Depressed dot commers have stopped wondering when it's going to stop hitting
the fan. For many companies in the sector, the only viable solution is exit.
But what kind of exit? For the technically adept, such as AltaVista, the answer
has been to hunker down into serious work for serious enterprises; to leverage
and build on their past technological successes, and to jettison bubble-inspired
flights of fancy.
But this hasn't been the most common pattern for the major B2C portal companies.
Instead of mucking around with the hard cold reality of information technology,
companies like AOL knew all along that their strengths were more intangible and
ephemeral - and focused on the consumer. So via a historic merger with Time Warner,
they exited "upwards" into the feel-good land of Big Media. AOL's Netscape division,
formerly a browser technology pioneer, now proclaims itself a "media company."
Which is precisely the crossroads that Yahoo has been stalled at for the past
year or two. Its founders were adamant that Yahoo remain independent from big
media suitors, because "we're Yahoo." It was probably a mistake, but it isn't
too late to rectify it.
Yahoo is currently going through the motions of responsibly implementing a more
diversified fee-based revenue base. That means it's trying to demonstrate to the
world that it "knows how to run a business." But which business?
Yahoo can't credibly exit the dot com world by hunkering down as an IT provider.
As one industry CEO commented to me, a foray into the enterprise space will be
difficult because Yahoo doesn't understand, as companies like Microsoft do, how
to build Cost of Switching into their products. As my correspondent wrote, "this
gives Yahoo the staying power of the latest summer blockbuster."
So where is the "out" for Yahoo? Instead of torturing itself with a low-risk,
low-reward process of buckling down, Yahoo will probably try to escape "upwards"
(as AOL did) through a portal to potential greatness in the high-stakes game of
Being careful has certainly never gotten anyone anywhere in that world. While
plenty of careful, technically adept people are needed to operate any large
enterprise, today's big media empires have often been built by obsessed,
Who wouldn't have questioned the sanity of a Ted Turner, boasting of his goal
to build a cable news empire (an industry that simply didn't exist at the time),
one that would be the "New York Times of television news" to boot?
Who didn't heap scorn on Rupert Murdoch and his schlocky fourth television network,
FOX, in its early years?
A recent Boston Globe article about Viacom chairman Sumner Redstone talked of
his humble beginnings. But humble he is not - nor ready to ride off in the sunset.
His personal net worth is estimated at $14 billion. He checks the stock ticker
"about every 20 seconds."
People like this make big bets on what seem to many careful businesspersons like
symbolic, intangible pieces of imaginary universes. They tend to have an irrational
confidence that huge sums of money can be found to keep things building.
On a more modest scale of high-stakes frivolity, wasn't it little more than vanity
that caused Edgar Bronfman, heir to the Seagram fortune and still an important
shareholder in Vivendi Universal, to orchestrate an exit from a diversified liquor-and-consumer-goods
empire into the rubbing-shoulders-with-the-talent lifestyle of the Big Hollywood
One always marvels at the vanity. Canada's Ted Rogers always leveraged his cable
company so perilously that bond raters always gave this large cable empire junk
bond status. Some lucky breaks with the rising value of cable assets pulled Rogers'
assets out of the fire, and the company today is a diversified holder of not only
cable and new media assets, but wireless phone service, a chain of video stores,
and major broadcast media outlets to boot. Recently, Rogers also bought the Toronto
Blue Jays. The end product in an empire like this may not be particularly sophisticated.
But the control over consumers' leisure time habits and a nation's communications
infrastructure is mindboggling.
So what of Yahoo? So far they haven't been run by the kinds of people that want
to own everything and abuse their positions as owners to have a chance to meet
Winona Ryder or play golf with Michael Jordan. Exiting Excite@Home CEO George
Bell carefully stated that the company would have to "do less" if it were to survive.
But surely this cannot be Yahoo's path. For one thing, Yahoo doesn't have a subscriber-based
Internet access business to fall back on. It must go big into Big Media, or go
The hiring of CEO Terry Semel, a seasoned Warner Brothers executive who has overseen
a breakneck pace of growth at a major media company, and who is accustomed to
the excesses and lavish spending common to that world, should turn out to be a
good first move. The move will prove sound should Semel manage to track down the
needed obsessed billionaire to make a play for Yahoo.
Obsessed people like Ted Turner and Rupert Murdoch tend to be passionate in their
belief that they can create what isn't there yet. The idea that "my company's
programming will be in every living room in America" type of thing. So what kinds
of futuristic-but-fun services could a unique company like Yahoo push out to the
general population if it were combined with a company with major broadcast assets?
What about a customized news digest service that makes a push into hotel rooms
and business flights? How about using television sports broadcasts to get the
world hooked on Yahoo Fantasy Football, Baseball, etc.? It's a short jump from
there to substantial revenues as a reseller of online sports betting. Where permitted
by law, of course.
Yahoo has done well. It's got a lot of us hooked through sheer product quality.
But it can't pull off these newer, converged online services on its own. So now
potential buyers need to be convinced that Yahoo is their best bet to get in on
some of these futuristic-but-fun programming concepts.
At the top of every page of "Job Openings at Yahoo" posted online, there should
be a prominent advertisement for the leader who will take Yahoo to the next level:
"Wanted: crazed hallucinating visionary who controls large media empire.
Must be obsessed with the idea of building an even larger empire full of futuristic-but-fun
stuff that gets rammed down consumers' throats through diabolical, monopolistic
distribution channels. Should be motivated by a goal of total planetary mind control.
Must possess uncanny ability to talk bankers into billion-dollar loans. Recent
marriage to trophy wife forty years his junior would be a definite plus." [Note
to critics: I'm not making that last bit up. Seventy-year-old Murdoch recently
married a 31-year-old news anchor.]
Rupert Murdoch owns something called News Corp and something called Fox Entertainment.
According to his bio,
he also owns publishers HarperCollins, the huge European satellite network BSkyB,
Twentieth Century Fox, 22 US television stations, 25 magazines, most notably TV
Guide, and the LA Dodgers baseball team.
To think that Yahoo ever thought that they could stay independent from all this.