The Pains of Losing Capability
Yahoo lost capability in its business. To stay relevant, it started looking for for Hail Mary pass, out of desperation. It went into a very mission-less acquisition on Tumblr which it wrote off more than 60% of purchase price, few months after payment.
But that may not be the most value-destroying thing that Yahoo did: Yahoo signed a contract with Mozilla to have Yahoo as Firefox default search, but if for any reason Mozilla turns off Yahoo, Yahoo will still be sending $375 million yearly to Mozilla till 2019. From Fortune newsletter.
After Mozilla switched its U.S. search engine back to Google, Yahoo is suing over what it claims was an improper termination of its deal to provide search results. According to Recode, Yahoo, now owned by Verizon, may have to continue paying $375 million a year to Mozilla even without getting the search business.
How do you sign such contracts? I mean, you can only do such if you believe that you have lost your purpose as a company. Essentially, Yahoo felt that the only way it could have a purpose in search was to have its product in the only remaining browser it could knock on the door. Chrome was for Google, Internet Explorer was for Bing, Safari (who uses that?) was yooyoo. But Yahoo needed that Firefox.
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Too bad, that did not change anything in the life of Yahoo: it has since been sold for largely nothing (remove the Alibaba investment and Yahoo Japan, Yahoo core business was in negative value). Yahoo was a web pioneer which was massively disrupted by Google and then Facebook. Except Yahoo Mail, I am not sure anyone will remember the firm.
No company should put itself in a terrible position to lose any element of capability. It brings desperation and that never ends well. But should such moments happen, wisdom could be finding a way to extract remaining value than throwing Hail Mary. It would have made more sense if Yahoo was investing to improve its search, since no matter where you put the default button, most users will always navigate to the best one.
Yahoo saw glory, then it started being in a trance, and from there it went into slumbering, and finally dozed off. The sleep was such a long one that by the time it woke up, a big masquerade (Google) was in town, and while it was still trying to understand what hit it, another masquerade (Facebook) appeared. And then Yahoo behaved like Samson, not knowing that the power had left it, it went to 'fight', without strategy, and it received a fatal blow. And then it felt that its original popularity was still in the minds of its users, and it embarked on senseless and mindless journey, trying to hold onto anything it found on its way, including hugging mad people on the road. And now the world famous Yahoo is essentially looking like also ran. It is not a good thing that after being beaten to pulp, and you think the best thing to do is to keep fighting, rather than going home to reflect and rethink your strategies. Poor Yahoo, may you get your senses back, before your name is wiped off.
