December 17, 2010
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Thoughts On Delicious

Yahoo is abandoning the bookmark service.

This seems odd, because they paid a lot of money for delicious, and because – as far as I hear – it seems to run well, getting heavy usage at modest expense. It’s not bringing in money, but it commands some mindshare, and Yahoo paid a lot of money for it not long ago.

One great difficulty in business right now is the following cycle:

  1. Startups create novel services with challenging new business model
  2. Founders cash out in sale to large firm for lots of money
  3. Large firm subsequently finds itself with an asset it cannot quite exploit
  4. Because the large firm is so large, it simply writes off the purchase and discards what it purchased only a few years ago. To the large firm, the whole transaction is a distraction.

The result is simply destruction of wealth: we start with a nice little business, and we end up with nothing. It’s not just Web businesses and not just lack of monetization; I’ve seen this happen, for example, with consulting firms that were profitable from day one.

If you were discarding steel and glass and Aeron chairs, people would pick them up off the sidewalk and reuse them. But when you discard a service organization, there’s nothing left; it’s all up in smoke. What a waste.