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.”
Upcoming announced a new look in December. However, it was also under the “Merge” column in that leaked slide from Yahoo.
Looking back
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.
Raymond Brigleb
on 22 Feb 11So true. It’s sad. A success story coming out of these kinds of acquisitions is altogether too rare.
JD
on 22 Feb 11This is really sad. I’m still a Flickr Pro user, but this post is motivating me to look at other options.
Griffin Caprio
on 22 Feb 11Rivals.com is a decent success. Might help that it’s decidedly not a tech company. It’s also more of a traditional media company.
JJG
on 22 Feb 11@Matt
Honestly, I don’t feel bad for the companies who were acquired.
3 out of 4 of those companies listed above, all but Flickr, did not have revenue models.
Getting a multi-million pay day from Yahoo on a business that wasn’t even a “business” (i.e. making money) doesn’t seem all that bad to me.
Even if those companies had not been acquired, they probably would have shut down regardless of Yahoo’s acquisition because a business without revenue will in evidentially shut down.
Stefan Seiz
on 22 Feb 11What a great article, Matt! Looking very much forward to this “series”.
More
on 22 Feb 11JJG hits the nail here.
Gerry Power
on 22 Feb 11Google’s acquisition of Blogger is my favourite neglect story – it was an incredibly advanced product at the time of acquisition. 10 years on, it’s basically unchanged, and well, rather dated. Evan needed to sell, so if Google didn’t buy it, it likely would have closed, so at least it survived.
stacy
on 22 Feb 11The underlying assumption of these “don’t sell” posts is that the company will last and be profitable for as long as the founders want. Utter nonsense.
Businesses have a life-cycle that no one can predict, other than the shape of the curve. So I say make your money when you can (sellout). Then you can always start “the next best app”, probably 100% on your own terms.
It’s only a matter of time before the shine comes off of 37s or any other business. To think otherwise reflects a lack of experience and history.
Robert
on 22 Feb 11This is unfortunate. The founders of these companies (whether they are profitable or not) are all brilliant risk takers who did the world a service by providing something awesome for us and asking little in return.
It’s a shame that they start to die off almost immediately after acquisition. Just imagine some of the cool applications some of these products could have evolved into if they were given room to grow.
John Campbell
on 22 Feb 11Many of these businesses were never really viable. Consider digg.com. They never sold out and kept working on the product, but the end result is no better.
Michael Pinto
on 22 Feb 11Your article is more of an indication of just how bad the management team is at Yahoo! rather than if being acquired is a bad idea. If you look at Apple’s acquisition of NeXT or Facebook’s acquisition of FriendFeed I think you’ll see a very different story. There are also some companies that flounder when they don’t get acquired like Digg. It all comes down to people in the end and how smart the management is about what is going down.
Ryan Cannon
on 22 Feb 11I wonder what it is that made YouTube such a success, seeing as it seems to have both been built to flip and to have flourished since its acquisition.
(I base my assessment of their having been built-to-flip based on my memory of e-mails published as evidence in some copyright lawsuits against them, although the exact attribution and some light Googling fails me.)
JF
on 22 Feb 11The underlying assumption of these “don’t sell” posts is that the company will last and be profitable for as long as the founders want. Utter nonsense.
Businesses have a life-cycle that no one can predict, other than the shape of the curve. So I say make your money when you can (sellout). Then you can always start “the next best app”, probably 100% on your own terms.
It’s only a matter of time before the shine comes off of 37s or any other business. To think otherwise reflects a lack of experience and history.
I mostly agree with you. It’s all a matter of time.
I do think that a lack of a business model drives people to have no choice but to sell. They aren’t doing it because they want to start the next thing (many of them talk about how excited they are to be at the new company improving their existing product), they do it because they have no choice. And that’s when they find themselves locked into an environment that makes them consistently unhappy. That unhappiness will too come to and end, but was it worth it? That’s a fair question to ask.
