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June 04, 2013

Life After Tumblr: Predicting Yahoo's Next Acquisition

By TMCnet Special Guest
Josh Alexander, CEO and Co-Founder, Toopher

While I believe that Marissa Mayer is incredibly shrewd and wicked smart, the Tumblr purchase is -- how shall I phrase it carefully? -- a stretch.

The acquisition of Tumblr by Yahoo is a very expensive gamble to be a fringe player in the social sharing space. Let’s consider the fact that Tumblr opted off one of the most prestigious tech lists out there — those who rejected a $1 billion offer from Yahoo, including PayPal, Skype, and Facebook, implying that Tumblr's shot-callers thought the Yahoo! offer was as good as it’s going to get.



So, why did Yahoo overspend to be the eighth most significant social sharing platform? 

One must question how Yahoo views itself in context to its Silicon Valley peers Google (News - Alert) and Facebook,

companies that have similarly spent serious dollars to reap significant benefits. 

It occurred to me that it could be valuable service for me to generate a shortlist for Mayer and her board of other similarly misguided M&A opportunities warranting consideration:

Ray-Ban

Given the media firestorm that ensued after the release of Google Glass, Yahoo considered purchasing the popular sunglass manufacturer Ray-Ban; after all, what's cooler than wearing glasses with no ophthalmological value? Exactly — wearing sunglasses with no ophthalmological value. Through this acquisition, Yahoo would have leap-frogged Google and solved one of Google Glasses' greatest weaknesses — privacy. With the ultra dark tint option, Yahoo! Sunglass would have provided complete anonymity to its wearers.

BlackBerry

Apple (News - Alert) has iOS, Google has Android, Facebook has its new Home product, and Microsoft has Windows Phone; clearly this mobile thing is going to be big. To make a splash in to the mobile market, Yahoo considered purchasing BlackBerry. Not only would this have established Yahoo as a brand in mobile, it would have opened a door to the enterprise space. While this deal may still be on the table, Mayer realized that every day she sat on the paper she could have saved about $5 million.

Barnes & Noble

Apple has the iPad, Amazon has the Kindle, Microsoft has Surface, and Google has pretty much everything else. To break into the tablet market, Yahoo courted B&N to co-op the Nook (renamed Nook!). Additionally, this purchase would have positioned Yahoo! against Amazon as a major player in the highly lucrative physical book retail market. Tablets and Tolstoy? It's a toopher!

On a more serious note, Yahoo has not yet become so marginalized that it cannot reposition itself to define markets where it still has influence. As such, there are a handful of acquisition targets that may actually make sense:

Identity

There is a quiet storm brewing among the major online players, a competition for who will own your online identity. The use of federated identities is heating up as Facebook, Twitter, Amazon, and Google are all vying to snag the top spot. Rather than throw in the towel and allow Yahoo! Mail users to use their Google identities to access Yahoo! Mail, Yahoo has the opportunity to differentiate its identity as the most secure and ubiquitous platform available. This opportunity seems like low-hanging fruit and should not even require a major acquisition.

Spotify (News - Alert)

My grandma has started using Spotify, meaning it's either jumped the shark or gained enough critical mass to present a compelling challenge to iTunes. While Spotify and iTunes are serving the same market in very different ways, Yahoo!'s content and media differentiation could be strengthened instantaneously through the acquisition of Spotify. Plus, as an added bonus, a Spotify acquisition seems like it has the potential to be accretive quickly.

Financial Times (News - Alert)

Yahoo! Finance is still a hot spot for consumer and prosumer financiers. To expand its footprint, owning greater resources in topic-specific content creation would further differentiate Yahoo from competitors. The Financial Times is a well-respected publication, but has a poor online presence. While this is a niche, it would solidify Yahoo's position in the space and allow Yahoo to take a step up-market toward enterprise-level opportunities.

Elon Musk

Yes, Elon Musk is a person, not a company, but hear me out.

Yahoo effectively tried to pluck up Elon when it unsuccessfully bid on PayPal, which could have given Yahoo an incredible presence in financial transactions. Elon has been relatively successful post-Yahoo offer. Elon's following foray created the Tesla, the world's second most awesome car. Elon's next venture involves spaceships. Given that Google is already working on an autonomous vehicle and that SpaceX (News - Alert) necessarily needs an exclamation point, buying Elon Musk may make good business sense.

However this plays out, congrats to the Tumblr team, the undisputed winners.

About the author:

It's always ironic when the guy in charge of strategic vision wears glasses. Josh is Toopher's business juggernaut. With a deep and extensive background in investments, strategy, corporate finance, and enough tech know-how to be dangerous, Josh manages Toopher's business development. Josh's experience includes Adjunct Professor of Finance at the McCombs School of Business (UT Austin), Sr. Advisor at Durbin Bennett Peterson, CFO of Lucas Petroleum, and Consultant at Tucker Alan. Josh earned an MBA in Finance and Strategic Management with honors from the Wharton School, a BA in the Plan II Honors Program with special and high honors and a BBA in Finance with honors from The University of Texas at Austin, and a Professional Certification in Computer Science from Stanford University.




Edited by Rich Steeves
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