LAST month, beleaguered internet giant Yahoo! finally put investors out of their misery, announcing it would be sold to Verizon for nearly $US5 billion.
Forbes described it as the “saddest $5 billion deal in tech history”. “In its sale to Verizon, Yahoo! gives up fighting its long march to irrelevancy,” the magazine wrote.
So what went wrong at the once-dominant internet giant? And what can other Silicon Valley tech executives learn from Yahoo!’s mistakes?
That was the question posed by one user of question-and-answer site Quora. Quora’s own vice president of engineering, Xavier Amatriain, penned this response:
I have not worked at Yahoo!, but I know lots of people who have worked there. I have also interacted with many former employees and have been able to get a good sense of what went wrong at Yahoo at different times. Given this context, these are the main takeaways for me:
TALENT DENSITY
Great companies are made by great employees. It is extremely hard, but worth it, to hire and retain the best and not fall into the temptation of hiring second-best just to fill in.
At some point, Yahoo! had some of the most brilliant minds in Silicon Valley. However, they also started hiring mediocre engineers and did not put enough focus on keeping their talent density high. Because of this (and other reasons I will mention later), the best people started to leave, reducing the talent density even more.
Some years ago I was interviewing a manager who was leaving from Yahoo! When I asked him what would he do to improve his current team at the company he replied: “If I could, I would fire 80 per cent of them.” This got stuck in my brain for being the saddest answer I have heard from someone in an interview. Not only he felt that his team was not great. He also felt he could not even take action to improve the talent density. No wonder he was looking to leave!
FOCUS
Besides their “lost war on talent” perhaps the other capital sin for Yahoo! was to never really find their focus as a company. Yes, they tried to be a “web” company. But, what does that even mean? They never had the best search engine, the best social network, or the best anything. What’s worse, they never seemed to have a strategic focus around any particular area. Even when Marissa articulated that they had to become a mobile ad company, they were doing a thousand things besides that and there never seemed to be the kind of focus a company like Yahoo! would need.
YOU CAN’T BUILD A COMPANY THROUGH ACQUISITIONS
Related to the previous one, here is another lesson: you cannot build a company through acquisitions. Yeah, I know this has worked for some companies. And, I know even Google has some successful ones like Youtube. However, in most cases, companies that do big acquisitions do have a focus and a well defined strategy. Think of Facebook acquiring Instagram or WhatsApp, for instance.
It is also fair to say that Marissa’s use of acquisitions was a somewhat desperate attempt to fix the first issue of talent density (see Why Marissa Mayer’s Ultimate Talent Acquisition Strategy Failed). But, in my opinion, all those acquisitions by Yahoo! did nothing but decrease their focus and dilute their culture (more on this later).