Double Down, But Only On The Right Hand

Comments (Archived):

1. I enjoyed Jason’s post as well. Knowing what to bet on is one thing, but these big public companies have a bigger problem in the timelines along which their success is measured, and this seems to have severely traumatized Yahoo! in recent years.Many of these firms are managed solely to meet quarterly earnings goals and “estimates”, and everyone freaks out when they “miss.” Such management is the surest way to destroy the long term value of a firm, and to crush its innovative spirit from the top down. There’s never any money to pay for semantic web acquisitions when you’re worried that you’ll be $50 million in the red and your share price is going to drop. As the Ferris Bueller line goes, “[a] man with priorities so far out of whack doesn’t deserve such a fine automobile!”Smart firms bet on the long term- the next 2 years, not the next 3-6 months. The market rises and crashes on hysteria, but strong companies are build on innovation and guts, the ability to see beyond all that.

   1. quoting Ferris Bueller on this blog gets you extra props! nice one.

2. Jason writes very well and, as you say, that particular post was excpetionally good.Regardless of the underlying merits of his arguments, what really shines through is his passion and fighting spirit. It’s almost as if he views incumbents as mortal enemies, to be fought with cunning, guile and innovation by the rebel start-up army.Way to go!

   1. that is one of his strengths. he loves the game.

      1. when it comes to incumbents in the exciting field of celebrity gossip, no doubt jdawg shows tenacity. when it comes to incumbents in the field of real journalism….not so much.would love to hear your thoughts on his beef with howard, if you ever wanted to chime in and help make that beef a bigger news story. maybe a video interview with howard about it? lol, if i could bribe you to do it i honestly i would.

         1. My opinion of that beef is its two guys looking to get more attention. And I’m very fond of both of them

            1. “Fred Wilson calls JDawg and Howard Out For Being Attention Whores”damn boss didn’t expect you to jump in the beef like that! you need me to write a song on your behalf calling them out just let me know. it’s gotta be a collaboration though, maybe you can do the rap verse. i can mix it and then upload to youtube/itunes. time for you to go multi-platinum up in this piece!!!

            2. I have no musical abilities. And it takes an attention whore to know one 🙂

            3. lol, indeed, i think internet entrepreneurs are likely to be guilty of being attention whores. it’s the attention economy, so we’re just doing our job.of course some of us choose to earn attention by delivering messages that warrant attention. others choose to deliver celebrity gossip. but the youngsters won’t step into the ring and beef with me, ’cause they know i’d drop a truth bomb on their ass to put them in their place. damn.no worries boss about your perceived lack of musical abilities. you got the passion, which is the one thing pro tools/autotune/melodyne don’t have. yet. maybe spend some time freestyling, let your son capture it on his flip cam, we’ll put it on itunes, heyzap will turn it into a game you can embed here on avc.com, zynga will make it a game for facebook and iphone. it’s end to end digital. you should pitch your music career to USV!

            4. That sounds awful

         2. My opinion of that beef is its two guys looking to get more attention. And I’m very fond of both of them

   2. Agreed, Jason Calacanis’ post was what’s called quality!

3. This may be completely left-field, but I think one day, Amazon will play a huge role in search. Their Mechanical Turk (MT) as well as scalable services could be a new “vector of attack” for distributed search.IMHO, distributed search will be the new norm as information, metadata, geodata, etc. continue to explode. And by distributed, I don’t mean datacenters all across the globe; I mean a search that is customized to the searcher by using past information, geo information, social networks, etc.

   1. you can’t count amazon out of any sector. companies run by entrepreneurial founder CEOs who have all of their net worth and life’s work invested in them are always the best positioned for long term success.

      1. I have always admired Jeff Bezos. But what I admire even more about Amazon is their ability to position for the future. They jumped on the scalable services, open API, and community bandwagons before many established players (including Yahoo and Google) had even thought of it. And they have managed to stay clear of the problems that have been affecting Ebay, Paypal, and other merchants… I don’t know if it’s Bezos or their corporate planning department, but someone is doing their job right.