The great thing about having a solid model, and being profitable, and not having to generate investor-grade returns, is that you have a better chance at owning your own schedule. Certainly your schedule can be altered (or destroyed) by external factors, but the chances are in your favor if you’ve put yourself in a position that you want instead of being forced into the decision you have to make.
Really
on 22 Feb 11Have Google or Microsoft done any better when it comes to integrating an acquired company? That doesn’t seem to be the case.
Perhaps this applies to a relatively agile small company being acquired by any behemoth.
ItsNotEasyBeingPurple
on 22 Feb 11This article resonates with me. I’ve been there and seen it all happen, up close n personal. I hung on for a year and watched everything we created unravel in spectacular stye.
What’s more difficult to sit by and watch, is the value being eroded and the talented people being shafted by the Y! HR hatchet squad as the revenue begins to dive.
Yahoo! execs seem to forget why they buy these companies. The attitude is almost, “thanks guys, we’ll take it from here”.
Yahoo! needs to learn to create innovative stuff in house if they are to survive. Their DNA suggests that they cannot buy and build on outside innovation.
A Reader
on 22 Feb 11The stake in Alibaba and the RightMedia franchise are two of the most valuable assets Yahoo has. That they haven’t focused much attention on growing tiny companies they acquired that had minimal revenues at acquisition doesn’t prove anything. How much you like a service as a consumer isn’t always indicative of how good a business it is.
What it comes down to is that entrepreneurs can build whatever kind of business fits them and the opportunity best. Not every company needs significant investment capital, and not every company that can get it actually wants it. For every local sandwich shop that morphs into Subway, there are thousands that don’t.
I don’t understand why 37Signals is so determined to convince the world that raising outside capital is bad and remaining independent is good. Yes, there are plenty of successful businesses that never raised a dime. So what? If you don’t want to take venture capital, don’t. Why keep pressing the point?
Anonymous Coward
on 22 Feb 11Yes, there are plenty of successful businesses that never raised a dime. So what? If you don’t want to take venture capital, don’t. Why keep pressing the point?
Pressing the counter-point.
Pay attention to the rest of the tech media and all you read about are how much this company took in this round, how much these guys took in that round, who’s leading this round, how much that round was worth.
SvN is attempting to provide a small counterpoint against the large trend of talking up VC, rounds, angels, and investments.
John Allspaw
on 22 Feb 11Some notes about Flickr:
...and yet, between 2005-2008, Flickr went from 25th most popular Yahoo property to 5th, the largest group of geo-tagged anything on the planet, translated to 7 languages, and became one of the most-used open APIs in the world. We didn’t do too bad. :)
I’d also doubt that anyone who was a part of those acquisitions listed above would say that Yahoo treated them all equally (nor were feature-driven by the same part(s) of the 12-14000-person company), so comparisons can’t actually be made, because there’s not a single entity (really) that can screw up each acquisition.
Note that Yahoo Mail was originally an acquisition, and had (still might have) the largest market share of web mail. In fact, most of Yahoo’s successful properties were either acquisitions or acquisition-augmented groups.
So, Yahoo doesn’t have any sort of monopoly on fucking up (or increasing the value of) acquisitions. I’d be interested in seeing a similar list for Google, Microsoft, or Amazon.
Also: Kellan’s quote was answering a different question than what you’re suggesting he answered. :)
Rex Hammock
on 22 Feb 11The key to the success of Yahoo’s acquisition of Rivals.com is, in my opinion, an exception that proves the rule. Most of these failed acquisitions were first created by people outside Silicon Valley who had a passion for what they were doing, free from the distraction and mis-guided focus that often takes place there.
Once absorbed into the corporate bowels of Yahoo, the benefit of being run by people in Canada, Florida, etc., was lost.
