17 Aug Yahoo!! Wept
This week we heard the news that Tumblr was sold by Verizon for a derisory $3 million. It was bought a few years ago by Yahoo for $1 billion. Then Yahoo sold itself to Verizon, which has now dumped Tumblr. A fitting coda. Yahoo is likely the biggest botch up in global corporate history. You think I exaggerate?
In the late 90s as the dot com roared, Yahoo was golden. Founders Filo and Yang were the Brin, Page and Zuckerberg of that time. Yahoo rose when there was no search engine. I remember in 94 and 95 trying to find webpages for technical topics. Before Yahoo we had archie, a search engine for ftp archives. Mostly used by engineers to search for software patches. Yahoo was so much easier and more comprehensive. Filo and Yang had the insight of hiring people to manually search the Web and classify pages by their topics. It was so effective pre-Google. Yahoo reached a peak cap of $125 billion in the dot com. Ah those were the days. When Google booted up, it snared a contract to be the algorithmic search behind Yahoo’s manual search. No one anticipated how big algorithmic search, and thus Google, would be.
After the crash, Yahoo could have bought Google for $5 billion. CEO Semel rejected this. Today Google’s cap is $800 billion. Yahoo lost $800 billion. Every company makes mistakes. But none for number of mistakes and sizes of these like Yahoo.
The second mistake was in 2006. Facebook was a new firm and rising in social networks. Yahoo had nothing in this field. Zuckerberg offered Facebook for $1 billion. Yahoo said no. Facebook is today $500 billion.
The third mistake was in 2008 when Yahoo was worth some $30 billion. Microsoft offered $40 billion and Yahoo said no. We can guess how discussions inside Yahoo went. Semel, Yang and others would have pointed out Yahoo’s peak of $125 billion lass than 10 years ago, and said that Microsoft was being predatory. Maybe. So Yahoo rejected the offer. Then came the Great Recession…
The final mistake was by CEO Meyer in 2013. She had come on board after Semel threw in the towel, and was well aware of the earlier blunders. Surely everyone in Yahoo had by then. She saw Tumblr as having promise of massive traction in social media, not unlike Facebook a few years earlier. So she plonked down $1 billion for it. to be flushed in 2019 by new bosses for $1 million.
Here is some informal accounting. Google and Facebook not being acquired cost $1.3 trillion in lost market cap. Tumblr is another $1 billion in losses. While not selling to Microsoft was a few billion, depending on how you want to account for its Japanese subsidiary. But really the big two were Google and Facebook.
Yahoo lost $1.3 trillion.
PS: Yahoo is formally written with an exclamation mark. They needed this to get a trademark. But many news articles rightfully ignore it. I put 2 in the title of this article as sarcasm.
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