Last night a source of mine sent me a text message about spotting Jerry Yang and David Filo (in a suit) at Palo Alto’s Four Seasons Hotel in company of some serious looking men, who spend a lot of time (and money) appearing to be self-important, a skill they perhaps learn in business school. His pithy message to sum it all up — looks like it is all going down.
The “it” is Yahoo’s very public auction of itself to the highest private equity bidder. In case you were hiding under a rock, here is a recap of rumors around Yahoo’s possible sale:
- Silver Lake Partners wants to buy a minority stake in Yahoo for about $16.60 a share (valuing Yahoo at $20.6 billion or about 6 percent higher than yesterday’s closing price.) Silver Lake is working with Microsoft and Andreessen Horowitz.
- The transaction is going to use PIPEs, private investment in public equity — a type of transaction long reserved for somewhat dubious companies.
- Jerry Yang will stay on the board, but the investors will get three seats on the board, reports say.
- Some folks believe that Jeff Jordan, former CEO of OpenTable, will become the chief executive of Yahoo and VC Marc Andreessen will become the chairman.
- TPG Capital is considering offering a $1 per share more — aka $17.60/share.
- Others are also eyeing the company including KKR and Blackstone Group.
- Thomas H. Lee Partners is thinking about a bid.
- Alibaba Group wants to buy Yahoo. Yahoo owns 40 percent of the Chinese company. Kara Swisher says they are thinking about teaming up with Softbank and Blackstone for their own bid.
600 million
Last time I wrote about Yahoo and its dismal and disastrous board of directors, I pointed out that 600 million users make up Yahoo’s biggest asset (and biggest stumbling block) and that company needed to clean house and then go shopping. Most of the people in comments disagreed and said that no self-respecting startup would want to be part of Yahoo.
Instead, most felt that the company should clean house and focus on a few pockets of growth inside the company — communications and shopping for example. I am betting buyers will be thinking along those lines, but will that be enough?
Whatever comes of these moves, the question is, can Yahoo be saved, and if yes, what is the value that can be retrieved? More importantly, will these private equity investors meet their own tech Waterloo in the fallen Internet star?
Dead Fish
As far as I am concerned, Yahoo is pretty far gone and is essentially a hollow shell of its former self. Its board – probably the single worst group in business – has managed to drip every last drop out of its body. There are few bright spots — Flickr, Yahoo Mail and Yahoo Shopping — but they cannot make up for the singular reality that the Internet that helped Yahoo thrive is no longer the Internet most people use.
Behavioral shifts in the Internet are so strong that Yahoo has no chance. The average U.S. Facebook user is spending over six hours a month day on the social network, Twitter is becoming the new news network and photos are thriving on mobile platforms.
The Internet of today is one of many screens. Yahoo, despite its mobile products and wonderful experiments with Yahoo TV, is still a one trick pony — online advertising. More accurately, the classic CPM-style advertising depends on large audiences, lots of page views and well, you get it, an old-fashioned way of thinking. When I think of Yahoo, I am reminded of a salmon farmed on carcinogens that is trying to move upstream in order to find growth.
Smart guys, but…
The consortium that is making a push for Yahoo is the same group that went out and bought Skype from eBay and turned around and flipped it to Microsoft, and in the process they made a lot of money.
However, this is not the same case. Skype was and still is on the right side of history. Usage behavior favors Skype, which continues to grow despite the company having ruined a great user experience. Skype is thriving despite all the meddling from the previous owners. Microsoft can’t do anything because Skype provides value.
What does Yahoo do that you and I can’t live without?
That’s right … nothing!
I have a lot of respect for Jeff Jordan (who would actually be one of my choices to run Yahoo), but I am sorry even he cannot do the impossible. Yahoo’s brain drain is legendary and it continues. There are more resumes going out of Yahoo than there are folks lining up to work for Yahoo. Unless there is a tech/broad economy collapse, that situation isn’t going to change.
Frankly, if you were a smart engineer or a product guy, why would you go work for a company, which is going to be owned by buyout guys who essentially nickel-and-dime your creativity to death? Why not go and work for a startup, where the chances of an upside, however remote they might be, are still there.
Or better yet, take a flyer and start your own company. Hell, if you need a job, these days even Google is pretty lax about hiring. The fact is that the buyout philosophy might work on old industrial-age companies, but I am not sure it would translate to Internet companies.
Related research and analysis from GigaOM Pro:
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I remember the '90s like they were yesterday. Websites such as Amazon and eBay were well on their way to transforming commerce as we know it, and even flash-in-the-pan startups were making their founders into overnight millionaires. But while the money piled up for other people, I quietly nurtured a vision of my own: Craigslist, a revolutionary online classifieds site that allows people who wish to buy or sell goods and services online to be raped or murdered by total strangers.
Nobody, absolutely nobody, thought my idea for changing the way unsuspecting victims were entrapped into life-threatening encounters with sociopaths had a chance. Nobody except me, that is.
Those initial meetings with venture capitalists were some of the most humiliating experiences of my life. I'll never forget the way they just fidgeted as I explained my plan for a virtual bulletin board where a person looking for a summer sublet could be beaten to death with a crowbar or someone in search of a running partner could, with just a click of the mouse, find another person planning to kill and eat them. Everywhere I turned, there was someone else telling me how crazy I was. Even my parents, who had always been supportive, told me I was absolutely out of my mind.
And at first it seemed they were right. When the site went live in 1995, the traffic was robust, and word of mouth was driving up the visits every week. Sure, people found writing groups and good homes for their pets—but where was the deceit and resulting brutality? Every day I checked the papers for a story about someone who had been lured into a soundproof torture chamber with the promise of a $100 like-new mountain bike. Every day, I was disappointed.
Maybe I needed to tweak the design? Maybe I needed to promote myself better? What was I missing?
I started to panic. I even considered hiring someone to take out an ad and then forcibly sodomize the first person who responded to it, just to prime the pump. I held back, however, because that kind of unethical behavior always comes back to haunt you. And, fortunately, my restraint was rewarded.
Ever so slowly, people started using the site the way I had always intended. Right before my eyes, the depraved and violent were going online and finding Craigslist. Half the ads placed in the Volunteering section were put there by sex offenders, while at least a third of the people who arrived for jobs they found in the Gigs section promptly had their legs broken. Maybe most gratifying was the uptick in mayhem in the Casual Encounters section, which had been surprisingly sluggish. Suddenly, it seemed like every other person showed up for his no-strings blow job with a switchblade. I knew I'd reached a tipping point. Only one thing was missing now—one thing I really needed to push Craigslist over the top.
A corpse.
Finally, almost two years after I launched the site, a man who had strangled his tennis instructor and dumped chunks of her dismembered body in a creek near his home told police that he had met his victim through Craigslist—through my site! Through my little site! I almost cried. It took awhile, but my dream had become a reality. Before long, anyone who wanted to bathe in the guts of an innocent knew all he needed was a fake ad for an Ultimate Frisbee team and my URL.
And look at Craigslist now. Here in 2011, it's hard to imagine slaughtering someone without it. Letters pour in by the sackful from people thanking me for helping them find just the right travel buddy to decapitate or math tutor to give to their imbecile cousin to rape. I'm not the type to gloat, but maybe I'll let myself say this just once:
I told you so.
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