Rivals.com, on the other hand, is still run in Nashville, Tennessee, where types of sports they cover are more than a game—they’re a religion. In a million years, an Yahooligan executive would never imagine that people would pay a premium to learn what 8th grade, junior high football player may one day be recruited by the University of Tennessee. But the people who work at and run Rivals grew up and live in that kind of world. (I grew up and live in that world, too, but wait until players are about in the 11th grade to start tracking such things.)
Bottomline: Rivals.com was already profitable and had a business model that was decidedly not 2.0, like the other acquisitions you list in your post. Someone at Yahoo had the unusual intelligence to leave them in Nashville doing what they were doing.
Hop
on 23 Feb 11You glanced over a small detail. Yahoo’s investment in Alibaba gave them ~40% ownership in the umbrella company. Alibaba’s marketcap is now about $78 billion. Thats a 31x return on their $1B investment.
If Yahoo wrote off the 4 you highlighted, that would be a rounding error in aggregate. Judged solely on the ROI of their acquisitions over the past 6 years, they would be fucking all stars.
Hopefully Yahoo has learned its better to invest a partial % and let the founders, like Jack Ma, keep doing what they do best. And kudos to Yahoo founder Jerry Yang for making the sage Alibaba investment before he was shown the door.
DHH
on 23 Feb 11Hop, to me that just goes further to prove the point. Yahoo blows it when they take over companies through acquisitions. The one time where they just put some money in and let the company stand on its own, they do well. These are completely compatible story lines.
Jess Pugsley
on 23 Feb 11This is the exact hope of most of these entrepreneurs. I can’t tell you how many people approach our company every week with no revenue model whatsoever. All with starry eyed hopes of being bought by Google. They’re all preaching incorporate and you’re instantly valued at a $1M story.
It’s very very sad.
New trend now – everyone wants to build a variant of Groupon!! Ugh!
As for Flickr – regardless of what’s happened to the company after the acquisition, I quite like the new product and the way they’re innovating with new solutions like their new apps on Windows 7 and Windows Phone 7.
Jon Pynn
on 23 Feb 11As a worker in a 30K employee global “sausage factory” company. I will say this. Yahoo is no better or worse than anyone other large company at this type of thing. Somehow the preception of value becomes real in a large organization. The perception of value is based on what the upper levels think is really important (or in line with thier agenda).
The short point of this little story is that if you like your creation, you probably shouldn’t let anyone get their hands on it.
yohami
on 23 Feb 11and to ask if Flickr wanted to create a special site for dog photos.
Joe Pantuso
on 23 Feb 11I faced these sorts of challenges when my startup was acquired by McAfee in 2001. We knew at the time that McAfee had a very bad track record when it came to acquisitions, often losing key team members rapidly, and frittering away the value of the acquired technology at the same time.
It is incumbent upon the acquired company to be proactive.
To that end I was lucky enough to be able to reach out to others that had been acquired (and subsequently left) prior to us. With that knowledge in hand I had specific terms written into the agreement that helped keep the team intact and ensured that the technology was integrated very quickly.
Even so we all ended up leaving out of boredom a few years later, acquiring company culture is never startup culture.
Tim Marsh
on 23 Feb 11That is an astounding amount of money. It never ceases to me amaze me how well these high paid execs do at wasting money (seriously). I’m in a telco where we just blew 34M (that’s $AUD) on a network no customers want. Shocking.
Anyway, something Jason F said (I think in one of his Inc articles, maybe the video on Innovation: http://www.inc.com/inctv/2010/05/live-jason-fried-innovation.html) where he said flipping is fine (or something to that effect), but, it didn’t make sense to him because, what if this was your only good idea?
I agree with that sentiment. I’m speccing up a SaaS system to be dev’d for WWW, mobile, native mobile app that has huge scope and I think, would I flip this for something north of a 1M, 2M?
I suppose it all depends on what else you have going on (I personally have two other projects to do with coffee and cycling, that I’d struggle to sell, I love them too much and they don’t have to make much, that’s totally ok) doesn’t it.
