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The Ugliest Girl At The Dance: How Yahoo Destroyed Yelp’s Google Acquisition

106 points by bdr 16y ago

MaysonL 16y ago
Sounds like the Yelp board blew it.
- jan_g 16y ago
  What I don't understand is this: who has the power to decide such things? In this story it seems like there are two entities who can block each other. Why didn't someone decide for Yahoo, if their offer was so much better? It's in the interest of the shareholders.
  - staunch 16y ago
    There's probably a legal agreement at Yelp that specifies what percentage of stockholders must agree in order to sell. It's unlikely the investors have enough equity to force a sale. That's irrelevant though. Even if it was possible Yahoo would not purchase Yelp if all the key employees where vehemently opposed.
    - jan_g 16y ago
      So, if one smaller part of shareholders couldn't force a sale to Yahoo, then why larger part of shareholders couldn't force a sale to Google? As I understand, management was all for Google.
      - deleted 16y ago
        [deleted]
      - staunch 16y ago
        The board of directors at Yelp has representatives from both the management and the investors. The board probably needs a majority (or unanimous) consent in order to sell.
  - bambax 16y ago
    Well if the management team won't work for Yahoo, then it's doubtful the Yahoo offer would stand; therefore there is no Yahoo offer and they should have taken the Google offer. It's not clear why they even considered the Yahoo offer if it was in fact impossible for Yahoo to go ahead.
    - michael_dorfman 16y ago
      They have a fiduciary responsibility to consider the offer, and as the offer was significantly higher than the Google offer, they'd also have a fiduciary responsibility to pursue the offer, even when obstacles (such as management resistance) arise.
      - zumda 16y ago
        I think the point he was trying to make is that the offer from Yahoo only will go through if Yelp brings their team with them. If the management bails, Yahoo won't buy Yelp. This is pretty common, since it is an easy way to get talent into the company without all the recruiting.
        michael_dorfman 16y ago
        I understand that. The point I am making as that Yelp was obligated to consider the offer (even if it ultimately was doomed). In this case, that caused Google to bail, and Yelp was screwed-- but not because their board screwed up. The board only did what they had to do.
        bambax 16y ago
        But as part of their diligence to consider the Yahoo offer, could they not have come to a conclusion such as this one: "given the fact that the management won't go, and that Yahoo won't buy Yelp without a management team, it follows that the Yahoo offer is void and nonexistent. So, let's pursue the Google offer"...? If for example I offered 3 trillion dollars for Yelp, would the board consider my offer (as opposed to laughing it off)? I guess my question is, What is the "reality threshold" of an offer?
ck2 16y ago
Yeah, that's a tasteful expression to use in a tech article title.
- htsh 16y ago
  I came here to say the same thing. This sort of misogyny is exactly why the tech world has difficulty attracting / retaining women.
- peterbessman 16y ago
  I think the title indicates that you are less a member of their target audience than you might have suspected. It was pretty funny and effective to me? And to the poster who called that "mysogyny"...really? Hatred of women? All women? Not just the ugly ones who screw up your attempts to get with the hot ones? And hate? A little strong. This article is about how yahoo is pitiable, and something you don't want to associate with. Kinda like ugly girls at dances. Reality is cruel. Mea culpa.
  - ericabiz 16y ago
    "Hatred of women? All women? Not just the ugly ones who screw up your attempts to get with the hot ones?" You know, it honestly didn't occur to me that the title of this article could be construed as misogynous. But your comment...that type of comment is why I hate the tech industry sometimes.
    - peterbessman 16y ago
      I can understand not liking that attitude, but that's as much Jersey Shore as it is anything else. It's not particular to the tech industry, it's not even predominantly in the tech industry. Take that comment I made, shop it around to 10 random techies, and then 10 random stock brokers on wall street. Which of the two groups do you expect it to resonate more strongly with? Reiterated and refined: that comment is neither in poor taste, nor indicative of an attitude particular to the tech industry. It is not in poor taste because (I take this a priori) TechCrunch does not target an audience offended by remarks like that. And it is not indicative of an attitude particular to the tech industry because there are many other industries where that attitude will, on average, resonate more strongly (again, a priori).