         1. it all comes from the top at the end of the day. it may well be his team,but he hired them and retains them.

            1. Noted as a future reference.

      2. I feel a really strong need to come back to this though:While you can’t discount Amazon, I do think they bought Zappos because they know they are not lithe anymore. They are the 600-800 ton Gorilla in the room and it shows in the visual design and customer engagement with Amazon. Zappos has that in spades. Emails about your purchase Vs a Tweeting CEO? Who would you say is the more engaging company? Amazon needs it to prevent it from being too tech top heavy (they sell things and give out reviews on those things, they need their customers first). In that game, trying to get data out of their customers by having to get them give it to them, the Zappos buy was a good move.I have a gut feeling that Zapposis the test-ground for the swifter ways of gathering data. You can’t merge and remain that separate for that long, something or someone is gonna give.

4. Search has always been a distraction for Yahoo! Yahoo! became popular as a directory, not a search engine. Search was always an afterthought, altavista, inktomi, google, and a few others powered Y! search. But the surfers were the hit makers, not an algorithm. Curated directories don’t scale well (as Jason is in the process of discovering).Yahoo built a great content portal on top of that huge audience. Then they went to sleep thinking that the world would never change.Y!’s future (if they have one) was never in search.

   1. i’m with you erik (as usual)where is their future?

      1. Monetizing their community. Along the lines of your post from a few days back “Monetizing the Audience”.

      2. I’m not sure they have one.10 years of “rip van winkle” management is tough to get away with in either media or technology.I think they’ve missed the window to be important in mobile. If they had bought Android instead of GOOG it would have been a different story. I think Android explodes in 2010. Apple is making the same mistakes with the iPhone that they made with the Mac in 1984-88.There are still huge opportunities out there. YHOO’s best shot is innovating in how programming/content is delivered. It’s being a content portal where you can go to be educated, informed, and amused. I think things like Boxee (and Foneshow if I might be self serving) are a good fit. Google has not competed well in areas of interactive, yet passive consumption. Passive consumption is still a huge market (the TV crowd). I’m not always “looking for something”. Sometime (often) users want to zone out and be entertained.The question is do they have the horses to do it?

         1. It’s more than that- I would suggest that a lot of what we measure with TV and traditional media, our choices with them (and what makes social networking pwoerful) is in some ways reflections of ourselves. It’ why we have lots of tc content, and essentially repeats of the same type of company. We are in some way defined by these mediums. Yahoo might have a great shot by opening up the definition of me again, the same way MySpace allowed for a hell of a lot of Customization. Even if it is through a passive means, people want their bar code stuck on their head that say- I am who I am.

         2. I read Jason Calacanis’ post which I found great, this post which is a perfect complement to it, your comment and Business Week article ‘Yahoo: Losing the Geek Factor’ which actually makes the point that there is more to Yahoo search unit than just search and that it is their reservoir of good engineers.What I get from all that reading is that Yahoo shouldn’t just give up being a technology company in order to become just another media company, it should reinvent what a media company is like.Just like you said, there is room to be better at delivering people with passive content relevant to their needs. I’m thinking about some kind of algorithm that would guess what you want before you realise it yourself. Nobody has come up with a good solution until now, so there is definitely room for innovation there and for Yahoo to create their ‘Blue Ocean’.

            1. “What I get from all that reading is that Yahoo shouldn’t just give up being a technology company in order to become just another media company, it should reinvent what a media company is like.”That’s exactly what I’ve been trying to say, and you said it better than I was coming up with. I think that’s dead on. And it’s right up Yahoo’s alley.

5. I haven’t used Yahoo search in ten years. I visit Yahoo Finance multiple times a day. Doubling down on original content/delivery like that will give Yahoo a much better chance for new opportunities. They realized that search (in its current form) was their cul-de-sac and not just a regular dip anymore – no reason to waste more money on a dead end.

   1. “Yahoo” search 10 years ago was AltaVista (I think). They didn’t have any in-house search until 2003 when they bought Inktomi.