Looking at some of the Yahoo acquisitions above, and looking at JJGs comments, you’d have to say that in some cases, taking the cash and running makes sense.
What next, though? For some serial entrepreneurs and smart guys, that’s cool. For some, taking the cash and running and spending the days sipping mojitos and surfing or cycling the French countryside is enough.
All depends on what you want.
Jason F’s points about building something simple and useful, reasonates. That’s the way to get users, make money and THEN you can decide whether to keep building, or flip.
Some of the hype around new ventures these days is pretty, well, hypey. Very dot com.
Good post once again.
simple
on 23 Feb 11Good Points. Yahoo acquisition of Alibaba, however is a good one. This investment put yahoo on china. The next thing (as they call it, in the magazine.
Anonymous Coward
on 23 Feb 11Yahoo acquisition of Alibaba, however is a good one.
Yahoo didn’t acquire Alibaba.
Brennan
on 23 Feb 11I don’t think most founders care what happens to their companies once Yahoo acquires them because they usually overpay by 3-4x. I’d say it’s a foregone conclusion that if you sell to Yahoo you might as well forget your creation having a future.
bobz
on 23 Feb 11Yahoo, can barely run itself. But Im sure it does give a few internal product managers a good feeling to be able to try their hand and something with someone else’s goods, and when its wrecked just forget it ever happened.
Integrating with Yahoo, is a fucking joke. They spend 70 percent of their time maintaining (read “dicking with”) internal deployment and server management systems that really dont matter, Im sure they looked cool 10 years ago.
So yeah, if you sell to them, you will get a nice payout, and then you can watch the wholesale destruction of whatever it is you thought was important, at the hands of people who are more or less completely incompetent idiots.
That’s what selling out is anyway right?
Nick Campbell
on 23 Feb 11@Stacy
Actually, history is littered with companies that survive the business cycle of a product by adapting their companies to change with/lead the market direction. Nokia started as a lumber mill and moved into pioneering cellular phones after shifting into rubber and tires. They are struggling now, but that’s a management problem and not the life cycle of a business.
One of the big things you learn in finance and economics is that firms don’t adhere to the principles of products so they don’t have life-cycles necessarily. Management does, but if you train your managers to lead properly and with your values the firm will maintain through business cycles with relative ease.
Espen Antonsen
on 23 Feb 11If any of you Flickr-users would like to host your own photo gallery then check out Balder, an open-source Rails-app I created. Easy setup with Heroku and S3-storage.
Anonymous
on 23 Feb 11Hats off to the Flicker engineering team. Top notch engineers with a can-do attitude.
Former Yahoo
Eric Marcoullier
on 23 Feb 11Every time I comment on one of these “let’s call Yahoo a fuck-up” articles I just entangle myself that much more, but I can’t help myself. I’m like a dinosaur drawn to that sweet, sweet tar pit.
As people have pointed out in the comments here and elsewhere, those of us who sold to Yahoo got paid. Some also suggest that it’s gauche to get paid and then complain about the company that wrote the check. 1) Fucking bite me. 2) There’s a difference between kicking the company and engaging in a thoughtful postmortem in an effort to help steer other acquirers and acquirees through the difficult post-deal waters. I’ll fully admit that three years ago I was more former; these days I try to do the latter.
One of the common refrains here and elsewhere is that we were lucky to get acquired because we were going to go bankrupt / flame out / commit ritual suicide / etc anyway. A couple of ways to respond: 1) Every year people say that Twitter is stupid for not taking an acquisition offer (although that number does get smaller over time). No one will ever know what Flickr or Delicious or any of the rest of us could have done if we’d stayed independent. 2) None of us were in danger of going bankrupt any time soon. We were all funded, or in the case of MyBlogLog, less than 24 hours from closing and having $2M wired to our bank account. None of our “sell-outs” were done in a panic.