SkyMarshal 16y ago
Is it really so bad at Yahoo? Or are a bunch of fanbois just blowing things out of proportion?
- wh-uws 16y ago
  I think the universal conclusion is that engineering is good - great but management needs alot of work. As a former intern... I concur.
Tichy 16y ago
I can't imagine working for Yahoo is so bad - not worse than other big corps anyway. Seems to me they actually provide a lot of cool things, too. For example, YUI, Hadoop, lots of internet services, BOSS,... Also, I think they came up with internal Hackathons first? Just to name a few things - I am not a specialist on all things Yahoo, but I don't get why everybody seems to hate them.
- deleted 16y ago
  [deleted]
- staunch 16y ago
  Google has vastly more interesting software and services, so if that's the basis for a decision the winner is obvious. Of course that has nothing to do with their decision. They're probably much more concerned with who's more likely to make Yelp successful going forward. That's also pretty obvious. They'd bet $200 million that Google is a better bet. Talk about putting your money where your mouth is.
  - Tichy 16y ago
    If they are working for Yelp, it seems unlikely that after the acquisition, Google will move them to the core search engine team. Good point about where are the better chances. They must really care for their product, then. I would assume it is a given that after an acquisition, you just try to get out of the company asap.
    - eru 16y ago
      We still have lots of the original XenSource team at Citrix.
  - gaius 16y ago
    Google has vastly more interesting software Well, that's certainly the public perception, but I think the reality is more subtle. Like BigTable and MapReduce are just whitepapers outside of Google, but you can actually download and use Hadoop, and who wrote that?
deleted 16y ago
[deleted]
bigbang 16y ago
Maybe working at Google is better than Yahoo!, but both companies are notorious for killing acquired startups. Its hard for me to see any reason for the Yelp management team to take the Google offer when Yahoo! offer was almost 40% more. I suspect there is more to the story.
- neilk 16y ago
  I'm not sure we should really blame either of them for "killing" startups. In truth, often times, the startup just fails to grow much, or fails to complete a rewrite to be more scalable. But that might have happened anyway. We can say that they both have a history of not giving startups what they need to succeed, especially social startups. However, at Yahoo it's largely related to internal power struggles on the order of Europe in 1913, and it can seem much more personal.
ErrantX 16y ago
The Yelp board of directors, faced with a fiduciary duty to act in the best interests all stockholders, couldn’t approve a Google deal when a competing deal was available at a $200 million higher price. If it became clear that the management would not work at Yahoo (for whatever odd reasoning) then surely the best interests of the stock holders is to take the deal that works.. Rather than let it go down the pan!
- coryl 16y ago
  Not when you're selling your stake in the company. $200 million is a helluva lot of money. They're tabling offers left and right, shoulda woulda coulda.
- rms 16y ago
  I agree with you, but the courts of the State of Delaware do not.
  - skorgu 16y ago
    I don't doubt that this is true but do you have any more information on precedent for this type of thing?
