"It's probably too much to hope any company could avoid being damaged by depending on a bogus source of revenue. But startups can learn an important lesson from [the fact that] in the software business, you can't afford not to have a hacker-centric culture."
I think Yahoo made the correct decision on both counts. As far as depending on a bogus source of revenue, all new advertising mediums are massively undervalued at first, then massively overvalued, and then only eventually even out. It would be a huge mistake not to plan your entire business model around this cycle. Yahoo did this, and they made literally billions of dollars because of it. Sure, if they had chosen to go into a different sort of business they could have perhaps extended their reign, but it's hard to argue that they made the wrong choice.
As for not having a hacker-centric culture, I think they made the right choice here as well. Every time Yahoo bought a startup, their stock rose more than they paid for the company, meaning every time they acquired their tech through a buyout the execs took home massive paychecks. Whereas every dollar they spent on elite programmers was money out of their pocket.
I think the lesson here, if anything, is that you can make mostly the right decisions and your business can still decline over time.
Incidentally, I heard a great story about one of the Yahoo sales guys. Apparently he bought his own inventory at the end of every month to meet his quota, because the stock he was getting vested was worth more than the 100K or so he was required to fork over each month. (Because he obviously couldn't actually make any sales.)
I think Yahoo made the correct decision on both counts. As far as depending on a bogus source of revenue, all new advertising mediums are massively undervalued at first, then massively overvalued, and then only eventually even out. It would be a huge mistake not to plan your entire business model around this cycle. Yahoo did this, and they made literally billions of dollars because of it. Sure, if they had chosen to go into a different sort of business they could have perhaps extended their reign, but it's hard to argue that they made the wrong choice.
As for not having a hacker-centric culture, I think they made the right choice here as well. Every time Yahoo bought a startup, their stock rose more than they paid for the company, meaning every time they acquired their tech through a buyout the execs took home massive paychecks. Whereas every dollar they spent on elite programmers was money out of their pocket.
I think the lesson here, if anything, is that you can make mostly the right decisions and your business can still decline over time.
Incidentally, I heard a great story about one of the Yahoo sales guys. Apparently he bought his own inventory at the end of every month to meet his quota, because the stock he was getting vested was worth more than the 100K or so he was required to fork over each month. (Because he obviously couldn't actually make any sales.)