So, the $64k question is why we actually sold out. I won’t speak for anyone else but MyBlogLog, here. We were promised access to Yahoo’s 500M users and the thought of that sort of acceleration simply obliterated any other option from our thinking. Imagine it—500M MyBlogLog users showing up on the sites they visit, discovering new content from people like themselves, signing in with YID. Basically, we realized we had the ability to create Facebook Connect when Facebook still only had 15M users.
Unfortunately, Yahoo was (is) a large and complex place made up of a lot of silos and a lot of people jockeying for control. We had some incredible champions inside the company but we also had some people who were horrified by what MyBlogLog did and wanted to do next. Some were protecting their own fiefdoms, some were concerned about the legal implications, some we just didn’t get along with.
So, by all means, kick Yahoo when they’re down, but keep in mind that their track record really isn’t any worse than most other companies. Facebook gets a pass because they mostly do talent acquisitions and shutter startups upon closing the deal. I think Google has begun doing that more and more. Maybe Yahoo will try that approach too. And keep in mind that two years ago we were all mocking AOL mercilessly and these days they’re actually a pretty attractive acquirer. All it takes is a couple of good quarters—everyone’s memories are short in this town.
And Matt, sorry I didn’t respond to your email. I am trying harder these days to steer clear of commenting on my Yahoo days, but I just can’t seem to get free all the way. Whatchagonnado?
Joe Sheehan
on 23 Feb 11Might I suggest looking to possible success stories too?
Not that I’m disagreeing with you guys here. But when you talk about “tech” companies, I’m often thinking you’re only talking about software companies that usually provide a service. Granted, that’s pretty much your niche. But what about looking outside of your niche?
Sure, Yahoo is a lousy integrator of smaller companies. OK, I buy that. What about IBM? Aren’t Rational’s products still doing well since IBM bought them? Did the Lookout guys run away screaming after Microsoft bought them? There must be examples of successful M+A of smaller companies by larger ones. Perhaps those stories would be just as valuable to this blog as the critical ones (which, frankly, are starting to sound more like whining rants).
Sarat
on 23 Feb 11It’s really pity that the strategies at Yahoo isn’t really working well. The worst thing I ever had seen is Carol Bartz blaming everything else is at company. I’m not sure how it’s gonna affect the motive of the developers working there. Google also had lot of acquisition and failed business. But those never affected their main business.
I feel like Yahoo is more concentrated on generating money rather than creating something good for user and let the money follow later.
Now the best thing Yahoo can is to merge with some technically competitive company Like Google or Microsoft to make the products better.
I’m almost out of Yahoo services. I’m not really using Yahoo Mail for Years, Using Google talk and facebook chat to chat with my friends. The best thing Google had done with Orkut is to allowed Google Talk to chat with buddies which made me a core user of it. The same things are happening with facebook. Now I’m more in to facebook chat. So soon we may call the death of Yahoo Messenger. It really doesn’t matter how hard they try. But maintaining the face of company and internal customers is happy about the running business successfully.
PlusFront
on 23 Feb 11sausage factory is suit for Yahoo
Steven James
on 23 Feb 11Matt, a few weeks ago, you mentioned a Steve Jobs sentiment about tech startups with an exit strategy (I think I see a theme developing here, genius that I am)... http://37signals.com/svn/posts/2744-in-a-conversation-years-ago-steve-jobs Yahoo may have mismanaged these projects post-purchase, but perhaps some were developed by people with a quick “exit strategy”? Maybe Yahoo’s not the only devil in the piece.
Sachin
on 23 Feb 11although yahoo is different from Nokia ..i think it will meet the same fate as Nokia..no innovation left
Ger
on 23 Feb 11The really really sad thing is that there are thousands of people using this websites, checking their profile first thing in the morning, being emotionally involved and in loved and they have no other choice but to watch, helplessly and in utter astonishment, while the site sinks slowly down.
“The perception of value is based on what the upper levels think is really important (or in line with their agenda).” +1
Mark
on 23 Feb 11It’ll be interesting to watch how 37Signals handles acquisitions in the years to come.
