Yahoo! finally throws the towel in
I was contacted by Spanish financial daily Cinco Días about the article published in The Wall Street Journal claiming that Yahoo’s board of directors is thinking about selling off all its internet-related strategic assets.
I laid out my views on the company in an October 22 post called Yahoo! Hanging in there, by a thread, which pretty much mirrors an article in Ars Technica yesterday: Yahoo!’s internet activities are worth very little. With very few exceptions, it’s a disparate collection of near worthless assets that bought with some idea in mind but that are barely used these days.
A look at Yahoo!’s acquisitions is a depressing experience, and one that charts the company’s decline. According to Wikipedia, 48 out of a total of 114 purchases cost it more than €18 billion. This is a company that has spent huge amounts of money on acquiring services that either closed, drove the founders of the companies concerned mad, or were later sold for pocket money.
If it had managed to make something of just a few of its acquisitions, the company would by now have a pretty impressive group of people on its payroll, that instead have done very well on their own. One such case is Stewart Butterfield, who joined Yahoo! after it bought Flickr in March 2005 for $40 million, and who stayed on as manager until July 2008, then leaving to create Slack, which is today valued at almost $3 billion. Other examples include Broadcast.com, which it bought in 1999 at the height of the dot.com boom for $5.7 billion, only to later kill the service it created out of it, Yahoo! Music Radio. There are many more. Bad management, the wrong strategic focus, and choosing businesses it knew nothing about saw Yahoo! develop pretty much into King Midas in reverse.
Below, my email answers to Cinco Días:
Q. The Wall Street Journal says Yahoo! is to sell its internet assets on the advice of Stanboard Value. This will include its search engine, its email service and its news platform. Does this move make sense, particularly when 79 percent of its revenue comes from display advertising and searches?
A. Yahoo! has run out of answers to its problems. It’s a shadow of its former self and seems to be dying a slow death. After trying to revive its fortunes by bringing back the founder and signing up an industry star player, it’s returning to barracks and abandoning anything that it’s too slow to be able to compete, and instead taking refuge in other business areas. The move is a desperate one, and makes little sense: fleeing the very industry that converted it into what it once was.
Q. Do you think it will sell its 15 percent stake in Alibaba, a company valued at €30 billion?
A. The idea is to extract as much value as possible from assets that are depreciating by the day. Its stake in Alibaba is an important asset, bought when the online retailer was still starting out. In theory, it could generate synergies, but so far hasn’t.
Q. How did Yahoo! get into this mess?
A. Yahoo! joined the walking dead when it turned its back on technology and tried to become a media player. When it signed Terry Semel, who had worked in Hollywood, it went in exactly the wrong direction. Strategically, the industry was headed another way, toward boosting technological capacity: even media companies these days need to become tech companies to a degree. Yahoo! moved away from technology, stopped investing in its search engine, its segmentation algorithms. It’s now turned into a zombie that infects everything it sinks its teeth into.
Q. If it sells its core internet business, what is left for it to do?
A. It could develop content, co-branded services, e-retailing, or maps. Yahoo! today is a dog’s dinner of products, most of which are of no interest to anybody.
Q. What’s going to happen to Marisa Meyer. She was signed up to save the company, but increasingly looks in trouble. What has she done well since she was signed in 2012, and what has she done wrong, or simply didn’t do?
A. If we look at the company’s results, she seems to have done very little right. But in reality, she had little room to maneuver: the company was already in a nosedive that its founder was unable to pull it out of, despite his popularity in the company. Trying to attract employees back by cancelling their work-from-home agreements is one way to rebuilt a business culture, but it’s also a good way to annoy people who enjoy flexi-time. The result was a brain drain of key personnel who easily found work in other companies. With virtually no technology, it now lost its human capital, losing more flexibility in the process. Looking back, it all seems so predictable now.
Q. Is it simply too late for Yahoo! to compete with the likes of Facebook, Instagram, Snapchat, or Google?
A. It’s too late. I can’t see how on earth this company could ever recover: its assets are all gone, any interesting acquisitions have lost their value, the talent it gained through its acqui-hires has long gone, and the mish-mash of services it offers makes no sense to anybody. Game over.
(En español, aquí)
