Yahoo!-Verizon Deal: Another Silicon Valley Legend Bites The Dust 

by Rajeev Srinivasan - Jul 26, 2016 12:12 PM +05:30 IST
Yahoo!-Verizon Deal: Another Silicon Valley Legend Bites The Dust  A sign is displayed in front of the Yahoo! headquarters in Sunnyvale, California. Photo credit: Justin Sullivan/GettyImages
Snapshot
  • Verizon buying Yahoo! is a welcome news in the sense that it puts the company out of its misery.

    Yahoo! missed out on providing ‘freemium’ services to stay relevant in these times.

The news that Yahoo! is finally being bought by somebody after being shopped around for at least a couple of years is welcome in the sense that it puts the company out of its misery, and salvages some credibility for Marissa Meyer, its embattled chief executive officer. But it is a cautionary tale about the problem of increasing consolidation in the internet space, and the winner-take-all, network-effect-heavy mode of operation in the industry.

While the World Wide Web was originally invented with a vision of openness, the reality has turned out to be a little different. Despite the best efforts of semi-libertarian boffins to maintain the anarchic days of the early Web, there’s dark talk of oligopolies. Just look at GAFA, they say: Google, Apple, Facebook and Amazon. Each has a domain in which it is dominant, but the common currency is the same: user data. They all know a lot about users.

This transition is what Yahoo! missed out on: it is not any more about search or e-mail but about ‘freemium’ services, ie the consumer pays nothing because he himself is the product. It is slightly creepy these days when Google Now knows a bit more about you than you are comfortable with. The other day, I was startled when Google cheerfully warned me that I was due to be at a government office at 4.30pm, and that was probably too late in the day!

And all those ads that are targeted towards me, uncannily aware of what I am interested in, and sometimes, as in the case of Swiftkey or the Google search box, even anticipating what I might be looking for. I’m reminded of the ‘precogs’ who can do ‘pre-crime’ predictions in the film Minority Report, and it is a bit unsettling.

All this is leading to talk of an internet 3.0, which, using a variant of Blockchain, becomes a peer-to-peer system, where the user does not cede his personal data to the service providers, but carries it with him embedded in a series of anonymous P2P servers, and perhaps exchanges bits of his own data in exchange for a cryptocurrency. Thus the business model of minutely targeting micro-segments – the forte of Google and Facebook – may lose its current relevance, and then maybe Yahoo! with its core strengths in entertainment can make a comeback.

Perhaps some variant of that thought motivated Verizon, the biggest cellular player in the US, to buy Yahoo! They bought AOL, another diminished early giant, last year, and perhaps believe that using these two, plus the customer intimacy inherent in their ownership of customer big data, will enable them to roll out something really unique. It’s not clear what that will be.

Yahoo! couldn’t make up its mind as to what it wanted to be when it grew up. Initially it acted as quite a useful directory of links; then came a mail system (I had a yahoo.com id as my default address), and various other services. But upstart Google provided a better, self-referential algorithm to improve search outcome; and it also created a superior mail system, in both cases beating back Yahoo!

It is possible that if Yahoo! had stuck to entertainment services, it would not have kept steadily losing market share. But in a classic case of the fast followers defeating the first-movers, other firms were able to invent continuously, while the strategic confusion at Yahoo! meant a succession of leaders came and went quickly.

Ironically, the biggest success that Yahoo! can point to are two-fold: its Japan subsidiary, and its significant stake in China’s Alibaba.com, both of which are not part of the Verizon deal. This asset will be held by a new investment company, and the Yahoo! name and most of the staff will move over to Verizon. So another Silicon Valley/Stanford legend bites the dust.

Once again, the observer is moved to lament: ha, sri bhuvil asthira asamsayam! Glory is transient, surely. Especially in internet time, and how the mighty are fallen!

Rajeev Srinivasan focuses on strategy and innovation, which he worked on at Bell Labs and in Silicon Valley. He has taught innovation at several IIMs. An IIT Madras and Stanford Business School grad, he has also been a conservative columnist for twenty years.


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