Start, Grow, Mature, Consolidate

The life cycle of tech companies is pretty straightforward. They start, they grow, they mature, and they consolidate.

The news that Yahoo is finally selling to Verizon and joining forces with AOL is a not in the least bit surprising and probably long overdue.

Yahoo has not been a growth business in quite a while.

Putting AOL and Yahoo together allows Verizon to cut costs and rationalize the two businesses and add scale to Verizon’s growing base of Internet assets.

But this is yesterday’s news in many ways. It is the denouement of the web 1.0 era when AOL and Yahoo were the Internet to many. They operated the training wheels that got so many of us online.

I am not saying these businesses do not matter anymore. Together they serve hundreds of millions of Internet users around the world, they produce a lot of revenue, and when structured properly, a lot of profit.

But these are not growth businesses, they are mature businesses. So it is time to extract profits, not revenue growth, and run them appropriately for what they are.

And that is what is happening with this merger that will be announced this morning.

In twenty years, the same thing will likely happen to thousands of businesses that are starting up this year.

That is the life cycle of tech businesses, shorter than many sectors, but a wild ride while it lasts. As was Yahoo.


Comments (Archived):

  1. awaldstein

    Yup–the “Ob-La-Di, Ob-La-Da” of tech and innovation.Listened to a long detailed (and wonderful) podcast of the history of innovation and entrepreneurship in photography yesterday (… ).Same cycle up to and beyond KodaK.

    1. Lawrence Brass

      Awesome link, thanks. I am a fan of inventors and tech history, it is full of useful patterns.* url is broken by the closing parenthesis.

  2. David Semeria

    Yahoo is also a story of missed opportunities.They had a chance to buy both FB and Google in the early days, but passed on both.Zuckerberg learned from that and has executed much better, especially wrt acquisitions.

    1. awaldstein

      Very true–makes me think back to a very brief moment in time when CREAF was 1.5x the size of AOL and board nixed the decision to approach and buy them.

    2. William Mougayar

      Good thing they didn’t. Cause we wouldn’t have Google & Facebook as we have them today.

      1. LE

        Exactly. Which means the creativity and drive would simply simply end up somewhere else

    3. jason wright

      in hindsight. tumblr was a fail. i hear Fred wants to buy it back.

    4. Girish Mehta

      From Forbes July 1999….”During the 19th century, maps of the world showed much of the globe covered in pink, a sign of the extent of the British Empire. Today a map of the world reveals that it is now the Yahoo! yhoo empire on which the sun never sets”.…p.s. This article also called out AOL and Yahoo as ‘…the only two companies that clearly emerged victorious from the fray.’Both of whom have now been acquired by Verizon.

      1. LE

        Great link.Meanwhile yahoo finance which I visit everyday recently changed the homepage to try and be even more like a portal. I hate the change.

      2. ShanaC

        What is verizon going to do with them now?

    5. JamesHRH

      Zuck in particular seems to be under credited for excellent front running M&A stewardship He has not bought many duds and has wisely overpaid for strategic threats (Insta & WhatsApp), which I think of as front running insurance.Yahoo is a classic idea of a strategy trap – they were a portal; portals became low value; they never re-invented themselves. Classic lack of strategic leadership.Addicted to no growth revenue.

  3. Pranay Srinivasan

    Is Yahoo a tech search / data company or an online media company? U;timately wasn’t it this indecision that made them stagnate?

    1. Joe Cardillo

      Definitely w/you on that, also that they never seemed to harness (or filter down) enough of their own data to actually make that decision. Even though they had plenty of it and the answers were probably there.

  4. Mark Essel

    Like waves on an ocean beach, some are monsterous 60 footers, others barely a swell. Inevitably they all break at shore.It’s fun looking back at when AOL was a monster, and Yahoo was the king of search and advertising. I was thinking this morning on my commute in to NY how fast 10 years melts away now. It feels like time is literally slipping, and more than that accelerating.Some look forward to the legacy they’ll leave behind. I’m more concerned with maximizing my freedom with whatever time I have left.It’s a fantastic time to found or work with/in NYC startups.

