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Entrepreneurship

Why Yahoo Failed & What We Can Learn

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The end of Yahoo was pretty much inevitable the day they said they could no longer compete with Google (back in the early 2000s). What can we learn from Yahoo’s downfall?

Features Over Content

Building great features for users has been a hallmark of wildly successful companies the past few years. Snapchat with its well thought out and curated filters (that also generate revenue), Medium with its very handy “time to read” feature, and Google with the iOS app, Gboard, which brings a swipe-style keyboard with search built-in are features added to existing good products. Yahoo acquired Flickr then took a very long time to give users the feature of free space which was nothing new; Facebook already had unlimited image storage for its users. Yahoo acquired Tumblr which gave Tumblr some street cred but I cannot honestly think of one feature that Tumblr nailed after the acquisition to separate it from the pack of link sharing and blogging services.

Instead of building great products Marissa Meyer focused on mobile platforms which ended up not panning out too well. The Yahoo scatter beam was also focused on content deals. Huge sums of stock and cash were spent on Katie Couric and the NFL. Coupled with several failed video platform acquisitions (Hulu, Dailymotion, etc.) you could tell that despite Yahoo’s ability to acquire companies it was not going to be a major play in the content space (aside from the display content on its once great “portal”).

Video is where the web is heading. Yahoo saw that early on but failed to execute on that vision. I am sure that lots of Yahoo folks worked on lots of Yahoo product features. What set Yahoo products apart from their competitors?

CEOs Have to Build Great Teams

Marissa Meyer came in to Yahoo with a lot of fanfare and quite a few detractors. She was a brilliant, raw talent that people thought would bring new life to Yahoo. People also criticized Marissa Meyer’s lack of leadership experience. Anything was better than what Yahoo had and why not poach a Google executive? Right?

A CEO has fiduciary responsibilities but, CEOs must build a great team under them. That team has to execute at a very high level to be successful on the stage that Yahoo is performing on. CEOs have to encourage people to innovate. CEOs have to know when to say an idea is not turning into a product fast enough and pull the plug. CEOs have to build teams that know how to fail fast. Yahoo’s strategy of acquisitions, which Marissa Meyer called a necessity, did not build a fantastic team.

In my opinion, the best talent Yahoo acquihired was David Karp the CEO of Tumblr. He created an amazing product from virtually nothing that was drawing in a lot of traffic. At the time of the acquisition by Yahoo, Tumblr was the backend that powered chrisshort.net. I put my money where my mouth was too (even at the $1.1 billion value of Tumblr); I bought Yahoo stock the day the acquisition was announced. I thought the Yahoo Board of Directors would put David Karp on a prominent position and let him innovate. Giving David Karp a lot of leeway over the products, features, and development at Yahoo would have been a great idea. But, that never happened and the value of Tumblr was written down a total of $712 million over two earnings periods.

Yahoo could not keep or manage good talent in the highly competitive Silicon Valley market. Yahoo was unable to build a great team to bring it out of its funk. The Marissa Meyer detractors are sitting there saying, “I told you so.”

Do Your Damn Homework

The botched Alibaba spinoff was pretty much the nail is Yahoo’s coffin. Citing concerns about potential tax penalties, Yahoo decided against spinning off Alibaba after the IRS said it would not rule as to whether or not the deal, as structured, would be a tax free transaction. Two things immediately came to mind when I first heard of this spinoff plan (before the deal’s failure):

  • The Alibaba spinoff would only kick the can a little further down the road
  • The political climate of overseas dealings being tax free for US corporations made for horrible timing (see corporate inversion)

Clearly the due diligence for this deal was not done for whatever reason. This was either a leadership failure or flat out negligence. Either way, Yahoo did not do its homework in regards to the Alibaba spinoff. Now Yahoo is spinning off its “core business” instead.

What does Yahoo’s downfall teach us? That you must bring together a great team. The assembled players have to push people to build great features (the content will come, as exemplified by Medium, Snapchat, Facebook, etc.). That team must also do its due diligence in an effort to add value to the company. Now we all get to see how Verizon will deal with Yahoo assuming that deal gets approved, of course.

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About the Author

This article was written by Chris Short of a blogger committed to documenting the insights and developments in the tech sector. Chris Short has worked in the Information Technology field since 1995. Chris is now working in the Linux systems and DevOps spaces. See more of Chris’s work at his personal blog.

Entrepreneurship

What Kills A Startup

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1 – Being inflexible and not actively seeking or using customer feedback

Ignoring your users is a tried and true way to fail. Yes that sounds obvious but this was the #1 reason given for failure amongst the 32 startup failure post-mortems we analyzed. Tunnel vision and not gathering user feedback are fatal flaws for most startups. For instance, ecrowds, a web content management system company, said that “ We spent way too much time building it for ourselves and not getting feedback from prospects — it’s easy to get tunnel vision. I’d recommend not going more than two or three months from the initial start to getting in the hands of prospects that are truly objective.”

2 – Building a solution looking for a problem, i.e., not targeting a “market need”

Choosing to tackle problems that are interesting to solve rather than those that serve a market need was often cited as a reason for failure. Sure, you can build an app and see if it will stick, but knowing there is a market need upfront is a good thing. “Companies should tackle market problems not technical problems” according to the BricaBox founder. One of the main reasons BricaBox failed was because it was solving a technical problem. The founder states that, “While it’s good to scratch itches, it’s best to scratch those you share with the greater market. If you want to solve a technical problem, get a group together and do it as open source.”

