Nasdaq, AOL or Yahoo – The Next/Last Great Venture Exit?


More than Nasdaq or AIM, Yahoo has become in recent years The Great Venture Exit. Nestled in Sunnyvale only a Prius’s putter away from Google HQ, the elderstatesman of the Internet was only yesterday the contemplated ramp to riches for many college-aged entrepreneurs hoping to cash their internet traffic for a cool $1.65 billion.

So I have been watching with great concern the dark clouds descend upon this golden ramp of Silicon Valley. I’ve been following the company to handicap one of two outcomes possible from the company’s travails. One is the likelihood that it continues to use M&A to bolster the “white spaces” in its offerings. The other more realistic path is that it may spin-out groups and technologies while it dukes it out with Google.

You’ve Got Mail
My pessimism is simple-minded. For five years I watched in horror as friends and relatives clicked their way to the insanity of AOL and its email offering. The “easy-to-use” ISP defied gravity and my own predictions of its doomed irrelevance. How, in a world of broadband access, inexpensive dial-up carriers (EarthLink, etc), and easy-to-configure POP mail would anybody use the third-grade email service. Soon the internet blossomed and AOL’s service became a genteel English Garden surrounded by pretty fences and entrance fees.

Alas, the garden was sitting in Yosemite Valley and eventually (a LONG time later) many recognized that benefits of avoiding the walled garden all together. This awakening took a long time and was aided by the billions of “40 hours free” CD-ROMs bundled with every piece of paper that didn’t come in a roll. The technical term for these dog chews was “customer acquisition costs.”

Today AOL is a quaint relic which serves only as leading indicator for the future of Yahoo. The parallels are striking, in my humble opinion. Sure there is Yahoo Mail, and Finance, and Flickr, and one or two other destinations. Yes, I understand that traffic is great and growing (just like AOL’s did during its fabled denouement). But is it relevant? Does anyone care if it goes away? I use a few services on Yahoo, from email to my.yahoo.com to finance, and yet, should any of them go away, my regret would be shortlived. I contrast this with Ebay, Google, Amazon, or Expedia (some of the other Survivors from Web 1.0). Take away my Google search and I might pack it in for the evening. I don’t think I’ve ever used Yahoo’s own search engine. Flickr is good for users, not great, and I suspect a loss-leader at best for the company.
This Ain’t Sticky
My point is this: As analysts split apart the financial and traffic numbers on the yahoo.com properties, they find great reason for holiday cheers: the numbers are up, traffic is increasing, and the acquisitions are working. As I contemplate a hypothetically defunct Yahoo mail service (many supporters believe this is the stickiest of all Yahoo properties) I think back to the days the 650 area code was introduced in the San Francisco Bay Area and 917 in NYC. It was inconvenient to change, but life went on. Turns out there was nothing sticky about it.

For the sake of venture liquidity, I hope Yahoo figures out how to get back on track. Nasdaq needs some competition.