    1. Donna Brewington White

      Couldn’t let this poetic, reflective comment pass. Much of my inspiration and insight over the years has come from walking along the beach or observing the ocean from other vantage points. Also a lot of analogies for entrepreneurs to be found in surfing.Glad you’re having a good ride.

      1. Mark Essel

        Thanks Donna!It’s not always easy, but being able to conjure products that can positively affect many others is hard to pass up. The first few years of a startup are exquisite.

  5. JimHirshfield

    In 1997 I had the opportunity to be an early hire on Yahoo’s sales team. I took a different job. Oh well.

    1. JimHirshfield

      I thought they had peaked as a startup. Boy was I wrong.

      1. LE

        Ok that was a bad one

        1. JimHirshfield

          That wasn’t a joke

          1. LE

            That was a bookend to my other reply.

    2. LE

      It seemed more excite-ing to you.

      1. JimHirshfield

        Was that a joke? Hang on, let me Alta Vista that.

        1. LE

          Who? Where?

          1. JimHirshfield


  6. William Mougayar

    Well… they gave you a few good exits, so we can’t fault them too much. As I said somewhere earlier, they were the Last of the Mohicans.

    1. JimHirshfield

      The Mohicans? They invented native advertising, right?

      1. LE

        Ok that was a good one

        1. JimHirshfield


    2. Girish Mehta

      Geocities, Tumblr…what else ?

      1. David Semeria


        1. Girish Mehta

          Ah..didn’t know USV had invested in them.

          1. LE

            In fact Albert “Venger” was their President and according to Chris Fralic:Albert was critical in turning from a great idea and basic service into a company with traction and momentum.

      2. William Mougayar

        Delicious, Flurry.

  7. Matt Zagaja

    Well it worked out ok for Marissa:“Marissa Mayer, who was hired as Yahoo’s chief executive four years ago but failed to turn around the company, is not expected to stay after the deal closes. But she is due to receive severance worth about $57 million, according to Equilar, a compensation research firm. All told, she will have received cash and stock compensation worth about $218 million during her time at Yahoo, according to Equilar’s calculations.”I just wish my failures looked like that.

    1. sigmaalgebra

      You don’t understand! She was WORTH it! You are not counting all of her contributions!She’s cute! She’s so darned CUTE! STILL, fixed up, rested, in one of her red or blue dresses, she can still look like a college coed. When she joined Yahoo, she could still look like a high school, maybe even middle school, coed!And blond, gotta give extra points for blond! Of course, “only her hairdresser knows for sure” “if the collars and cuffs match”, but it looks the same on camera! Blond! Not just gentlemen prefer blonds!Who at Verizon will be so darned cute? Verizon is the total opposite of cute! There’s NOTHING at all cute about Verizon.What do I think of about Verizon? Sure, left over armies of Bell System lawyers filing thousands of pages of WTF before the FCC, etc. and then armies of lobbyists buying bottomless drinks at Capitol Hill watering holes for Congress members short on votes and campaign funds.But, wait! There’s more! She is a woman! Finally nerd-land got a woman CEO! So, nerd-land is not all just nerds, unsocialized, undisciplined, unwashed, inarticulate, insensitive, rude, crude, offensive, wanting to drag race Ferraris, slide down zip lines, play Call to Duty all night, insult investment bankers and the media, etc. and then debug code at dawn. That fact pleased, no, thrilled a LOT of people!But, there’s still more! Google was it! It was the sh*t. And she was right there from near the beginning. So, at least she saw the magic and maybe was much of the magic. She was the one and only Google It Girl! And she brought her special magic to Yahoo!See now? See why she was worth so much?No? I didn’t convince you? You still suspect that she was mostly just what she looked like, a cute high school coed in a pretty dress?You expected her to use her insight into the industry, the Yahoo! staff, and the capital of Yahoo! to find and/or develop new products and services, use the Yahoo! server farm and infrastructure to roll them out, use the Yahoo! traffic and brand to give them a big boost, and, thus, keep growing both the top and bottom lines rapidly?That’s what you expected?And she delivered on that? Nope.But, she’s still pretty cute, and pretty, and has how many babies now, and has a nice pot of cash for the rest of her life and the lives of her children. She can be a big deal in the family for well into her grand children. Maybe she can come out with a line of dresses? Special dresses for Silicon Valley women, with special pockets, for her smartphone, wireless mouse, spare batteries, battery charger, special glasses?Broadly, Fred’s point is correct — what goes up in tech in 20 years must come down. But apparently some people thought that Yahoo! could keep growing by developing and/or acquiring. Nope.Yup, something was missing. Drive? Determination? Luck? The Yahoo! C-level offices were too comfortable?What will Verizon do with Yahoo? Sure, lose money.