      1. I believe they had some sort of web directory in the late 90s/early 2000s that I remember visiting once or twice. The point is that any sort of search through Yahoo has been dead for a long time.

   2. yahoo finance was so ahead of the market when they built itthat and myyahoo were so amazingwhere is that yahoo?

      1. No matter what you think about Jerry Yang – he had foresight and major cojones. The last remnants of the Yahoo we remember left with him, but the downfall started long before that.

      2. The teams that conceived/built those products have been gone for 8+ years.

         1. Depressing, since the idea of an Me world, down to the buying of delicious, even working with bing, would be a good Path for yahoo. There is too much Internet out there. People want the right sort of Internet for them, and that could be a good niche for Yahoo if they kept at it.

6. Jason and you are both smart guys! Interested to here your take on Jason’s support + involvement with ThisNext? A social shopping site that appears to be going nowhere. Dave McClure quoted a year ago on this topic, “Social commerce is where (the business is) headed. Companies that have mined enough social graph data and can combine shopping to it–whoever figures that out, they will be set.” As an investor in estsy I’m curious to here your $.02 on this topic and how it approaches search in a different way!

   1. thisnext’s founder gordon gould is a good personal friend of the gotham galand mine and he was the third partner in silicon alley reporter back in the90s. so i am way too close to this to be objective. i am not an investorthough.

   2. IMO social commerce is happening, but i think a lot of the well-funded attempts at this put the commerce before the social, rather than the other way around. the deeper the social, the more high quality data mining opportunities. because real, high quality communities (like avc.com! ) tend to be niche and hence not very scalable, i think many of them fall short of the kind of scalability associated with VC investments, IMHO.

      1. Agreed. Just tried justbought.it today. Kind of liked how lightweight it is

      2. Agreed. Just tried justbought.it today. Kind of liked how lightweight it is

7. Jason forgets that Yahoo did double-down two years ago when Sue Decker was running around talking about Panama. Panama was supposed to bring Yahoo parity. Clearly, whatever is brought wasn’t enough. Yahoo is simply put “not good” at the Search game. They have tried. They have failed. Time to move on.

   1. Yet we talk about Yahoo. We do not talk about Alta Vista. We care. THis tells us something Yahoo is foing is right, but we just haven’t figure out what yet. There is a value in something they are doing- just a matter of what. Once we figure out what, we’ll be rushing into Yahoo’s arms. Either that, or they’ll wither on the vine because it will never get figured out.

8. I think it is far too early to be predicting outcomes. Obviously, Google isn’t going anywhere and Yahoo would have never caught up. So it will be interesting to see how Yahoo (more of a directory) matches up with Bing (search engine) and hopefully fosters some nice 2.0 action…. I look forward to it

9. Fred, Good post and I agree with most of Calacanis’ points. I am in full agreement that the console arms race is over and the social nets are the new console opportunity.But I think you missed the big picture on your comment about Nintendo which Jason Calacanis was correct about: Game consoles are a razors and blades business. NTDO still has the largest installed base, and makes the bulk of its money selling software, not hardware. So with nearly a 2-1 lead in installed base, a lower starting price point/COGS model initially, NTDO will likely be able to reap what its has sown for many years to come, despite one poor quarter.

10. Great post.As the web 1.0 or full-text index search industry grows mature, it’s become a capital intensive oligopoly game and it’s only natural for MSFT and YHOO to pool their resources in order to have a chance in competing with a dominant top player.I don’t think YHOO has ever stopped trying to innovate. In fact, my friends at their search team always tell me they’re working on such and such new features. But with the industry being so capital intensive and your #1 player so committed to maintaining its lead and has so much dry powder to invest in research, the degree of difficulty is just too high. I agree that Jason is great writer but this time his underlying logic indeed didn’t make any economical sense.

