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Yahoo Acquisition Proves Ephemeral Tech Is Just a Fad

Yahoo's purchase of chat company Blink didn't totally kill the ephemeral software market. But it should bring people back to reality.
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In its latest acquisition, Yahoo purchased Blink, an ephemeral chat system akin to Snapchat, which turned down a $3 billion acquisition offer from Facebook last year. But that's OK, because Facebook then went out and bought WhatsApp--for $19 billion. And just to close the circle, WhatsApp's co-founders were previously employed by Yahoo.

But things have changed dramatically in the industry since last year. The quick take: chat isn't worth what the industry thought it was, ephemeral as a concept is out, and big acquisitions are a distraction to the real business of being an entrepreneur.

Chat lost--or never had--value.

What is most telling about Yahoo's acquisition of Blink is what wasn't mentioned: the price. When a dollar figure is really big, a publicly-held company has to announce it. When that company doesn't mention it, it's because the price wasn't considered "material," in an accounting-and-SEC sense. Yahoo might have paid tens of millions for the company, but it didn't get close to a 10-figure deal. It probably wasn't at the nine-figure threshold either. The allure that chat had for the industry is beyond an excited squeal of "Ooh, let's pay billions!"

Ephemeral isn't an industry.

Blink apps for iOS and Android will both be shut down and the development team will go to work on "smart communications products." This seems to be an acqui-hire. Even if Yahoo does want to integrate ephemeral chatting into its products, that is a feature, not a business. As high tech has repeatedly shown through the decades, concepts get hot and then they cool off. Maybe people have sobered up, as they periodically do, and realized that ephemeral might not be as solid as they'd like. The Federal Trade Commission cracked down on Snapchat because--surprise, surprise--images and texts don't necessarily disappear forever if recipients decide to record them. And then, there was the data that the app collected without users' knowledge.

Big acquisitions are a distraction.

Successful entrepreneurs have to focus on what can make their businesses work. It's a hard enough job when you don't have loud explosions and bursts of color competing for your attention. Facebook's attempt to buy Snapchat and then its purchase of WhatsApp for what seems a ridiculously high amount of money--even with 500 million users, because there's no telling if they'd stick around for the monetization necessary to make the acquisition pay off--was like a series of roman candles ignited at the desks of entrepreneurs around the country. Talk about tempting. However, the chances of that sort of good fortune knocking at your door are somewhere between winning the lottery and none. Even if far fewer people are in the industry than buy lottery tickets, that type of payoff depends on more than the blind luck of a random draw. You need the right concept that happens to coincide with the shifting whims of large corporations.

When building a business, make sure it is sustainable and don't count on your exit strategy. If there turns out to be no convenient way out, you want to be sure your ship will float, not sink.

Last updated: May 15, 2014

ERIK SHERMAN | Columnist

Erik Sherman's work has appeared in such publications as The Wall Street Journal, The New York Times Magazine, and Fortune. He also blogs for CBS MoneyWatch.

The opinions expressed here by Inc.com columnists are their own, not those of Inc.com.



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