    - bl4k 16y ago
      (Note: IANAL but I am, or have been, the founder or co-founder or director or board member of multiple Delaware-based corps). If the company is in distress, or a sale is considered inevitable, the main precedent often cited is Revlon: http://en.wikipedia.org/wiki/Revlon,_Inc._v._MacAndrews_%26_Forbes_Holdings,_Inc http://en.wikipedia.org/wiki/Revlon,_Inc._v._MacAndrews_%26_.... If a company is not in a distressed state (referred to as 'Revlon circumstances') then the directors not only have a responsibility to accept the higher price, but also have to weigh price above all other parameters and have an obligation to shop or auction the deal to find and establish the best market price. This falls under Smith: http://en.wikipedia.org/wiki/Smith_v._Van_Gorkom http://en.wikipedia.org/wiki/Smith_v._Van_Gorkom Cases where a lower offer is accepted over a higher are very clear cut, most decisions are around having two equal offers, but where a decision is made against weighing up the future value and/or burden of any debt that makes up one of those buyout offers. ie. if you get two offers of $500M each, but one of those carries a debt burden, you must take that into consideration when making your decision. Also, any offers made to any directors in terms of future employment are a conflict of interest, and those directors or managers must be excused from the negotiation or must make the interest known to the board. The standard legal advice with Delaware companies is as follows (since most startups are based in Delaware, it is good to know this): "When it becomes clear that the target corporation will be sold, the board of directors of the target owes a fiduciary duty to the shareholders to obtain the best value reasonably available under the circumstances, and may even have a fiduciary duty to run a fair auction. The board cannot favor one bidder over another when both bidders are offering an adequate price." from: http://www.hogefenton.com/eblast_3-5-08.html http://www.hogefenton.com/eblast_3-5-08.html Other than Smith, there are plenty of cases where shareholders have sued and won after a company is sold and they feel that either the best price wasn't obtained, or that the directors had a conflict of interest (ie. they went on to gain employment with the acquirer at above-market/ridiculous terms - in effect a bribe for acquisition). If you have raised money, and you get an offer from a company where they will give you a small buyout but will offer you personally stock in their company and a great salary etc, you have to be careful because you may be neglecting your duty (Ron Conway mentioned last year that this was happening a lot with Facebook). Also related is the talk around the Parakey acquisition (though nobody sued, so no suggestion of any wrong-doing): http://techcrunch.com/2007/09/25/parakey-did-investors-get-left-out-in-the-cold/ http://techcrunch.com/2007/09/25/parakey-did-investors-get-l...
hackoder 16y ago
I interviewed at Yahoo and I didn't think it was that bad. I met some really cool/smart people and the technologies that they showcased were, again, really cool. I felt very little difference between the engineering culture at Yahoo vs other "popular" companies. And Yahoo's products are good- think YUI, Yahoo Mail (client side stuff), Hadoop, etc. They asked me one thing that Yahoo! could improve upon and I suggested that they focus on making one service really really great, which can then, in turn, drive traffic to other services. And to drop poking their head into everything (My yahoo, groups, games, social networking etc can be dropped). Its sad to see how Yahoo's value has fallen recently, since internally it seemed very vibrant and had the kind of atmosphere I would've liked to work in.
- raganwald 16y ago
  You're describing Yahoo's engineering culture. Have you looked into their management culture?
- ahi 16y ago
  For some reason Yahoo has incredibly talented engineers, all working on things that don't make Yahoo any money. When it comes to the paycheck, Yahoo is just a web publisher; not much more tech focused than AOL or IAC.
  - kscaldef 16y ago
    For some reason Yahoo has incredibly talented engineers, all working on things that don't make Yahoo any money My observation was that that was because the divisions that did make money were a cesspool of internal politics, back-stabbing, and constant re-orgs and re-writes as different managers gained power. For a while Yahoo held onto some good engineers in those divisions by throwing lots of money at them, but in the long run I think that just enabled those engineers to negotiate fat compensation packages at other companies.
deleted 16y ago
[deleted]
statictype 16y ago
I find this story a little hard to digest. I would think that the board of directors are supposed to act in accordance with the company's best interests and in a way that Enhances Shareholder Value. In this case, since management supposedly refused to join Yahoo, it was in the shareholder's best interest to take the deal from Google. If it's true that the directors squashed the deal then they dropped the ball and failed at their job.
- unexpected 16y ago
  Google would enhance the long-term shareholder value, to be sure, but what about the short-term value? Yelp's board is probably mostly composed of top Yelp management and the VC's that put the initial money. If the initial VC's can cash out early for $200,000,000 more, why wouldn't they? Long-term, it wouldn't matter what would happen to Yelp (if it was all cash) - they'd be able to wipe their hands clean and give themselves the biggest exit. It'd kind of like selling your house. If you were moving from Seattle to SF, you would try to sell your house for the biggest price. Say the best offer comes from someone with a bad history - they want to tear down the house, build a mcMansion, whatever. If this offer was 25% higher then the next competing offer, you wouldn't care - you would just sell it, move on, and then let the neighbors deal with their new problem. Kudos to the Yelp team that cares about the 5-10 year value of the company, as opposed to the 1-3 month valuation!
