tools were not as easy, intuitive as now. Outsourcing was also relatively expensive. Yahoo paid billions (that’s with a capital B). Several years later, Yahoo pulled the plug on the last Geocities page.

What went wrong? Again, Yahoo’s failure to incorporate deeply. Moreover, Jerry Yang and company failed to produce solid ad value for Geocities despite the huge ad space inventory it offered. What a flame out. Finally, GoTo.Com pioneered the pay per click technology Google’s ad platforms use to generate billions every year. Yahoo bought the company out and it continues to languish to this day.

Focus On Depth Not Width

Another key lesson all these sad acquisitions teach is that if you want to have a truly competitive service line, you have to dig deep into what you already offer and broaden incrementally. You can’t acquire your way into innovation. You have to master your current offerings and listen to your user base on how to improve it.

You can’t just throw cash at the problem of slow growth by buying a fast-growing property, you might not have the expertise to run it.¬†Even if you keep the acquired companies’ personnel, they might not stick around.

Trailblazing companies need passion to maintain. It’s better to start a project in-house which aims to fix problems posed and identified by your main property’s current user base.

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