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> She has defended her strategy by stressing that growth is the lifeblood of internet businesses. Or, you know, utility. It's funny how she defends all these
by joslin01 10y ago
> She has defended her strategy by stressing that growth is the lifeblood of internet businesses.
Or, you know, utility.
It's funny how she defends all these acquisitions underneath some imaginary fable that growth == success. Google didn't reach where it is today because it grew fast -- it was able to grow because it has basic utility and was known as the best amongst the competitors.
The key question for Yahoo has always been, what is the core part of our business that users love us for? As she probably knew, fantasy sports is a big one, but unfortunately that's not going to be enough for a company as large as Yahoo. As a result, they bought up a bunch of startups to try and find more core-utility.
It's been fun to watch, but I'm with the crowd that says Yahoo can't really change and should just sell its core off. When the average consumer thinks internet, they're not thinking "oh thank god Yahoo is there", but without Google or Amazon -- two companies that can justify aggressive growth -- we'd be left with a shoddier internet and that's just the basic truth of it all.
- Touche 10y agoYahoo was sustainable and profitable. They weren't as big as Google or Amazon but they made a lot of money. But that wasn't good enough for the investors or the public, who want infinite growth.
- WalterBright 10y agoI never understood the mania for growth. If a company is reliably returning, say, 20% profit, I wouldn't mess with success.
- jonknee 10y agoThe world isn't static, a "reliable" profit is worth less and less each year if a company isn't growing. Companies are valued based on their future earnings potential, growing companies will thus be valued much more highly. In Yahoo's case not only was there no growth, but their business was shrinking without a clear path to stopping that.
- refurb 10y agoOK, but unless that company is paying out a dividend, why would you invest in it? Theoretically, a stock price reflects future earnings. If future earnings are constant, then the stock price doesn't move. Why buy $1M in stock if you know 5 years from now it'll be worth $1M?
- ergothus 10y agoBut in turn, if a company is getting 20% profit, why do they need people to invest?
- toast0 10y agoBecause they're currently a public company, and without people interested in buying the stock, it's going to attract activist investors which often ends up as a big distraction without making any real changes.
- ergothus 10y agoSo it sounds like the problem is systemic - this is why I'm never eager about companies going IPO...for every Google that ensures shareholders can't kill the company, there are hundreds that guarantee mid-term failure for short-term gain.
- jsprogrammer 10y agoEquity cash out
- TheOtherHobbes 10y agoBecause you know 5 years from now it will be worth $1m, and not a lot less after a series of growth-oriented misadventures that didn't pay off. Also, you'll be getting steady income from dividends. Also, in the bigger picture you're less likely to be dealing with a manic depressive cyclical market that gyrates wildly between extreme growth mania and extended depressive episodes. What you don't get is a monkey-brain dopamine kick from telling yourself that you're an awesome person who beat the market. It makes investing predictable and drama-free, and where's the entertainment in that?
- mst 10y agoDividends are taxed at a higher rate than capital gains. Once you look at the incentive structures that creates, the mania becomes disappointingly rational on the part of investors.
- mcguire 10y agoIt also converts investing into a negative-sum game.
- Naritai 10y agoThat leads back to the dividend question. As a shareholder, you only make money one of two ways: your stock goes up, or you get dividends. To be attractive, a company needs to be doing one or the other.
- usrusr 10y agoIf you think the company will keep returning that profit, no more, no less, and it happens to be true, then you will most likely find market participants who are convinced that the company will return more than that in the future. Since their projection of future returns is much higher than yours, they will offer you enough to sell. The new owners won't be content with with the stable return because that's not what they paid big money for.
- jonnathanson 10y agoA company usually needs to be growing YOY in order to reliably return a 20% profit. Unless it's a protected monopolist, or a comfortably ensconced player in a stagnant market. (In which case it's ripe for competition.) It is entirely possible to overprioritize growth. Doing so can lead to overreach, spiraling costs, bloat, and loss of focus. But at least some growth is often required just to maintain a stable return. It also bears mentioning that ther are many possible factors driving growth, some of them endogenous and some of them exogenous, some of them cyclical and some of them secular. It's very hard to speak of the blanket term "growth" as being particularly meaningful, in and of itself. We need to be specific.
- jonknee 10y agoIt's not too complicated: if you don't pay a reliable dividend you need to have growth to keep investors happy. Yahoo's profitable businesses have been shrinking and they have been unable to find new ones to replace them.
- joslin01 10y agoSure, but looking at their historic revenue, you're going from ~1.8B between 2007 - 2009 down to ~1.1B 2011-present[1]. In fact, their latest quarter for Mar 2016 only netted them 1.08B. This is a ton of money and I reckon they could last a long time on it, but I believe the investor-mindset is something like "if you're not growing, you're dying" and if you're dying, you should probably sell at your peak. Looking at Yahoo revenue, it's clear they're dying and as a result, I wouldn't paint this as just greedy investors being greedy. [1] - https://ycharts.com/companies/YHOO/revenues https://ycharts.com/companies/YHOO/revenues
- tim333 10y agoAs an occasional investor if a company isn't growing then I'd say we want it to make profits in the old fashioned manner of sales exceeding expenses. Yahoo was struggling a bit there. If you look at the earnings of the previous years there was quite a lot of funny stuff relating to Yahoo Japan rather than straightforward profits from happy customers.
- usrusr 10y agoIt's an inherent risk of being publicly traded. Imagine a company with perfectly stable profits, unlikely to change in any direction. If some part of the market develops a collective delusion about that company being a prime growth candidate, then that part will buy out the realists. When that has happened the new owners will reshape the company into the growth-or-die-trying experiment they where expecting to buy.
- zelias 10y agoShe should've focused on growth adjacent to Yahoo's core strengths -- trying to acquire FanDuel in its earlier days, for instance. Maybe we could've seen Yahoo lead the daily fantasy sports industry.
- deepfriedbits 10y agoAs I understand it, she/they did try to make a play here, acquiring Jerry Shen and Bignoggins for fantasy innovation, including daily stuff. Unfortunately, he was quickly fired from Yahoo! for sending out an inter-department email quoting N.W.A. (the rap group) with language one wouldn't consider work appropriate – particularly at a company that size.
- oldmanjay 10y agoI guess there's a pretty good argument to be made that people deserve to be protected from concepts that offend them. I've just never heard it.
- sjg007 10y agoOne issue is that fan duel is basically illegal in the us, despite the legislation that seems to legalize it.. Now maybe as an overseas fan duel could work.
- OpenDrapery 10y agoGrowth for the sake of growth is the ideology of the cancer cell. https://en.wikiquote.org/wiki/Edward_Abbey https://en.wikiquote.org/wiki/Edward_Abbey
- gooserock 10y agoAlso ponzi schemes.