EDL
on 23 Feb 11When you’re young and rich the world and it’s options look a bit different to you vs the avg Joe. I say if someone offers you 20M + you should take it 99% of the time. If you’re actually smart vs lucky, you can go out and do it again…...if it turns out that you were just lucky, at least your rich.
It’s not all about money, but once you have a lot of money, it’s even easier to say “it’s not all about the money”
Rick
on 23 Feb 11I believe Flickr was only (only?) $11 million.
FSN
on 23 Feb 11Concerned about media freedom and diversity? The National Conference for Media Reform will host panels that address these topics. Check it out! http://conference.freepress.net/
Making it
on 23 Feb 11I bought “How to Build a Business and Sell It for Millions”: http://www.amazon.com/How-Build-Business-Sell-Millions/dp/0312383118
The author stresses ways to ensure your business is a well-oiled operation that continues running smoothly even after the founders sell and/or leave the company.
Mark Harai
on 23 Feb 11Interesting facts you bring to light here Matt…
It must bring in to question two things:
1. Is acquiring small tech companies by large ones a solid strategy to build market value over the long term?
2. An even more profound one; is taking a multi-million dollar pay day worth seeing your vision and dream die?
I think we’re seeing the answer to that question right before our eyes.
rick
on 23 Feb 11It really makes me angry about what happened to Delicious. I use it all the time—still.
But Feedburner kills me. What an awesome service that Dick and co built. Purchased by Google for $100m and now no one works on it—just runs stagnant inside of Google.
Amber
on 23 Feb 11I know Yahoo doesn’t own Bing, but their partnership seems to be going pretty well. Or am I wrong?
Wyrd
on 23 Feb 11It’s all a tale of woe. Sure you can generalize that being bought by Yahoo, in its current state and status, is a Bad Idea. But you can’t necessarily generalize that being bought by a big company is always bad.
What’s happened here is, for a long time, Yahoo has been struggling and for some reason it’s continued to believe that the way to stop struggling and stay competitive is to keep buying more and more little startups. It’s like trying to gain the power of creativity by eating creative people’s brains.
But that doesn’t mean that being bought by a bigger company is always the same as having your brain eaten by a zombie. Of course it is the case that being bought always carries risk—just as not being bought carries a different risk. If you are a small start-up with a Big Idea gaining in market share and mind share, you’ve gotta ask yourself which risk you feel the most comfortable with and make your choice.
Oh, and don’t let Yahoo buy you anytime soon. :-)
— Furry cows moo and decompress.
ricky
on 23 Feb 11It is a true shame that Yahoo! has acted in self self destructive behavior with their abusive takeover and destroy attitude. Than Jerry Yang not accepting the buyout offer from Microsoft and well info graphics did a rise and fall of Yahoo to explain it all :(
MichaelY
on 23 Feb 11Have Google or Microsoft done any better when it comes to integrating an acquired company?
MichaelY
on 23 Feb 11Wow – my comment was truncated. Thanks.
Mark
on 23 Feb 11It’s interesting to think of a parallel universe where Yahoo’s acquisition bid for Facebook in 2006 actually succeeds. Makes you wonder what they would have done with it.
insight
on 23 Feb 11I worry that this will happen to Cappuccino – motorola doesn’t have a great track record in this regard either… :-/
Joe Stevens
on 23 Feb 11Yahoo’s engineers are awesome, I love their development tools like YQL. However their management is disappointing and consistently seems to miss the boat on things when the engineering talent they have at their disposal would allow them to drive it.
Stacy
on 23 Feb 11That unhappiness will too come to and end, but was it worth it? That’s a fair question to ask.
Yes, here’s why.
