The Diverging Exit Strategies of Dollar Shave Club & Yahoo: A Study Of Marketing & Leadership
The biggest business stories of the past two weeks were the $1 billion dollar acquisition of the Dollar Shave Club by CPG conglomerate Unilever and the $5 billion dollar purchase of Yahoo by Verizon Communication. Simply looking at the figures suggests Yahoo as the bigger winner here but like most things, the numbers only tell half the story and the details explains why the headlines read more like a funeral than a celebration.
At its pinnacle in 2000, Yahoo was worth an estimated $125 billion and was one of the most heavily trafficked sites online. Through a series of head scratching investments, an inability to integrate some of their acquisitions technologies and teams and most importantly the revenue explosion within its biggest rival Google through its success with its AdWords product, Yahoo lost its way and its valuation continued to decline. Yahoo actually attempted to scoop up its biggest rival in 2002 but failed to do so because they didn’t believe Google was worth more than the $3 billion dollar initial offer. They were.
So yes, Yahoo was once “worth” a lot more than it was purchased for on Monday but that is not why it failed in many areas that Dollar Shave Club succeeded. In this excellent write up from a VC of one of Dollar Shave Club’s earliest investors, David Parkman shares the considerations his firm took into account before making an investment in Dollar Shave Club and in the “e-commerce” space, which prove to be equally as revealing as logical:
With the advantage of hindsight, here are several valuable marketing lessons today’s modern companies need to learn from these two companies recent sales:
YOU MISS 100% OF THE SHOTS YOU NEVER TAKE
Dollar Shave Club’s entire business model was built on three simple strategies: 1) making their operating model convenient 2) their pricing aggressive and 2) challenging everything about the razor industry.
Since day one, Dollar Shave Club gave no quarter to the big boys in their space and began asking very real questions about the business of shaving few had ever considered. Like why are razor blades so expensive? What kind of benefits can someone expect joining a shaving club instead of trekking to the drugstore every month? And is there some criminal underground of heavily bearded men stealing razors that make excessive security measures a necessity? This guerilla style marketing coupled with a subscription delivery service made them the people’s underdog and Unilever just made them billionaires.
Yahoo was the first widely adopted web indexing tool before placing its primary focus on its web portal, which in 1998 was the most popular starting point on the web. Yahoo made a ton of money in advertising over the past twenty years and couldn’t see beyond their past successes to write a more inventive future. Yahoo doubled down on creating their own original content because that was familiar, while Google gave the reigns to their engineers and tasked them with building the plumbing for a faster, more reliable gateway to the world’s information. In the end the people christened Google, preferring the purveyor of content to its creator and we all were sparred from having to use the term “yahooing.”
As my favorite prophet from Baltimore reminds us: “if you come at the king, you best not miss.”
IF YOUR PRODUCTS ARE SIMPLE, SO IS YOUR BRAND IDENTITY & MESSAGING
Dollar Shave Club offered three tiers of razors initially and made certain that business line was sustainable before entering into the shaving cream and other men’s grooming products.
Yahoo’s most recent CEO Marissa Mayer made 53 acquisitions in her four-year tenure, throwing Yahoo’s hat in the ring across a variety of fields without ever truly committing to one. There was digital magazine portfolio that was going to propel Yahoo into new riches that was shuttered a little more than a year later. Next video was at the center of their next pivot, investing in original programming and resurrecting cult TV hit “Community”, only to see the same outcome and a $42 million dollar wash. Mayer herself promised to not “screw up” Tumblr when Yahoo purchased it for over $1 billion dollars but did so anyways. Layoffs were common, trust deteriorated and senior talent started walking out the door, with almost a third of the entire headcount leaving by choice or otherwise.
Yahoo constantly found itself looking in the rearview mirror, carrying the baggage of a series of bad decisions and weighed down by a self imposed pressure to differentiate themselves to the point of losing their identity and cache. They were always a step behind with only one toe in the water. Somewhere in the middle, Yahoo began to have a midlife crisis unsure if it’s futures lay in technology or in media. Because they tried to be both they ended up succeeding at neither.
TRUST IN YOUR VISION (BUT IF YOU PIVOT, SEE #2)
Dollar Shave Club co-founders Michael Dubin and Mark Levine famously met at a party where they began bitching about the cost of razors, earning its place as the strangest piece of small talk in history at what must have been the world’s most boring party. Their business deck was so simple, so short and the opportunity so clear they never deviated from the mutual passion in that initial discussion.
Yahoo decided to get in (and stay in) the content game during the most perilous time ever to be a publisher. In 2016, it would be like investing your life savings in typewriter ribbons or a taxi medallion.
Rob Norman, the chief digital officer of GroupM, summed it up succinctly in his quote from a New York Times article published over 9 months ago:
“(Yahoo) becomes vanilla in a land of not 32, but 5,032 flavors. What Yahoo tried to do both with magazines and video was to be old media in the Internet age, and I suspect that that wasn’t the answer.”
The strangest part is that Mayer herself saw the writing on the wall while she was still at Google. Before the Senate in 2009 she presented her thoughts about the future of journalism explaining how search engines like Google made news available in snack bite portions putting the traditional magazine and newspaper — digital or otherwise- in a vulnerable position:
“When producing an article for online news, the publisher must assume that a reader may be viewing this article on its own, independent of the rest of the publication…. It also requires a different approach to monetization: Each individual article should be self-sustaining. These types of changes will require innovation and experimentation in how news is delivered online, and how advertising can support it.”