11. The ‘sepukku’ post was a good one….i left a comment there yesterday…but since comment systems aren’t standardized yet i’ll cut n paste here (hoping for comment standardization soon)….I think this deal is pretty irrelevant compared to the hype. Yahoo was decomposing long ago. And even though msft is a behemoth overall, they are an underdog in search and are making the classic mistake of trying to fight the giant head on….in search they are david, and google is goliath (http://www.newyorker.com/re….This is the fundamental flaw with BDCs, they are culturally and structurally incapable of acting as challengers in new growth areas due to success in other businesses. The next wave of search is clearly going to be leveraging personal/social data to make a better experience…….smart companies go to where the ball will be, not where the ball is….i guess this is why start-ups exist :)…..also….like the comments on amazon….this is what makes them such an exciting company…..they have the ability and courage to take a longer view at actually creating new markets and opportunities (instead of piling into proven markets as an also-ran)

    1. Great comment. I agree with you 100pcnt

    2. Great comment. I agree with you 100pcnt

12. Jason’s post was a good read. Still, the Yahoo deal is just business as usual. Yahoo is a $20b company and Microsoft is a $200b company. Yahoo is now a mature business; it is simply too small to dominate the market at this point. What do mature businesses do? They lower costs, manage quarterly earnings, decrease risk, focus on their core business. So outsourcing search to Microsoft is a perfectly logical move. It let’s Yahoo harvest or perhaps build what it has left – traffic. Search and advertising are about to get a lot more complicated and expensive with the real-time web and semantics. That’s out of Yahoo’s league in terms of buying or building. I liked your point about losing Yahoo and gaining Twitter in one week.

    1. If they are, they seem to be a directionless company. If it were a real person I would want to give it a hug and a therapist.

13. “I believe that Google has won the “web search version 1.0” game and the only thing that is left is second place. Yahoo! and Microsoft essentially agreed to share second place instead of fighting each other for the spoils”That section stuck out to me. Google has only won round 1 of a very, very long fight as you say here. You’ve also stated in previous posts that the internet is just starting to develop. The game wasn’t over, it was just beginning (relatively speaking). Right now the internet and even search really is still just a baby… it cries a lot, poops its pants often, and needs a ton of human attention. Someone will come along and improve on the Google model just like Google did to other search sites before. It could have been Yahoo if they focused and innovated. They didn’t need to give up just yet IMO.Sidenote: Pretty sure double down is just Black Jack, not poker. Still it’s a great headline. ; )

    1. You are right. I mixed metaphors. Oh well

    2. You are right. I mixed metaphors. Oh well

14. What I don’t understand is why Microsoft even wants to fight in the search wars, they gain nothing that helps them out in their core business. They are a software company, there is no reason to become an ad agency. True, Google is making money hand over fist, but so is Exxon. Is MSFT going to start drilling for oil next? What this deal tells me, aside from the fact that Yahoo is desperate, is that MSFT lacks vision into where technology is headed. Their attention is better spent on how to innovate and bring some youth to their brand. They are the de facto beige box OS, but what happens when the beige box disappears? They lack the cool of Apple, the innovation of Google and the community of Linux. These are the battles they should be fighting, not advertising. You’d think the Vista failure had taught them something.

    1. “They lack the cool of Apple, the innovation of Google and the community of Linux” instant classic! 😉

       1. Yeah, I liked that too

       2. Yeah, I liked that too

    2. Agree with it or not, Microsoft’s strategy appears to be “stop letting Google threaten our other businesses with the money they are printing from search.”Whether or not this strategy will succeed or not is another story. Frankly, I think there’s a lot to like about Bing. I use it for about 50% of my searches now, and it’s on par with Google for my every day searches in a way that Yahoo wasn’t even in the same galaxy.Besides, I’m not so sure we’re not in the second or third inning of even basic search (not counting Twitter or other vectors on search). It’s still a fairly crude tool. If you don’t think so, take a look at what I have to do to program my Google Alerts to get my own news clippings (I sit on a local community college board) and avoid mixing in the guy with the same name who is the Jerusalem bureau chief for an online news site.Microsoft has never been great at dreaming up things from scratch. It has historically been pretty decent at winning a space by innovating within it. Will that work with search? They may have just gotten the scale to give it a try. Time will tell.

