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SELLING A BUSINESS

Yahoo: A History of Botched Start-up Acquisitions

From Delicious to Flickr, Yahoo doesn't have the best track record when it comes to start-up acquisitions. Can Tumblr break the mold?
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Founder David Karp made a promise to the Tumblr community Monday in announcing he sold his company to Yahoo for $1.1 billion:

"Our team isn't changing. Our roadmap isn't changing. And our mission--to empower creators to make their best work and get it in front of the audience they deserve--certainly isn't changing."

The 26-year-old Karp may truly believe in Tumblr's ability to maintain its independence from its new parent company, but Yahoo's checkered track record of acquisitions suggests that living up to that promise may be harder than he realizes.

As 37Signals' Matt Linderman wrote in a lengthy blog post a few years back, when it comes to Yahoo's start-up acquisitions, from Flickr to Delicious, history tends to repeat itself.

"Both sides talk about all the wonderful things they will do together. Then reality sets in. They get bogged down trying to overcome integration obstacles, endless meetings, and stifling bureaucracy," Linderman wrote. "The products slow down or stop moving forward entirely. Once they hit the two-year mark and are free to leave, the founders take off. The sites are left to flounder or ride into the sunset. And customers are left holding the bag."

As Linderman points out, the most famous of these fumbles, of course, was the $35 million acquisition of Flickr in 2005. Though founders Caterina Fake and Stewart Butterfield vowed at the time, "We're going to grow and change, but we're in it for the long haul, with the same management and same team," both founders ended up leaving the company in 2008, just a year before Yahoo made deep cuts to Flickr's engineering team. 

In 2005, Yahoo also bought the online bookmarking tool Delicious. At the time, founder Joshua Schachter was also optimistic. But just two and a half years later he, too, left the company, later claiming on Quora, "I had been mostly stripped of responsibilities and employees less than a year after acquisition."

Linderman explains how the same sad song played out at Upcoming, an event calendar site that Yahoo shut down in April, as well as MyBlogLog, a blogging network Yahoo acquired in 2007 and terminated in 2011. All of this leads Linderman to ask the fundamental question: "When a company is bought, does it deserve acquisition congratulations or condolences?"

Of course, the obvious difference this time around with the Tumblr deal is Marissa Mayer. Since she became Yahoo's CEO, she's gone on a well-publicized buying spree, snapping up 11 companies in total, many of which appear to have been talent acquisitions. This time, however, the release announcing the Tumblr acquisition bluntly stated Yahoo's promise "not to screw it up." To her credit, Mayer is also working to reverse the damage done at Flickr, announcing a completely overhauled site at yesterday's press conference.

While Yahoo's acquisitions may have left a trail of disgruntled founders in their wake over the years, it remains to be seen whether Karp will be one of them. That $275 million he reportedly made on the deal may keep him happy--at least for a little while.

IMAGE: Photo courtesy ofFlickr
Last updated: May 21, 2013




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