      1. LE

        Broadly, Fred’s point is correct — what goes up in tech in 20 years must come down.The reason for this, in part, is simple. The workforce at a company ages and they lose the drive that they had when they were young and hungry. [1] The young and hungry are working elsewhere trying to unseat the incumbents who are asleep at the switch (or distracted with their cell phones in their self driving car). You remember GM in the 70’s, right? I’ve lost count of how many times I’ve seen this pattern. A company has to weed out the lazy lifers or at least make them fear for their lives.People are probably laughing at you as a result of the emphasis on all of the ‘cute as a button’ that you speak of. Unfortunately they are missing the message and perhaps your point. The truth is (for anyone willing to sit still) that was an angle that was pushed by the media and the PR departments. As much as “the google guys” was pushed for google. The image went a long way to make her seem invincible.…I called this failure just by reading the tea leaves and the emphasis (and the triviality) of what she seemed to be focused on. You know Bill Gates didn’t shower for years when he started Microsoft, let alone care about anything other than business.[1] There are exceptions in totally ‘entrepreneur narcissistic dictator’ companies….

        1. sigmaalgebra

          Yup. My emphasis on her being cute was to get a laugh but, like you noticed, is actually correct and important: In the end it was a lot of the best she brought to the job and got paid for. Much of the laugh is why the BoD was willing to pay so much just for some blond hair, two dresses, one red, one blue, a cute face and figure, and a smile?Why? The BoD wanted to date her? Felt protective of her? Just liked having something pretty in the board meetings?Ah, sometimes for dinner, right, in front of my computer, I watch something, and yesterday it was an old Charlie Chan movie at YouTube. At one point Chan claims that there is an old Chinese saying that “No one can see past a woman’s smile.” or some such. I’ve concluded that! And since women haven’t changed much since that movie, maybe it had a good point!If believe that it was a Chinese saying, then notice: The most recent common ancestor of Western women and Chinese women was about 40,000 years ago. So, if want to know what those common ancestor women were like, then they were closer to both current smiling Chinese women and smiling Marissa than those two are to each other. Thus, the challenge of smiling women goes way back! Took me too long to figure it out!Sounds like some Silicon Valley boards of directors are eager to get some support for their decisions, that is, cover their asses, by using some case of political correctness — that is, how could anyone criticize such a cute woman? Poor way to make money!So, Gates saved on time and water and didn’t take showers! Recently I went for a medical checkup, and the day before got some HCL, used the valves I installed at the furnace and a drill pump, and let some HCL circulate and clean the calcium carbonate out of the hot water coils, flushed with baking soda, turned on the furnace, got some hot water, and took a shower, first in some years! Wanted to be nice to my medical staff! Sure, then turned off the furnace since don’t need more hot water!Gee, Gates and I discovered that time saver independently!Actually, for writing software, it remains important to wash clothes, and I do that.Showers? Once each year or so if need one or not!E.g., at HP,…what is she getting paid for? More terrific new products as from HP’s history? I’m still waiting for those. So maybe she’s getting paid for her hair do, smile, teeth, make up, earrings, and professinal clothes?Gee, Marissa is a LOT cuter!

        2. Lawrence Brass

          When i read this: “or distracted with their cellphones in their self driving car” i thought about adding this: “hunting pokemons” :)As a pro negotiator you have to admit that she negotiated brilliantly her own benefits.

