Is this what dying tech companies do? Sue the more successful next generation? Yeah, evidently.
The good ship Yahoo is on the rocks. Wave after wave of bad news threatens to crumble the company. First, their cofounder, Jerry Yang, ditches the company in January. Then, we find out that Yahoo’s new CEO apparently has big plans for restructuring the company, which we all know means throwing hundreds or thousands of employees over the bow.
The good ship Yahoo is in trouble.
But now, in a last-ditch attempt to save the beleaguered tech company, Yahoo is suing Facebook for patent infringement. And this makes Yahoo appear significantly more desperate than previous news would lead us to believe.
On the outside Yahoo may seem a lot like Kodak, which sued the likes of Apple and HTC over digital imaging patents, only its desperation less justified and its claims less substantiated.
Kodak is bankrupt, was recently delisted from the NYSE, and Wall Street’s grave dancers are tearing off bits and pieces of whatever is salable. In one of its last corporate actions, Kodak filed patent infringement lawsuits against companies far larger and technically advanced than it on decades-old technologies.
Yahoo is a company worth almost $18 billion. Yahoo pulls in about $1.3 billion in revenue. It just acquired a company, Interclick, for some $270 million. And while it might be fair to say that Yahoo has seen better days, it’s by no means a bankrupt company so why is it acting just as desperate?
Kodak was an amazing company, a hub for innovation which developed some of the fundamental technologies underlying digital photography. (Kodak developed the first digital camera in 1975. It weighed 13 pounds and stored images on a tape deck, according to Willy Shih, a former Kodak executive and current Harvard Business School professor, in an interview with NPR in January.) While I think Kodak’s move to monetize its intellectual property portfolio was late in coming, the company’s actions against Apple, HTC, Fujifilm, Samsung, and RIM were justified. Each of those companies borrowed heavily from Kodak’s innovations and failed to compensate Kodak up front.
And who is Yahoo? Ultimately, it’s a jack of most trades and a master of none. Yahoo has a search engine which nobody uses. It offers media outlets for news, sports, finance, music and movies. It offers forums for questions and Answers, ecommerce services for “Shopping”, real estate, automobiles and travel. And then there’s Messenger and what seems like a zillion other apps and services, none of which I use. This is a serious question: What were Yahoo’s core innovations? It was a web portal. The commercial viability of web portals died with the advent of the search engine. That’s it.
In an effort to become an omnicompetent internet company, a full-service provider of everything anybody could ever ask of the Web, Yahoo did little to innovate and more to riff on promising new genres of web products, all while ultimately failing to deliver a user experience that competes with the dozens of competitors in each market segment Yahoo entered in to.
Unlike Kodak, Yahoo never was a truly innovative company. It may have had its moment in the sun, in those heady pre-Google days of the intertubes, but ever since it’s been the slow wildebeest in a highly competitive field consisting mostly of lions, tigers, and other cunning, tactical and more specialized predators.
Kodak had some pretty serious patents in its intellectual property portfolio. It had legitimate claims to its technology. But Yahoo’s IP portfolio may be similarly voluminous to that of Kodak, but the contents of Yahoo’s portfolio are far less substantive. Whereas Kodak’s core innovations came on the hardware side, Yahoo’s patents are primarily for software and business methods, which many believe are difficult to defend and even morally wrong.
Fred Wilson, a venture capitalist and one of my favorite bloggers, said Yahoo crossed the line by filing this lawsuit.
The patents that Yahoo! is suing Facebook over are a crock of shit. None of them represent unique and new ideas at the time of the filing. I supect they all can be thrown out over prior art if Facebook takes the time and effort to do that.
But worse, Yahoo! has broken ranks and crossed the unspoken line which is that web companies don’t sue each other over their bogus patent portfolios. I don’t think there’s a unique idea out there in the web space and hasn’t been for well over a decade. Pretty much everything useful is based on prior art going back before the commercial web existed.
Wilson further added that, “I used to care about that company for some reason. No more. They are dead to me. Dead and gone. I hate them now.”
Fred Wilson is right. Nothing about the company is compelling anymore, not to him and not to me. I moved away from Yahoo mail to Gmail years ago; my home page changed from Yahoo to Google to Facebook. It’s one of those companies which has largely been left behind by more nimble competition, and whose appeal has waned as its more tech-savvy users move to platforms and services which are—quite frankly—better, more popular and better-designed.
When Kodak filed for bankruptcy, we may not have been surprised, but we cared. The public recognized the contributions Kodak had made to the industry and their core audience, photographers, mourned. But nobody is crying for Yahoo, not because their products lost popularity, or because the articles on Yahoo News were notoriously poorly-written, but because now they’ve lashed out. They’ve “weaponized” their intellectual property. Yahoo’s move to pit its portfolio of rather specious software and business methods patents against Facebook’s equally “bogus” patent portfolio is a shot across the bow which could—but likely won’t—take what’s up to now been a relatively cold patent war between tech titans and turn it into a hot one.
Writer’s Note: I leave you, reader, with the following: Talking about software patents and one tech company’s inveighs against another on the grounds of intellectual property makes me sound like more of a fuddy-duddy than I actually am. And this is a problem with tech journalism in general. It leaves the reader somewhat far-removed from what actually matters, what actually effects them in the day-to-day grind. Intellectual property doesn’t really matter. And it’s not because of IP that Yahoo is in trouble.
I posit the following explanation for Yahoo’s fall from grace: Yahoo has a lot of fingers in a lot of pots. It lacks an overarching platform which unifies each of its services; there’s no thread of continuity between—say—Yahoo Answers and Yahoo Real Estate. Yahoo was a company with a great deal of promise, but its products and services are not user-friendly.
I have friends who are Twitter “power users“. I have friends who are power users of Gmail. I am a power user of Facebook. I challenge you to name one person who is a power user of Yahoo.
Take a minute to think about it.