    3. They know that the os is the internet and they have to build software for it

    4. They know that the os is the internet and they have to build software for it

15. One search where no one is looking at is offline search. I mean there are billions of people who do not have access to internet and are not going to have in near future. Can they not have ability to search for info ? Fortune lies at bottom of pyramid – ck prahlad

    1. yes using a CLI – SMS

16. No sense in doubling down if you don’t believe in your hand. Yahoo’s investors stopped believing over a year ago; Yahoo’s leadership couldn’t convince anyone they weren’t big losers in search (and they weren’t). So I guess it was time to fold. Pity they didn’t fold to Microsoft last year when it was billions on the table for a pure search deal, rather than this we’ll leave you 88% stuff they ended up with.

    1. I’m just not sure I agree. I won’t rehash what I wrote earlier about Yahoo’s other possibilities, but to quote a perplexed Steve Ballmer, Yahoo ends up with 88% of the revenue and zero cost of goods sold.I’d take an 88% revenue share of 20% of the search market with 100% gross margin any day of the week if it freed me up to go invest those boatloads of cash in growing the part of the business I’m still #1 in (delivering media to big audiences).

17. Seppuku is an honorable death for a warrior.Selling for $47b (v. 20 today) might have been such a death.This deal is more like lying on the side of the road with a wasting disease and getting looted by passing ronin while still breathing.

18. Fred, this is a really good point. Another one, in my mind, is simply focus. This really does move Yahoo away from being a tech company (notwithstanding its mail product, among others) and makes it much more of an Internet media company.Pure tech guys will howl that you have to own the tech to ensure your own destiny. Some very smart people have stated just that. But I think focus is understated in a company. If this turns out to have been a home run deal for Yahoo, it’s because it gave them the ability to focus on something else.Not that far off from what you were writing above, but I think we often discount that they are still the #1 visited site on the web. I’m not so sure they don’t have some pretty good tricks up their sleeves now that focus is possible.

19. Fred, you forgot to mention you have an investment in Zynga, too. Don’t you?

    1. Yes we have an investment in zynga.

    2. Yes we have an investment in zynga.

20. It’s all a guess right now – kind of like the White Sox essentially trading a great, but un-tested pitching staff for Jake Peavy. Was that a wise move? We’ll see.I like Yahoo! and Bartz’s move though. Yahoo cut the proverbial bait. On to new fish.

21. on the subject of new search engines, i’ve been using startpage.com. the results are good enough, page load time is a little slow, probably too slow for many searchers. they compete on the privacy dimension which i am a huge fan of, that gets my loyalty.i think the browser is a place where can search disruptions can happen. create a new browser and get it popular to market your search. i also think getting your search as site search for niche communities is great, like the “roll your own search engine” type of companies. so much of the disruption in search will be about marketing, IMO, which is where i spend much time focusing on when thinking about the future of search.

22. An aside on Nintendo.They may have already reached market saturation. They’ve sold an absolutely incredible number of Wiis and DSes at an astounding pace ever since the products were launched. When everyone’s got one, you can’t really move your product like you used to.

    1. Unless you are apple and obsolete the old model every 6-12 months (which I find incredibly annoying)

23. I love the references to Casino Royale, Poker, and Doubling Down in the context of business strategy.If you ever needed backup to explain why the Zappos CEO Tony Hsieh says he learnt alot in business from poker, articles like this provide that backup.So the question is, who has the best hand right now with the flop having being dealt (first phase of search engine development) which favours Google’s hole cards, even thought Microsoft’s hole cards were way stronger than Google.Can Microsoft use its bigger stack to muscle Google out of the game, or will Google get a Turn or River card that damages the Redmond beast so much that it can’t recover.Deal those cards!!!!

24. I added my 2 cents to Jason’s post (I hadn’t realized he blogged, and used Mahalo to ask him a question). But since it’s also pertinent to your discussion here’s the gist of it. Microsoft got a great deal on search, but I think they could have done better by hunting after real time search.

25. I think two weeks to start and then the oppty to earn more with time put in is a good plan