Whether it’s Flickr, Delicious, MyBlogLog, or Upcoming, the post-purchase story is a similar one. Both sides talk about all the wonderful things they will do together. Then reality sets in. They get bogged down trying to overcome integration obstacles, endless meetings, and stifling bureaucracy. The products slow down or stop moving forward entirely. Once they hit the two-year mark and are free to leave, the founders take off. The sites are left to flounder or ride into the sunset. And customers are left holding the bag.
Flickr was acquired by Yahoo in March ‘05 for $35M
The Flickr announcement of the deal said, “We’ll be working with a bunch of people that Totally Get Flickr and want to preserve the community and the flavor of what is here. We’re going to grow and change, but we’re in it for the long haul, with the same management and same team.”
But in 2008, co-founders Caterina Fake and Stewart Butterfield both left the company. In 2009, many engineers from the service were laid off or left on their own.
Meanwhile, Facebook kept taking a growing share of photo traffic. Yahoo’s top executives barely mentioned Flickr publicly (and few of them actually have a public Flickr account). Decision-making at Flickr slowed because of bureaucracy. “We just missed some opportunities that we could have tried if we were independent and raised our own money,” Butterfield said. “Who knows what would have happened?” He said ideas to give more visibility to photos of breaking news and ideas for international expansion never got off the ground.
Ex-Flickr Architect Kellan Elliott-McCrea also blamed the Yahoo bureaucracy for slowing the Flickr team down. “Roughly 15% of any of the large projects they (we?) tackled over the last few years (internationalization, video, various growth strategies, etc) went into building the feature. 85% was spent dealing with Yahoo,” he said. According to a worklog he kept in 2008-2009, 18 meetings scheduled over a 9 month period discussed why Flickr’s API was poorly designed and when it’d be shut down and migrated to the YOS Web Services Standard. He said, “That kind of stuff slows you down. Especially when you’re being starved for resources.”
On the plus side, Yahoo says it’s still “absolutely committed” to Flickr. And Butterfield says that although Facebook is grabbing more mainstream photo sharers, Flickr continues to be the leader among photo enthusiasts.
Delicious was acquired by Yahoo in December ‘05 for $15-20M
Delicious’ Joshua Schachter announced the deal saying, “Together we’ll continue to improve how people discover, remember and share on the Internet, with a big emphasis on the power of community. We’re excited to be working with the Yahoo! Search team – they definitely get social systems and their potential to change the web.” Meanwhile, Yahoo promised “to give Delicious the resources, support, and room it needs to continue growing the service and community.”
But then the app seemed to go stagnant. Traffic dropped. Schachter claims he was stripped of responsibilities and employees within a year after acquisition. “My boss didn’t agree with my technical design or product direction,” said Schacter. “It was phrased more like ‘you should be the idea guy, we’ll find other people to run engineering for you;’ the guy he decided would be good was ultimately him. However, he mostly spent all his time on Answers and none on Delicious, so it was more like absentee landlordism.”
Schacter left Yahoo when his contract was up, in June of 2008. “I was largely sidelined by the decisions of my management,” he said after leaving. “It was an incredibly frustrating experience.”
Recently, a leaked slide revealed Yahoo might be planning to “sunset” the app. Schachter vented, “[Yahoo!] killed a lot of good startups, wasted a lot of engineers’ time, etc. Perhaps I spent too much time inside that particular sausage factory. I wish I had not sold it to them. The cash and freedom do not even come close; I would rather work on a big, popular product.”
MyBlogLog was acquired by Yahoo! in January ’07 for $10M
Upon acquisition, Chad Dickerson, senior director of Yahoo Developer Network, said, “We don’t plan on making any immediate changes to the MyBlogLog Web site, distribution or branding. We want to encourage and not disrupt the continued growth of the MyBlogLog community and foster the innovation that has already made MyBlogLog an indispensable part of [users’] lives.”
But ReadWriteWeb says Yahoo “let the service atrophy for years” before deciding to put it to rest. “To think that this service offered publishers and developers access to personal, demographic, taste and activity data of a website’s readers – and yet that offering has in the end gone no where – that’s downright crazy,” RWW’s Marshall Kirkpatrick wrote. “Imagine getting a feed of the LinkedIn job titles of all your recent readers and presenting that to a blog’s advertisers. Both analytically and financially, there was so much potential in MyBlogLog.”
In a comment there, co-founder Eric Marcoulier blamed the lack of executive support. He says, “So much of your company’s long term sucess when it’s acquired is based on the amount of executive juice it has. The only way it survives and flourishes is if you have an executive champion who promotes it internally. Shortly after we were acquired we were transfered away from our champion and under someone who didn’t feel the same way about MyBlogLog. In those circumstances, things simply slow down.
“For any startup that has earn outs, and this didn’t affect us, you’ve got to keep in mind that in 3 months you could be reorganized and the new guy could shut you down. The picture that gets painted early on when you have your product champions can change in a heartbeat and it’s important for entreprenuers to consider that when looking at the deal terms.” Elsewhere, Marcoulier added, “It’s sad to see the company closing down MyBlogLog, and I feel bad for all the customers and users.”
Upcoming was acquired by Yahoo! in October ‘05 for $1M
After the deal, co-founder Gordon Luk wrote, “We’re happy to become valued members of the Y! Local team, trusted to turn our part-time ideas and blue sky into a tangible, fully-featured events offering. The opportunity to join forces with Y! ultimately bespeaks all of our sincere interest in making a useful, interesting events substrate on which a flourishing, social community can naturally grow.”
But Luk and co-founder Andy Baio both left a few years later. Upon his exit, Baio warned against the flip mentality saying, “Acquisition should never be the goal. Build something people love, and build revenue to keep it sustainable. After that, the decision to sell is very personal.” He continued, “For Upcoming, going to Yahoo! was the best thing we could’ve done to improve the site and grow the community, so that made the decision easy. But if you’re only building something to flip it, you’ve already lost.”
In a talk at the June ‘08 PDX Web Innovators meeting, Baio offered this advice to startups: “Build for yourself. Build something you love. Build with smallest team possible. Bootstrap yourself.” During the presentation, he also looked back at his time at Yahoo. The good parts included “being surrounded by brilliant people” and platform technology that enabled things like geolocation open API. The not so great parts: the bureaucracy, integration obstacles, and complexity that slowed down the site.
Neil Kandalgaonkar, a former engineer at Upcoming, says acquired companies like Upcoming were “parcelled out to different parts of Yahoo where they were subordinate to the existing hierarchy and agenda.” He also argues there was a failure of vision. “The Yahoo model is to think of their sites as media properties with audiences, and bolder ideas like one social network encompassing them all was never a priority,” he said. “Even if top executives wanted to see revolutionary change at Yahoo, most of the organization was set up to do deals with Purina Puppy Chow and to ask if Flickr wanted to create a special site for dog photos.”
All totaled, Yahoo spent $61M on these four companies.
Below is a full list of Yahoo’s acquisitions since 2005. How many can be described as success stories?
Is this the future fate faced by most acquired tech companies? Is the cash worth it to founders who have to watch their creations slowly decline into obsolescence? Is freedom better than building and honing a big, popular product? When a company is bought, does it deserve acquisition congratulations or condolences? These are questions we’ll be looking at more closely (and talking with founders of acquired companies about) here at Signal vs. Noise soon. Stay tuned.
* All purchase prices are based on online media reports.
Exit Interview is a Signal vs. Noise series that examines what happens after companies get acquired.