How Do You Solve Yahoo’s Indigestion? Pass Some Gas!

(I apologize in advance. This is one of my less appetizing metaphors.)

Anyone that follows tech news has undoubtedly heard about the mass exodus out of Yahoo. The departures are a mix of startup-acquired leaders (Flickr and delicious) as well as executives from the Old Guard.

At first glance, it’s a pretty shocking to watch the large swaths of Yahoo’s leadership disappear. Watching it all from the outside, you’d think the whole company was imploding. The end is near!

old-yahoo Then again…what were all these people doing? I get the funny feeling that nothing will materially change at Yahoo with all these people departing. That’s not meant as a knock to the talent that’s on its way out. I’m sure they’re all very capable people. It’s really more a statement about Yahoo’s all-over-the-place strategy and how 95% of it is going nowhere.

Yahoo, and Google for that matter, are their very own Internet bubbles. They are, in and of themselves, their very own environments for incubation. They have a handful of revenue-generating businesses that effectively provide "funding" for all the other "startups" that spring up inside their walls. And like most startups, most of them fail. Except that unlike the real world, where running out of money means you stop existing, within a large organization you can politic your way into daddy’s pockets to keep subsisting. This leads to the inevitable dragging down of the entire business.

Google is in precisely the same situation. Youtube is wildly popular yet monetization is still a puzzle. Gmail, Google Apps and many other initiatives are themselves ventures that amount to a tiny fraction of Google’s revenue. The key difference between Yahoo and Google is that Google’s search business is wildly successful, providing significant cushion for these other initiatives (for now at least).

Alka-SeltzerOrig20 A bubble bursting is a good thing in the long run. It displaces talent and focus and resets expectations. The first wave of Internet startups needed a reboot in 2001. Google and Yahoo are really just bubbles in and of themselves.  think it’s good for the organization to revisit the value of its various initiatives.

Diverse organizations like Yahoo and Google don’t really "burst" per se.  Nonetheless, it’s healthy to let out some gas every so often. While it may seem like an unraveling to everyone else, it could well be the healthiest thing for Yahoo.

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