General Thinking

Yahoo! – The Upside

A lot of ink has been spilt on the many mistakes made by Yahoo. How the company refused to buy Google or Facebook when the opportunity existed. Yahoo might in fact be a story of many missed opportunities. But those misses did not really define the failure. Yahoo failed because of a series of poor decisions and a company culture that did not permit it to move forward.

The implicit assumption in all of the criticism is that Google would have certainly gone on to become the company that we know today. Yes, perhaps there would have been one less competitor to deal with.

Those of us who adopted and started using Google did so because its simplicity and precision. Do you really imagine that Yahoo! which was always a portal, would have purchased Google and retained a blank white page with a box?

Cultural Deceit

Yahoo failed because of the things that made it successful to begin with. It was launched as a directory service and then went on to adopt the portal model. For whatever it is worth, it worked very well for them in the late 90’s.

The linked post on stratechery which talks about the development of culture.

Culture does not beget success but it is the product of it

When a company does something and it works out for the company, it becomes a formula. The people who join the company hear the same stories and do the same things.

An employee who joins Marriott hears stories of awesome customer service which helped them retain customers, got someone promoted. The formula to get ahead becomes, providing awesome customer service.

Yahoo was a portal and wanted to continue to survive in that paradigm. It was just much easier to sell the idea to advertisers and generate revenues through multiple channels. Google went with income from ‘Search’ only. Honestly, the good boys at Google did not want to do even that! Eric Schmidt had to wrestled them into advertising.

Yahoo’s culture did not allow them to adjust to the changing nature of the web. Much like Google finds it hard to adjust ‘search’ to the demands of smartphones. Facebook by comparison found it extremely comfortable adapting to mobile.

Mergers and Acquisitions

Yahoo may not have bought Google or Facebook, but they bought often and bought a lot. Here is a list of all of the M&A that Yahoo has been engaged in over the years. You may notice that there are a list of 114 companies there. In the space of 18 years, that is an average of 6 per year; or one every alternate month! Number deceive in the absence of context; they made 23 off those in 2013 alone. An additional 19 were acquired in 2014.

Yahoo made big acquisitions in the 90’s that did not pay off. GeoCities, (founded by Mark Cuban) and Overture Services were all multi-billion dollar acquisitions which went nowhere. Flickr still survives and could have easily been Instagram, but is not.

I am sure had they acquired Google and Facebook, they would have been equally lost in the quagmire that was Yahoo. Throwing everything into a portal and melding it into one was not what was needed, but Yahoo could not help but do that.

Marissa Mayer kept deflecting criticism by acquiring one company after another. She closed 5 deals in Jan 2014 alone. When Steve Jobs went back to Apple he figured out the soul of the company and let go of everything else. Marisa Mayer did exactly the reverse in the case of Yahoo, kept everything and added more garbage.

So what is the upside?

For starters thank Yahoo that they did not acquire Google for $1 Million, you would probably be using bing today! Also, you might have been using Google+ had they ended up acquiring Facebook.

Yahoo redistributed 10’s of Billions of dollars to many startup founders through acquisitions. These founders went on to invest in other startups and created the startup eco-system that exists today. This is by far the most critical contribution that Yahoo made. This alone contributed significantly towards changing the trajectory of investments in startups.

Yahoo by itself might not have been a hugely successful business. A combination of cultural undercurrent and poor leadership ran the company into the ground. Having said that, Yahoo has made contributions that are valuable.

Not buying Google and Facebook are one amongst them.

General Thinking

WhatsApp Is Worth It!

Facebook spent a whopper to buy WhatsApp. Well whopper is an understatement. They spent $19 Billion, off which only $3 Billion is subject to shares vesting. So let us first put that number in perspective

Facebook bought a small company with a team of 32 engineers for $19 Billion. Let us compare this with the market value of some well known companies.

Looking at the Market Caps (as of 19 Feb 2014):

Nokia – $27 Billion

Blackberry – $4.74 Billion

Twitter – $30 Billion

T-Mobile – $9.49 Billion

Tesla – $23.74 Billion

Google recently sold Motorola for $2.91 Billion. Also, they bought another hardware company called Nest for $3.2 Billion. These were all big deals and big companies.

So well, is Whatsapp worth its price?


I have read countless reports of how the user base that WhatsApp has is important. Reports say Facebook is spending this much money to make sure that they acquire these users, this point is irrelevant. Facebook has the largest and the most global user base in the world. They do not need to buy another company to acquire users. In most probability 90% of Whatsapp users would already be Facebook users!

So why?

We are in the mobile age and the day is not far when the only things that the mobile networks will be selling would be data! Even today we rely more on messaging apps and Internet telephony apps to send messages and make calls. It also helps us overcome the high costs of telephone calls and messages. This wave began with Blackberry, which had the BBM built into its phones, which has since become a cross-platform app. Apple has been for long, baking iMessage and FaceTime into its phones. Viber, Skype, Line, WeChat and WhatsApp are all attempts at doing the same thing.

Making voice and text communication possible through the use of data.

When mobile networks becomes fast enough across the world to make calls over the internet. Everyone will switch to only data connections. People would no longer use voice calls or text offered by network providers.  At that point, the company with the strongest and most connected text and voice communication app will have the greatest sway on the mobile industry.

People are going to need to send text and talk on phone. The only thing that is going to change is the orifices through which these communications pass. WhatsApp is present on the most number of platform (they even have an app for the Nokia Symbian phones). As a result of this they have the greatest market share when it comes to this space.

Its about controlling all communications in the years to come.

WhatsApp probably has the strongest positioning for controlling this communication going forward. There will be more aggregation within this space going forward. I do not think Apple will try to control this space beyond its own eco-system. They will focus on making their hardware and software the most secure and use that as a marketing tool to sell more hardware. Blackberry has thrown the hat in the ring and in my opinion BBM is the only card they have got left. Skype has lost its sheen after its acquisition by Microsoft. I think Viber is the only other contender in this game apart from WhatsApp. The others will get acquired or will die a slow death.

Now when you look at it like this, you get a real understanding of the value and the potential of WhatsApp. Its not that Mark is using ‘Zucker-opoly’ money to buy companies (he has to answer to a board!); its just that his vision is clear.

Every moment, every thought, every communication that you ever share, Facebook would be a part of it. That is the idea!


Little Eye Labs – Facebook Acquisition

Yesterday, a small company called Little Eye Labs, which helps optimise Android apps got acquired by Facebook. Normally, not a lot of press would be extended to such an acquisition, since the company being acquired is rather small; but the media in India exploded with this news.

This acquisition is the quintessential, ‘One small step for man, is a giant leap for mankind’, moment for the Indian startup eco-system.

Typically, investors look to invest in startups because they have the ability to grow faster than established firms, simply because they start from a lower base. So, if you asked anyone; What is the kind of business would an investor seek to invest in? They would say, there should be a strong team, the idea should be great, you should solve a real problem, it should be scalable, there should be barriers to entry, large addressable market, etc.

The fact that most miss out is that an investor seeks to enter a business that he can profitably exit. Exit being the keyword here. For most small software product businesses, scaling the business to its full potential can take a decade or longer. Acquisition is a very attractive exit for investors. Up until this point, Indian startups had not been acquired by US technology firms. This one deal has opened the doors for many such deals to be explored in the future.

What does this mean for Indian startups? Well, the confidence on the part of the investors would be on a whole different level as such deals begin to materialise. Moreover, the exposure that the Indian startup eco-system would begin to get as a result of this is going to propel things forward.

This one step for one Indian Startup is a giant leap for the Indian startup eco-system!