        3. ShanaC

          I guess the next obvious question -what about Google in the 20 year cycle

    2. LE

      This is just another example of Yahoo blowing money (when they made that deal and thought that she was the answer to their problems). You have to wonder what the upside was if that was the downside.

  8. jason wright

    Albert Wenger’s blog posts seem not to be allowing comments. is there a tech issue?

  9. William Mougayar

    Yahoo and Verizon. A great match!Bad software meets bad service.

    1. ShanaC

      murm. I feel bad for yahoo

  10. sigmaalgebra

    It looks like the principle is, the seed is at the top of the stalk. If there’s no seed there, then there isn’t one.Or, for a big success, someone one must come up with the idea and have the freedom and drive to make it real. And, it’s a fact of human nature: That person can’t report to anyone in a responsible position because no responsible person would ever bet their career on any such idea or give enough freedom to let such an idea work.

  11. pointsnfigures

    Yes, but if their management saw the world differently back in the early/mid 2000s, they are a behemoth. Yahoo never evolved. It never broke new ground. It became reactionary.

    1. William Mougayar

      It kept dying on the vine, without ever admitting it. Every acquisition was a breath of fresh air, but it was no oxygen.

  12. Ana Milicevic

    It’s bittersweet for many of us who got to witness the full lifecycle of Yahoo (and the internet with it). There were many, many opportunities to reinvent and remain relevant as well as several for a snazzier end outcome but it’s also easy to be a Monday morning quarterback. They were as integral to today’s internet as Nokia was to mobile – and yet outcomes are strangely similar.There is no single point of failure. This is why I like that Google and Facebook are both swinging for the fences today.

  13. LaMarEstaba

    I wonder what’s going to happen to Tumblr. They aren’t selling the whole thing, just the core business, and I’m not sure if Tumblr is part of that.

  14. Salt Shaker

    Marissa prayed heavily to the Alibaba Gods. “Thank you, Alibaba,” she often was heard muttering in her sleep.

  15. george

    Any headline connection with AOL pretty much describes the products of the past. Once fierce competitors, and reigning champs of The Web, both failed to yield to the voice and a generation of change; hence, Facebook, Twitter, Instagram, Yelp and Snapchat.Sadly, Yahoo had all the capabilities and assets to position into each of these new services, I guess now, Verizon is considered their silver lining.

  16. Lee Blaylock

    Here is a slide from a deck of an investment business I was involved in from 2012. It explains the cycle Fred outlines. It is both a company (and thus a product) cycle.Apple is a notable exception to so few companies moving from Stage D to Stage B. This was mostly due to Steve Jobs coming back and pumping out great products. Nokia was another one as it started in the mid 1800s as a pulp mill.Ironically, I had Yahoo on the lowest part of Stage D.GE is the longest running stage C company. It is the only remaining business on the original Dow Jones Industrial Average (DJIA 30) which was formed around 1896. Great management builds great products. They define that model.

    1. ShanaC

      does anyone ever escape this cycle ever

      1. Lee Blaylock

        Nirvana is to remain in stage b forever. The only way to do that is have a great process for pumping out growth oriented products as your old products sunset

  17. William Mougayar

    Over its lifetime, Yahoo! acquired 114 companies, totally *way *more than $5 Billion. ONE HUNDRED FOURTEEN, yes…100 AND 14. If that’s not a financial failure…..

    1. Joe Cardillo

      That’s a crazy amount of technology to pick up. I only recognize about half of those (and only really 30 with any detail), but other than GeoCities and Tumblr none of it strikes me as deep risk taking, experimentation etc. Sort of speaks for itself, in terms of missing opportunities.

    2. Rick Mason

      How can you forget the sale of Mark Cuban’s to Yahoo? That one purchase was $5.7 billion!

