Making sense of Yahoo’s recent acquisitions

Gold-buying-companyYahoo! has acquired 6 companies in last 9 months after Marissa Mayer joined as CEO – Ontheair, Alike, Stamped, Snip-it, Jybe, and Summly. According to Yahoo’s corporate development department – “Primarily Yahoo! wants to buy small, failed startups with excellent teams for very little money.” Tech bloggers and experts have attempted to put together these pieces in a broader and long-term context.

Before we delve any deeper, let’s understand the problem each of these companies were trying to solve before Yahoo! picked them up –

OntheAir – It is essentially a video chat tool. Additionally, the content producers can webcast single or split screen interviews to multiple audience members. The real USP of the product is the ability for host to add a member from the audience; sort of taking a call on a live radio show.

Alike – A mobile application focused on suggesting nearby businesses a user may enjoy based on previous preferences.

Stamped – An iPhone app to let people record and share recommendations of their favorite things.

Snip.it – A web application to clip and arrange news in pinterest-like format

Jybe – An app that offers personalized recommendations based on user data from social networks

Summly – News gathering app that summarizes the content for mobile experience.

According to Mayer, Yahoo’s growth strategy will be focused on search, mobile and content.

Before anything, we need to understand where the company is positioned in social vs. interest graph debated. Yahoo! is too late to the social party. Facebook and LinkedIn are irreplaceable. The social graph of an user is built on people (s)he knows whereas the interest graph is created based on things (s)he likes. Clearly, the social networks have almost infinite switching costs. Ask Google+, it can tell more about it. I will learn the most about my friends’ daily lives if I hang out where all of them scribble their joys, pains,thoughts, experiences, whereabouts etc. On the other hand, the switching costs for interest graphs are considerably lower. In general, people spend their time on multiple domains to gain knowledge, stay up-to-date, express their opinions etc. E.g. as a sports fan, I open the apps of ESPN, NBA.com, NFL.com, Cricinfo and the time I spent on each of them depends, as you might have guessed, on the time of the year. The bottom-line is that multiple interest graph networks can co-exist with healthy visitor traffic.

Yahoo! categorized the internet in the 90s. It’s time now for it to leverage content from its hot web properties to serve the interest groups. This is where the acqui-hired engineers and product developers can play a key role. The objective for Yahoo is to combine content, interest graphs of an user and big data insights from his/her personal behavior to create the most personalized, compelling and contextual experience for mobile. The acquisitions have provided Yahoo with tools to do so on its current as well as future properties. E.g. Alike and Summly were built on machine learning and genetic algorithms respectively. These techniques can be leveraged to offer shortened yet comprehensive articles on Yahoo news, finance, answers etc.

So far so good but the fact is that these acquisitions are too small to add the scale of content and subsequently user eyeballs that the company needs. Yahoo needs to go for a big fish or two. The rumor mill has been running with speculations for potential targets – Pinterest, Hulu, Millenial Media, Quora, Flipboard, Rubicon, Waze, Foursqaure, Dailymotion. To what extent these targets fit with the company’s interest graph strategy will be a key determinant of what Yahoo ends up buying.

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