There was a time when it advertised itself as a happy, yellow emoticon, but these days, it’s more common for Yahoo
(NASDAQ:YHOO) to wear an expression of guilt. The iconic Web portal stands accused of killing
photo-sharing site Flickr, and it is implicated in the demise of two social networking services, Delicious and Upcoming. Yahoo acquired them, they slid into irrelevance, and in the court of public opinion, this is enough. The company’s $1.1 billion acquisition of Tumblr last week had the atmosphere of a parole hearing, complete with a promise not to screw things up
But Yahoo didn’t kill Flickr.
Let’s consider the facts. At the time of its purchase in 2005, Flickr had one million registered users. Today it has 87 million. The website’s traffic peaked in early 2009, four years after the acquisition. Instagram, now owned by Facebook
(NASDAQ:FB), has since become a more popular photo-sharing platform, a circumstance often blamed on Flickr’s slow transition to mobile. However, Yahoo wasn’t the only company to make the wrong call on Web apps vs. native apps – Facebook did, too
. Flickr was also mired in security concerns
, which may have been unnecessary but is hardly a smoking gun. Until Instagram became a smash hit, it wasn’t clear that Flickr’s dominance was in any trouble, and other early photo-sharing apps that did everything “right,” like Radar.net and Picplz, never caught on.
We tend to give too much credit for success, and too much blame for failure. Every company makes mistakes and every product is imperfect; it’s not uncommon for circumstances to decide the result. What was smart in 2007 was a mistake in 2008. Tablet computing was an old, unsuccessful idea that only became revolutionary after Apple
(NASDAQ:AAPL) sold a million iPads in under a month. Behind the “Web 2.0” are concepts that date back to the beginning of the Internet, but fell out of favor for a time.
Social networks have the added complication of being fashionable by nature. The more users they have writing updates, uploading pictures, and adding content, the better they become. In other words, the value of the network is determined by how well it does, at least as much as any innovation in its design. Chance events, like being chosen as a featured app or gaining buzz within a community, can decide everything. No one intended that Livejournal turned into a destination for fan fiction, or Tumblr into a medium for pornography.
It’s hard to predict success in an industry like this, and it is just as hard to maintain it. Yahoo tried growing its own social network with Yahoo 360º, and then shuttered it in 2008. Google
(NASDAQ:GOOG) failed twice with Google Buzz and Friend Connect. YouTube has flourished under Google’s stewardship, but then Myspace also did well after its acquisition by News Corp
(NASDAQ:NWS) – for a few years. After that, for reasons that we can theorize about but never prove, the grass got greener somewhere else and users fled. Today Myspace is “dead,” not because no one uses it, but because no one will admit to using it. Like baggy jeans and Apple stock, it’s become a point of embarrassment -- and that star will guide its fate more than any boneheaded corporate mistakes or brilliant strokes of innovation.
In both fashion and finance, narrative is everything. Today’s crop of tech companies could be criticized for growing losses, but instead, they’re praised for growing user bases. Tomorrow that could change. We’re told that Flickr died because of mismanagement by Yahoo, but it’s also plausible that monetization killed the photo-sharing platform. Like News Corp, Yahoo tried to extract profits from its new network by rolling out ads and cutting costs. In that respect, we might call both of these companies “industry leaders.” They did years ago what Facebook and Twitter are trying to do today. But while Flickr covered itself with ads, Instagram didn’t. While Livejournal steered users towards paid accounts, Tumblr was perfectly happy losing money. It could be argued that Yahoo’s mistake was in believing it had purchased a business – and not a fad.
But that, too, would be speculation. All we can really say is that there is a certain tension between growth and monetization, and that while a large company may offer more resources, it also imposes greater liabilities. We can also say that Web portals like Yahoo and Google, which used to gatekeep the Web’s content, now have no choice but to invest in social networks -- but that neither they, nor anyone else, knows quite what to do with them. And that these networks are like goldfish – sometimes they just die.
Tumblr, like Flickr, faces a hard road. The $1.1 billion acquisition price demands that, at some point, Yahoo make money off of this new purchase, and yet Yahoo has promised to honor a business plan that never planned for much revenue
. Compromises will have to be made, and they will either be fatal, or they won’t. Whatever happens, it seems inevitable that at some point the novelty will fade, the market will shift, and Tumblr will be pronounced “dead” as well. But don’t blame Yahoo. Eventually, fashion makes victims of everyone.
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