Basically we are wired to be entrepreneurs throughout our life. Take chances. See things others don’t. Get our product launch or exit timing wrong, etc. You could easily hit 60 years old and have no cash in the bank with this lifestyle. So when times are great, and people want your company, you NEED to pocket some cash. Understand that. You get the most cash when someone WANTS to buy you, not when you’re “ready” to sell for whatever reason. You may not know it at the time, but this $10M you pocket may be the ONLY “financial” success EVER as an entrepreneur.
So yes, it’s worth it on a very personal level, whether forced by VC or otherwise taking a “good/great” offer for your company. It’s hard as hell to live off the 15 minutes of fame you got some 20 years ago! YMMV :)
Ricky Trickartt
on 23 Feb 11You can add Oddpost to the list of services acquired and subsequently killed by Yahoo :(
Stacy
on 23 Feb 11@Nick Management does, but if you train your managers to lead properly and with your values the firm will maintain through business cycles with relative ease.
I agree mostly – dreams, visions, leadership, everything done properly, does come true sometimes. I don’t agree with the “relative ease” part though.
But in the context of first-time entrepreneurs who find themselves with a buyout/buy-in offer greater than they have ever known before, that will enable them to start other companies, raise a family AND be an entrepreneur; I would simply say a bird in-hand is worth two in the bush.
Go for the cash FIRST, then if you have the chops to extend business cycles, weather external events, and so on like you suggest, you’ll have a monetary safety net while pursuing greatness.
Dr Kersten
on 23 Feb 11This link sums up the problem nicely.
Zero Estar
on 24 Feb 11This is just an example of capitalism. It’s a way that people make money. You build something and decide to either put your own business plan in place and sell those widgets or you decide the business plan is to make yourself attractive and sell to someone else.
The guilt of what cool mystery widget could have been, falls directly on the shoulders of the business owner who sells the company or idea. It has nothing to do with the one buying it.
Just imagine what I could have done if I just would have stayed in college and gone all of the way through to collect my MBA!
Dang-it! Dang my stomach, bones and family. If I just didn’t need to quit and make money for feeding, keeping warm and provisioning a family, the world could have had some really cool synopsis, thesis or white papers square in the middle of their computer screens to read!
Just think of how much greater the world would be…how many more cool ideas would be out there…if people would just accept themselves as the issues and spend more time thinking of constructive things.
In the end though, mostly every cool idea that has hit the computer world has been replaced. It is just a matter of time for all of the companies that you today see as huge, profitable and full of your imaginative ideas, to shut their own doors and be swallowed up or replaced by something else.
About the only thing we lack in historical evidence that has never been replaced is: sun-air-water
Regards, Zero E. (My first computer program was written on a tape drive read by a Commodore Vic 20.)
John Percy
on 24 Feb 11Maven Networks purchased in Feb 2008 for $160M is another example. Within 6 months the customer and technology was being shut down and in December last year the whole office and all Maven employees were layed off.
wdr1
on 24 Feb 11Did you really leave off Yahoo’s biggest acquisition, Overture?
http://en.wikipedia.org/wiki/Yahoo!_Search_Marketing
Nicolas
on 24 Feb 11I was already thinking of stopping my Flickr pro subscription when it’s over. Now I’m sure!
Myst
on 24 Feb 11This article is misleading crap. Just another person jumping on the flame Yahoo train.
You could pick out every global company and they would not show better results regarding aquiring companies.
All of them made great profit selling to yahoo. And we all can´t proove that they would have done better without yahoo.
Anonymous Coward
on 24 Feb 11Oh. Of course this article is from AllThingsDigital. A company aquired threw AOL!
Say hi to Micheal Arrington!
Mike Pulsifer
on 24 Feb 11As an amateur photographer, there’s really no substitute for Flickr when it comes to exposure, social features, the ability to organize my work, and frankly, trust (in the provider). I also put my work on SmugMug, but until they become as vibrant a social network as Flickr or have social tools that are as good (I’m looking at you Don MacAskill), then I’ll have subscriptions on both sites.
