Business Lessons from the sale of Yahoo to Verizon

Business Lessons From The Sale of Yahoo to Verizon

Business Lessons From The Sale of Yahoo to Verizon

Perhaps the biggest business news today was our waking up to hear of the sale of Yahoo to Verizon for 4.83 billion dollars. That brings to an end the 21 years history of as an independent company the existence of one of Silicon Valley’s most iconic and pioneering companies. But those who has followed the development and growth of the tech industry all know that this is about the saddest and most regrettable 5 billion dollars deal in recent years if not in history.

With Jerry Yang and David Filo experimentally founding yahoo in January 1994(incorporated March 2, 1995) they both managed to build a company that became synonymous with the internet in late nineties and early 2000. When I signed up for my first email address in the early 2000 I thought email is the same thing as yahoo mail. Yahoo was probably worth $120 billion (today’s equivalent) in late nineties-they were clearly the market leaders, with little or no competitors. Then followed series of “poor” decisions.

First, The Chance to Buy Google

First in 1998 they had the chance to buy Google (and I mean it, GOOGLE of all people) for just $1 million and they refused ( I simply cannot believe this, but it probably didn’t look like a poor decision back then).

In 2002 Yahoo realized it was a big blunder not to have bought google 4 years earlier. They wanted to correct that mistake by offering $3 billion but Larry Page and Sagey Brin will only accept $5 billion, and once again Yahoo didn’t believe Google was worth that much. Today Google is well on its way to being listed among the first companies to hit the $1 trillion dollars net worth (this could happen as early as 2018).

From that moment going forward, for every dollar gained by google yahoo loses 3 dollars and by 2008 Microsoft threw a “lifeline” to yahoo by offering to buy it for $40 billion dollar. But Jerry Yang would have none of that (was he stubborn? Maybe! Was he believing in the ability of Yahoo to bounce back? Just maybe).

Finally in 2016 Yahoo admitted it is not getting any better and that they can no longer put up with the competition.  Yahoo was finally sold for a meagre $4.83 billion (it is actually arguable if the company is still worth that much today. Maybe Verizon was just paying that amount out of nostalgia).

Take Home From The Sale of Yahoo to Verizon

Now here are the take home for me and I believe for every entrepreneur:

1.Knowing Your Timing is Important

Perhaps the greatest challenge for every entrepreneur is to know when to try harder and when to give up. Timing is of great essence in Business. You may have a great idea, a great strategy and even a great business model, but you must carefully consider when to launch, when to buy and when to sell. I suppose Yang didn’t quite get it at that point.

Conclusion

CEOs are paid heavily because on their shoulders lies the burden of making decisions for the companies they manage. One single decision that goes wrong can completely destroy the company. The sale of Yahoo to Verizon for less than 5 billion dollars is a testimony to that. For that reason it is important that CEOs and entrepreneurs alike improve their decision-making skills as much as possible.

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2.Keep Evolving

Keep evolving to remain relevant. It is true that perfection can be stagnation, but never allow yourself to get to that point. Yahoo thought they have arrived and there was probably nothing to improve since “everyone” was on their side. You need to keep your eyes seriously in the trends. And don’t ignore distant competitors otherwise you wake up one day and realize you have done nothing wrong, yet you are no longer relevant in the market (Nokia quickly comes to mind).

3.Don’t Stop Working Even When You Get to the Top

It is far easier to climb to the top than to remain at the top. According to my friend “you don’t need to stop working as hard as you used to do while you were still struggling. You must continue to do those things you were doing when you started even when you get to the top, except that you need to do them much better and smarter.

4. Be proactive and not reactive.

Many people wants to blame Marissa Mayer for not being able to turn around the fortune of Yahoo as she promised when she took over. But for me that was practically impossible as she was only going to be reacting to activities of the now pacesetters like google. Yahoo should never have waited this long. They should have been proactive enough when the smart phones were taking over the markets.

5. Don’t be greedy

I have always said that I would rather own 10% of a 10 billion dollar business than to own 100% of a struggling 10 million dollar business. Many start-ups make this mistake of wanting to hold on firmly to “their idea”, they want to be the sole owner even when it is obvious that they don’t have the resources and personnel to scale up faster. I imagined what would have been if Mitchell Elegbe had insisted that InterSwitch must remain “his company “. I doubt if there could have been the InterSwitch that we have today or at best he will still be struggling with its growth by now.

It has happened to Yahoo today, don’t let it happen to this your brilliant idea tomorrow.

PS: This article was first written and published on my Facebook Page on July 26, 2016.

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