    3. PhilipSugar

      The rest of Yahoo will morph into a yet-to-be-named publicly traded investment company, with a 15% stake in Alibaba worth $32 billion and a 35.5% stake in Yahoo Japan worth about $8 billion.In 2005, Yahoo announced a partnership with Alibaba that included investing $1 billion in the Chinese retailer for a 40% economic interest. Alibaba has since become a retailing giant in China, spawning the biggest initial public offering in the U.S. when it started trading on the New York Stock Exchange in 2014. Alibaba (BABA) boasts a market cap topping $200 billion.”That should go down as one of the greatest investments of publicly traded companies,” says Scott Kessler of S&P Global Market Intelligence of Yahoo’s Alibaba stake. In 2012, Yahoo sold half its Alibaba stake for $7.1 billion.

      1. William Mougayar

        Correct, these were financially engineered deals that did well, but most of their other acquisitions were supposed to boost their core business, but they didn’t. Also, this removes Marissa Mayer from the asset side of Yahoo that she was clueless about anyways.

  18. Kirsten Lambertsen

    Whether or not the current CEO did what she was *hired* to do is up for debate. But …

    1. PhilipSugar

      I agree. People love to build people up then tear them down. The board didn’t want her just to try and milk the business.

  19. creative group

    CONTRIBUTORS:Can we reminisce about Yahoo?Can remember first being introduced to Mirabilis offered ICQ text messaging to the masses. That was a fun ride. Then we think AIM from AOL came after in 97-98. (We neverparticipated in the AOL messenger). In 1998 Yahoo released Yahoo Pager it was whatPokeman Go is to children now. Pure excitement communicating with people around the country. Then rolled out to the world. The offerings of sports, etc. Yang was just much toa softy to be a businessman. Yahoo market cap was around 150 Billion. Just a tombstone in the technology encyclopedia.Reminisce over you! My God.

  20. PhilipSugar

    This is one of the hardest things for companies when you hire outside talented management for an existing company that is growing slowly. What are they supposed to do?? Say boy lets just milk this thing??? What am I needed for…..I should get replaced. Same for the board.

  21. cavepainting

    When your core business is declining rapidly – as in the case of Yahoo – any acquisition that is incremental in scope is unlikely to pan out. For example, Tumblr was an interesting niche blog, but was not a game changer. Neither was Flurry or any of the hundreds of other acquisitions. Yahoo may have overpaid for them, but none of them positioned Yahoo in a new, large market experiencing outsize growth.Yahoo needed to have bought an instagram or whatsapp or equivalent. Something that would have put Yahoo squarely in the middle of a new consumer trend or behavior that would change the trajectory.The failure to do that is as much on the board as the CEO.

  22. Will Chow

    The cycle that Fred describes is driven a good bit by the governance/structure of late stage companies, ie these ultimately go public where decisions by committee tend towards “safe” choices that don’t change a company’s trajectory. Goog and FB have a good chance of overcoming that with their corporate structure (well, as least it’ll be dependent on the capabilities of their leader instead of outsiders with no sense of product).

  23. Warren Whitlock

    Rule #1. Conglomerates don’t increase shareholder value. Rule #2. When you think you’ve found synergy and the exception, read rulte #1.

  24. Jc_mellinger

    There are some very specific failures that doomed Y! and unless you are in advertising/media they aren’t obvious. For one, after acquiring Right Media they never kept it up to date. Had they built upon it’s foundation or even slightly innovated on top of the platform they would’ve been years ahead of what AOL is doing now with their ad tech stack. Their lack of vision here caused them to be an also-ran even as of three years ago because so many other platforms made it much easier to buy their inventory. Second, they’ve been a declining media property for years which means holding co’s incrementally move their clients’ budgets elsewhere – like Buzzfeed, Vice, Snapchat, etc. Myers didn’t help Y!’s cause here in two ways. First, she didn’t cozy up to ad execs and second she focused on content. Given Y!’s reputation it would’ve taken a mega-deal like exclusive streaming of all NFL games to bring meaningful viewership back – Katie Couric wasn’t going to cut it. Over-paying for startups as a hiring process spoke more to the lack of execution. Y!’s revenues are from a.d.v.e.r.t.i.s.i.n.g and they failed miserably at executing a vision especially relative to Google and AOL.