3 – Not the right team

A diverse team with different skill sets was often cited as being critical to the success of a starti[ company. Failure post-mortems often lamented that “I wish we had a CTO from the start, or wished that the startup had “a founder that loved the business aspect of things”. In some cases, the founding team wished they had more checks and balances. As Nouncers founder stated, “This brings me back to the underlying problem I didn’t have a partner to balance me out and provide sanity checks for business and technology decisions made.” Wesabe founder also stated that he was the sole and quite stubborn decision maker for much of the enterprises life, and therefore he can blame no one but himself for the failures of Wesabe. Team deficiencies were given as a reason for startup failure almost 1/3 of the time.

4 – Poor Marketing

Knowing your target audience and knowing how to get their attention and convert them to leads and ultimately customers is one of the most important skills of a successful business. Yet, in almost 30% of failures, ineffective marketing was a primary cause of failure. Oftentimes, the inability to market was a function of founders who liked to code or build product but who didn’t relish the idea of promoting the product. The folks at Devver highlighted the need to find someone who enjoys creating and finding distribution channels and developing business relationship for the company as a key need that startups should ensure they fill.

5 – Ran out of cash

Money and time are finite and need to be allocated judiciously. The question of how should you spend your money was a frequent conundrum and reason for failure cited by failed startups. The decision on whether to spend significantly upfront to get the product off the group or develop gradually over time is a tough act to balance. The team at YouCastr cited money problems as the reason for failure but went on to highlight other reasons for shutting down vs. trying to raise more money writing:

The single biggest reason we are closing down (a common one) is running out of cash. Despite putting the company in an EXTREMELY lean position, generating revenue, and holding out as long as we could, we didn’t have the cash to keep going. The next few reasons shed more light as to why we chose to shut down instead of finding more cash.

The old saw was that more companies were killed by poor cashflow than anything else, but factors 1, 2 and 4 probably are the main contributing factors to that problem. No cash, no flow. The issue No 3 – the team – is interesting, as if I take that comment ” I didn’t have a partner to balance me out and provide sanity checks for business and technology decisions made” and think about some of the founders and startup CEOs I know, I can safely say that the main way that any decision was made was by agreeing with them – it was “my way or the highway”. I don’t therefore “buy” the team argument, I more buy the willingness of the key decision makers to change when things are not working (aka “pivoting” – point 9).

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About the Author

This article was produced by Broadsight. Broadsight is an attempt to build a business not just to consult to the emerging Broadband Media / Quadruple Play / Web 2.0 world, but to be structured according to its open principles. see more.

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Callum Connects

Jasmine Tan, Director of Stone Amperor

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Jasmine saves her clients time and effort when doing kitchen fit outs with her biz Stone Amperor.

What’s your story?
I started working in the industry in 2003. I was in a marble and granite supplier company for 5 years. Even though I left the company, I still had customers calling me for my services. I referred them back to my previous company but they refused to because they loved the fast response service that I offered. I realised that customers do look at prices, however most of them prefer quality over quantity. Thus I have decided to establish a sole proprietor company also known as 78 Degrees which later rebranded as Stone Amperor in 2014.

What excites you most about your industry?
The kitchen countertop industry is a very confusing market. There are many brands, materials and prices to choose from. What excites me the most is my ability to help clients choose the best materials and brands within their budgets, whilst saving them time and effort.

What’s your connection to Asia?
I have been in Asia all my life and I love Asia. No matter where you go there is no place like home.


Favourite city in Asia for business and why?
I love Singapore. This is because Singapore has always been a stable country and it is great for doing business. However as it is a small country, it can be really competitive. I believe that if just do your best and give your best to your customers, you can overcome this.

What’s the best piece of advice you ever received?
“Take actions. Learn and improve continuously. An idea without action is just a dream.” This was really good advice that I received from my partner.

Who inspires you?
A very down to earth billionaire from Malaysia, Robert Kuok

What have you just learnt recently that blew you away?
Property is the foundation of every business.

If you had your time again, what would you do differently?
Own instead of renting property for my business.

How do you unwind?
I enjoy going shopping, watching movies and hanging out with friends. I am quite a simple being.

Favourite Asian destination for relaxation? Why?
I love going to Taiwan as I love the culture there. Everyone is so polite and the weather is great.

Everyone in business should read this book:
Sun Tzu, Art of war

Shameless plug for your business:
Perfect top, Perfect price, Perfect life from Stone Amperor

How can people connect with you?
Email me at jasm[email protected]

Twitter handle?
@StoneAmperor

This interview is part of the ‘Callum Connect’ series of more than 500 interviews

Callum Laing is an entrepreneur and investor based in Singapore. He has previously started, built and sold half a dozen businesses and is now a Partner at Unity-Group Private Equity and Co-Founder of The Marketing Group PLC. He is the author two best selling books ‘Progressive Partnerships’ and ‘Agglomerate’.

Connect with Callum here:
twitter.com/laingcallum
linkedin.com/in/callumlaing
Download free copies of his books here: www.callumlaing.com

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