Stephen van Egmond
on 24 Feb 11Lest we forget, this is from the same thought-collective that gave Mint.com shit for selling to Intuit.
As a technical founder who is aiming for a big payday, I can’t stomach listening to other founders who take an exit and then complain about the outcome.
It’s as if they’re saying, if Yahoo comes knocking, don’t take their money. Continue eating ramen and chasing your programmers and crossing your fingers that your servers don’t fall over and trying to figure out how to turn all these electrons into money.
To hell with that. Their money is as green as anyone else’s.
The real story is, Yahoo has so many stories about being a place companies go to die, and still hasn’t been reverse-takeover’ed by a mining company looking for a stock symbol. Far better companies have been wiped out for far less.
It’s a miracle!
Sanitation Man
on 24 Feb 11JJG nails it hard. By the 1990s it was obvious: creating and selling a potentially-profitable business technology was the real money maker. Less dent in the universe, more enhancement of founders’ wallets. Risking inflammation here: what techniques do founders use to hustle their workers and the buyer?
Mandar Shinde
on 24 Feb 11Weird! But please tell me some successful M&A stories elsewhere and then the average success metric (if there is such a thing!)
Surprised Overture or Right Media or Alibaba not being discussed here.
M&A is like investment banking, the one success pays big over the 20 failures.
Serendipity
on 24 Feb 11If only Microsoft would buy Yahoo. Time wounds all heels
Anonymous Coward
on 24 Feb 11Alibaba not being discussed here
For about the 3rd time… Yahoo did not acquire Alibaba. They invested in Alibaba. Huge difference.
KR
on 24 Feb 11Geocities RIP
Charles Frith
on 25 Feb 11Fink about the money. Great post :)
Paul Montwill
on 25 Feb 11Did anybody asked in Yahoo – what is the estimated ROI on this $13,3B. Did they write any business plan? One page at least… unbelievable. Who allowed for that?
How can you spend sooooo much money and get away with it?
Ankit Saini
on 25 Feb 11Sad news to me… I use mybloglog service and happy with them but now i have to look for another alternative.. Thanks
CReidS
on 26 Feb 11It seems like the tech companies DO have a hard time integrating acquisitions—their big companies have a culture that is stifling and competitive in the wrong ways.
Plenty of companies in the broader economy live by acquisitions: GE, IBM, and so on. These folks, suits they may be, sink billions into their leadership development programs and develop strong, company wide plans.
Laura Moncur
on 26 Feb 11I wrote a fiction novel about this very phenomenon. It was a weekly story that started in 2007 and ended in 2009. I actually wrote it after meeting Andy Baio, Gordon Luk, and Dennis Crowley. I saw such pain in their eyes when they talked about Yahoo and Google that the character of Random McCain immediately popped into my mind.
It’s all online to read. The first episode is here:
http://www.merriton.us/2007/05/23/that-thats-a-shed/
Sam Beal
on 26 Feb 11You left out Maven – $160M and it was shutdown one year later.
Marc Gayle
on 01 Mar 11Matt, Wonderful article and quite frankly a quite damning indictment on the state of Yahoo and their ability to do anything good with the companies they acquire.
However, I think you guys are misusing the data. Sure, there are many examples of companies that when acquired by larger companies are horrible integrations. But there are many examples of successful ones.
See YouTube, DoubleClick, A4 (or the company that made Apple’s A4 processor that goes inside the iPad, etc.), Android, Google Maps, Zappos, etc.
I am not saying that acquisitions always work – but just like any investment, people make dumb investment decisions all the time. I am sure you can list a number of people that lost their shirt in some equities over the last 50 years, but does that mean that investing in the stock market is a bad idea ?
I think it is disingenuous to argue from that vantage point using cherry-picked data.
P.S. I am generally referring to the fact, that even though you don’t spell it out here David and Jason constantly bash VC investing and M&A activity. So that is my background for this comment.
This discussion is closed.