Now companies like Facebook and Google possess so much more valuable data and information about consumers that their targeting is light years beyond Yahoo’s and publishers become increasingly beholden to the social platforms that steal their lunch money on a daily basis.
Mayer was correct in 2009 but too timid in 2013 to follow her own advice refusing to innovate or experiment and that cost her the company.
Dollar Shave Club realized the power Gillette had in the razor category when they jumped in the space but refused to be intimidated, while Yahoo was in Gillette’s favorable position yet never viewed Google as the serious threat they posed, much to their own demise. Dollar Shave Club’s marketing and press releases took the tone of a company with a clear focus going gunning for the belt and Yahoo a company lacking the confidence to see an obvious threat coming around the corner.
Facebook is a company that has been both the hunter and hunted and also played an influential role in the demise of Yahoo. Zuckerburg understands that reaching the top of the mountain requires a very different set of skills then staying on top and that transparent sense of paranoia is something most successful leaders cannot or will not reveal. His hawkish monitoring of the marketplace, not only in the areas Facebook currently competes but also in areas Facebook may enter one, three or five years down the road. If he sees vision and opportunity he will buy your business (Instagram, Oculus Rift, WhatsApp) and if he is futile in his attempts, he will find ways to mirror your value proposition while attempting to build a more strategic roadmap (Snapchat).
HIRE FOR POTENTIAL NOT PRESS
Dollar Shave Club accelerated their success because of where and how they mined talent. They didn’t hire seasoned professionals with big titles and salaries like many other hot and quickly growing start-ups. Ironically, their leadership team is mostly made up of former media professionals coming from places like AOL and Time paired with a former junior marketer from P&G who ended up creating brilliant, lifestyle related content that resonated with their customer base. The co-founders and investors understood that they didn’t have to play by the old playbook when building the team and that a hungry, savvy and unproven talent could rise to the occasion.
Yahoo took the complete opposite approach having handed the reigns of their business to a film studio executive and a former golden child from Google. Mayer then doubled down on collecting her own famous names hiring Katie Couric, cosmetic mogul Bobbi Brown and NY Times alum, Megan Liberman, with none of these lavish hires proving to be a difference maker.
Even in defeat and without a job, Mayer still stands to benefit greatly with a reported severance package of over $55 million. When your candidate has a name and you hire based on previous successes, you concede a bargaining chip that allows –and rewards- failing up. When you hire young and hungry, you have the protection that these are individuals willing to bet on themselves and their financial security is only realized with success.
STRONG LEADERSHIP LEADS TO DEVOTED INSPIRATION
That young, confident individual in Dollar Shave Club’s famous launch video talking about how “f#$%-ing great his blades are” is still the company’s CEO five years later. The humor of that first video set the tone for everything the company has produced and Dubin remained the pitchman for the brand ever since.
Yahoo had six different CEO’s since it tried to buy Google in 2003, acquired nearly a hundred different businesses and lost the cache it once had in the tech community. They had an out when Microsoft offered to buy them out for $44 billion, but again they couldn’t see the writing on the walls.
Yahoo was in denial for many more years unable to realize that they were at the right place at the right time. Their leadership team earned a reputation for lacking a sense of self-awareness and bloated narcissism, a claim difficult to refute when the face of the company is featured in a magazine spreads where she is literally holding a photo of her very own face.
It is impossible to have expected the rank and file at Yahoo to remain optimistic and focused on executing their products and messaging with such frequent turnover at the top affecting everything from positioning, strategy and personnel.
People who need a job work for a boss. People who want a career seek out leaders.
There are two things that I look forward to watching play out after these two acquisitions:
First, how Gillette and P&G will respond as they have dominated the disposable razor market for so long and nobody expects them to go quietly into the night. There is already speculation that they may acquire Harry’s, which to date has been Dollar Shave Club’s biggest competitor in the subscription razor market. Will they be the type of company that sees the tide turning around consumer behavior like progressive companies Facebook or Buzzfeed? Or will they follow the path of Yahoo or Microsoft, who underestimated Google and Apple, respectively as minor gnats rather than the elephants they would become?
Meanwhile Verizon is building a stable of fallen tech stars akin to the cast of the Expendables, after acquiring AOL a few years ago as a centerpiece to it’s blue hair chip conglomerate. Will they be able to integrate their mobile apps with the data collected from their web companies to connect the dots where Yahoo and AOL missed? Or will the unknown but sure to come Dollar Shave Club of the mobile industry waiting in the wings shake up how we buy our phones and access the web?
Yahoo lasted a lot longer than most of their contemporaries (Netscape, anyone?) but they will be equally remembered as story of unfulfilled promise and squandered opportunity as much as a pioneer of the Internet’s early years.
But isn’t that what pioneers have always done? Driven by a sense of curiosity matched only by their ambition, these brave people forge the paths for everyone else to follow. Grade school lessons immortalize the great one’s: Daniel Boone, Davy Crockett, Kit Carson. But history can be as heartless as the American frontier, and many names are quickly forgotten. Because when it comes to business, surviving is rarely a reason to celebrate and the history books become the most reliable equalizer, differentiating a guest of honor versus a hanger on who lingered at a party before being pushed out the door when all the lights came on.
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