Blood Unicorns

Don’t Cry for Yahoo

When big tech companies fail, they have only themselves to blame.
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By Simon Dawson/Bloomberg/Getty Images.

This week, Yahoo’s seemingly interminable 20-year run as an independent company came to an end. Verizon announced a $4.83 billion deal to buy the core assets of the flailing web giant, including the company’s media, advertising, and search properties, bringing closure to a company that never successfully pivoted from being a 1990s web portal into something more. “Yahoo was a great company where a lot of good people did good work,” investor Benedict Evans lamented on Twitter this week. “Nothing in tech lasts forever.” Even reporters couldn’t stay out of the defeatist fray. “Yahoo’s troubles long preceded Marissa Mayer,” Wall Street Journal columnist Chris Mims added. “Maybe foolish to think she could turn it around, but she tried.”

It’s easy enough to paint Yahoo as a victim of changing times. But this rhetoric absolves the company’s leadership and Silicon Valley boosters of the role they played in driving Yahoo’s value down to little more than a tenth of the $44 billion that Steve Ballmer offered for it less than a decade ago. Yes, Yahoo's troubles preceded Mayer’s tenure as C.E.O.; the chief executive role high atop the company’s Sunnyvale headquarters was always a revolving door for dubious talent, from Carol Bartz, who was unceremoniously fired after two and a half years at the helm, to Scott Thompson, who infamously forged details on his résumés. Mayer was the sixth C.E.O. at Yahoo in five years (including two interim chief executives). Despite the constant executive upheaval at the company, it wasn’t until the end of Thompson’s tenure and the beginning of Mayer’s that investors like Dan Loeb and hedge funds like Starboard took notice and began using activist tactics to force radical changes at the company, including the laying off of 15 percent of Yahoo’s workforce. Even then, there was little sense of accountability at the once-great tech company, from Mayer or other top executives, as Yahoo prepared to hang up the “for sale” sign.

Yahoo isn’t the only company that has struggled to evolve beyond its initial promise. Twitter, after 10 years, now seems a likely acquisition target, too. User growth has stagnated, and the company is relying on a multi-million-dollar, last-ditch effort to expand into live-streaming to boost engagement and sell ads. For all its years of C.E.O. changes and turnaround efforts, Twitter has little to show. Of course, investors—by profession, ever-optimistic about these companies—still cling to hope for the company. “Always trendy for press & pundits to pile on a struggling startup like Twitter; sometimes #schadenfreude, sometimes factual—often both,” investor Jason Calacanis pontificated in the wake of another dismal earnings report from the company. But calling Twitter a start-up is irresponsible; it fails to take into account the fact that the company is 10 years old, a mature, public company that has had years to work out its problems. And if a company can be so easily toppled by press and pundit schadenfreude, the company should, perhaps, reconsider its business model.

Companies like Twitter and Yahoo already get too much benefit of the doubt by virtue of being in the tech sector. At the beginning, it’s assumed these companies will be unprofitable; investors clamor to pump money into them, typically on the strength of pitch decks and founder promises. In no other industry are companies allowed to flail for so long before ultimately getting smacked down by public or private markets. That blind faith can cut both ways. Investors’ belief in a singular concept is what has led to the creation of behemoths like Amazon, which went public while it was still unprofitable and has now reported four consecutive profitable quarters. But it’s this same faith that can make investors turn a blind eye to problems until it’s too late. Last month, Tim Draper made an appearance on Bloomberg TV to defend Theranos, the bumbling blood-testing start-up, which was once valued at $9 billion. “Theranos is being attacked by the powers that be in big pharma, in founder Elizabeth Holmes’s competitors, in the world of medical insurance, the people in government who are going to be very much affected by a really cheap, really effective, wonderful solution,” he said. Weeks later, Holmes was banned from operating any labs for two years. The accuracy of the company’s technology remains an open question, as it has for the past year.

Too often, the denizens of Silicon Valley are loath to take responsibility when financial reality falls short of their starry-eyed vision. And investors, perhaps, are too forgiving of failure. When Mayer accepted the job at Yahoo, she knew she was inheriting a fixer-upper of a tech company that had been in decline for ages. To cast her as someone requiring pity neglects to take into account the $55 million she could snag in severance if she ends up leaving Yahoo, and the $162.1 million Mayer has earned during her tenure as C.E.O. of the public company. (Yahoo’s indulgent board, which signed off on her compensation package, must also come in for criticism.) It also neglects to take into account the $3 billion Yahoo spent on acquisitions during her tenure as chief executive—including the $1.1 billion purchase of Tumblr, the largely failed microblogging site—or the expensive hires of people like ad man Henrique de Castro, who was paid $109 million for 15 months of work—money that would have been better spent devising practical strategies for keeping its many thousands of workers gainfully employed. Don’t cry for Marissa, and don’t cry for Yahoo.