Business

Shopping ‘til you drop: What Yahoo’s retail therapy says about the state of tech

By Richard Poplak 9 April 2013

Skill testing question: how many humans currently living on Earth remember Broadcast.com? Answer: approximately nine. The company was purchased by Yahoo during the First Great Dot Com Boom for the not inconsiderable amount of $5.7 billion in stock and turned Mark Cuban into Dallas Mavericks' owner and also an insufferable rich brat. Man, wasn’t 1999 a gas? But Yahoo’s new president and CEO, the highly respected ex-Google-ite Marissa Mayer, is still buying companies 14 years later. What’s changed, if anything? By RICHARD POPLAK.

Instagram, to Facebook for $1 billion. Goodreads, to Amazon for $150 million. Summly, to Yahoo for $30 million. Summly, you ask? An app using no new technology developed by a British teenager who still has a year and a half yet before he finishes high school. Almost a decade and a half since the first Dot.com boom, the buying frenzy has never really abated. And like the first boom, many of these acquisitions make little or no sense.

Broadcast.com is recalled by few as one of the more insane purchases in the history of tech. For $5.9 billion, Yahoo spent almost $10,000 for each of Broadcast.com’s customers, or “eyes” in the parlance of the era. How in Steve Job’s name did the company come to be valued so high? The company made billionaires of Mark Cuban and Tod Wagner, and fools of everyone else. It was basically an Internet radio station, and while it had managed to sew up a few exclusive deals to sub-broadcast online, there wasn’t much to it except smoke and mirrors. The stock set a then one day IPO record, rising from $18 a share to $62.75, before it started sliding again. When Yahoo bought the company, it changed the name to Yahoo! Broadcast Solutions, and started chopping it up into tranches, which has always been Yahoo’s instinct. Now, not even a distinctive URL remains.

What’s changed in all these years? Not much, if recent history is anything to go by. The Facebook IPO was little more than a stockbroker’s scam, and while it has made some people very rich – Wall Street listers notable among them—it hasn’t done much good for anyone else. The company is not quite floundering, but its ham-handed means of introducing advertisements is alienating users, the younger set primary among them. Facebook is becoming a place where old people congregate, the Internet version of American network TV—a dinosaur product for dinosaurs. Calls for a major overhaul and a revival cannot be far away.

Yahoo, one of the first big tech darlings, knows all about that pain. While Facebook is facing a far more pressing existential crisis than Yahoo ever did — no one ever questioned the need for an aggregator that could appeal to as many people as possible, with advertising part and parcel of that model – the company routinely lost focus, and thus market share. Yahoo somehow missed the importance of social networks, mobile apps, and everything else that the postmodern homo-sapiens considers to be an element of the tech revolution. It bungled Flickr, Delicious and Upcoming.org by letting them collect dust, and repelling the talented engineers that they had recently transformed into millionaires.

Marissa Meyer’s job is to turn the frown upside down. Her CV is encouraging, but quite a few stellar resumés have come and gone from Yahoo’s corner offices. Mayer is currently most famous for instituting a company-wide ban on telecommuting, insisting that all Yahoo employees show up at the office to work. That feels a tad Model-T Ford, but the company is not exactly in fine fettle, so some culture changes were obviously required.

But if anything has baffled tech watchers, it’s the acquisition of Summly. The app was created by a kid named Nick D’Aloisio, and he comes with pimples and a school satchel. Summly, a news reading app, doesn’t use proprietary software, and doesn’t do anything other apps don’t do better, faster. No one knows exactly how much Yahoo spent on the company, but it’s rumoured to be roughly $30 million. The current rule of thumb for so-called aqui-hires is that a company is worth roughly $750,000 to $1.5 million per engineer – a company with 10 engineers is worth $15 million or so for talent, plus equipment buy out, and paying off investors and/or creditors. That equates to about $30 million, which is how tech watchers have run the numbers on Summly. More than anything, though, the Summly purchase feels like a publicity stunt – bring in a young, hip teenaged engineer with baffling hair in order to prove that Yahoo isn’t getting grizzled. At worst, this seems like a desperate lunge for hipness.

Yahoo certainly isn’t broke after selling off half of its interest in Alibaba for around $4.3 billion, but like most Internet companies, it needs to make its purchases wisely. Other recent acquisitions include Stamped, an iPhone mobile app that allows you to keep track of stuff you like. Mayer has also bought Snip.it, OnTheAir, Propeld and Jybe – all of which are shoving the company in the mobile direction. All have been swallowed into the Yahoo brand, which hasn’t always been an airtight policy. Look closely at these acquisitions, though, and we note that most of the engineers were either ex-Yahoo or ex-Google, and it’s a case of coming back into the fold.

Yahoo is by no means the first choice for Internet wunderkinds these days. Their cheques cash, but you have to go into the office to work for a woman who claims that “God, family and Yahoo – in that order” are the most important things in her life. Mayer is considered by some in tech to be the second coming of the second coming of Steve Jobs. That is by no means certain. But one thing is for sure – she likes to shop. It’s something of a Yahoo disease. DM

Photo: Yahoo! Chief Executive Marissa Mayer speaks during a Startup Battlefield session at TechCrunch Disrupt SF 2012 at the San Francisco Design Center Concourse in San Francisco, California September 12, 2012. REUTERS/Stephen Lam

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