  - pbhjpbhj 16y ago
    >If this offer was 25% higher then the next competing offer, you wouldn't care - you would just sell it, move on, and then let the neighbors deal with their new problem. Love you neighbor. It's possible that someone somewhere amongst those simply trying to screw these businesses for every last cent they can get is someone who thought beyond capitalism and decided that being bought out for more was not the be-all-and-end-all but that they should hold to some other moral. Sadly, I find that unlikely though.
    - unexpected 16y ago
      It's not just businesses though - at the end of the day, it reverts back to a game theory type question. Hindsight is 20/20, but I wonder how Yelp feels right now. Google/Yahoo are probably out now - who does that leave for a potential big exit? Microsoft? Amazon? Facebook? Yelp is an interesting business, but not a "change the world" type business - at least not on its own, with its current revenue model. What if nothing else pans out, the founder's stakes get further and further diluted, and they end up with nothing? Are they going to end up kicking themselves? Even Friendster had an offer from Google to be acquired... Yahoo has a notorious track record of poor acquisitions, to be sure: Flikr, Delicious, etc. I'm sure that's what Yelp was worried about - but Google hasn't done that much better either. A lot of Google's acquisitions have languished after being acquired. I wonder if there is still turmoil within Yelp management after this whole episode.
kujawa 16y ago
I had a very promising interview at Yelp right around that time last year. I have a feel for this sort of thing, and I was damned sure I got the job. Great fit for my experience and skills. Never heard anything back from them. I'm gonna guess that this was at least partially related.
neilk 16y ago
Could this be a rational financial decision from an employee's point of view? I'm not smart about financial things, so perhaps someone can school me. As I understand it, startups are usually acquired through stock swaps. So that $X million really means $X million in company stock. The investors cash out immediately, but employees vest years afterwards. So the employees are the only ones who care about the future value of the acquirer's stock. If Yelpers had calculated that 3 years hence, the difference between Yahoo and Google stock moves would have erased the difference in initial price, then does the Google deal become the rational choice? The difference wouldn't even have to be that large. If we assume a three year vesting period (with no partial vesting earlier on), and that growth rates are constant, then by my calculations the Google deal works out better for employees if (for example) Google grows by an average of 6% per year while Yahoo shrinks at 3.5% per year. But this is just my rambling, I don't actually know much about this stuff. Informed comment?
cwalcott 16y ago
To me the most interesting part of this article are the comments: many people questioning Arrington's impartiality since Yahoo is a competitor to AOL. It'll probably subside over time but still interesting.

106 points by bdr 16y ago

MaysonL 16y ago

Sounds like the Yelp board blew it.

jan_g 16y ago
What I don't understand is this: who has the power to decide such things? In this story it seems like there are two entities who can block each other. Why didn't someone decide for Yahoo, if their offer was so much better? It's in the interest of the shareholders.
- staunch 16y ago
  There's probably a legal agreement at Yelp that specifies what percentage of stockholders must agree in order to sell. It's unlikely the investors have enough equity to force a sale. That's irrelevant though. Even if it was possible Yahoo would not purchase Yelp if all the key employees where vehemently opposed.
  - jan_g 16y ago
    So, if one smaller part of shareholders couldn't force a sale to Yahoo, then why larger part of shareholders couldn't force a sale to Google? As I understand, management was all for Google.
    - deleted 16y ago
      [deleted]
    - staunch 16y ago
      The board of directors at Yelp has representatives from both the management and the investors. The board probably needs a majority (or unanimous) consent in order to sell.
- bambax 16y ago
  Well if the management team won't work for Yahoo, then it's doubtful the Yahoo offer would stand; therefore there is no Yahoo offer and they should have taken the Google offer. It's not clear why they even considered the Yahoo offer if it was in fact impossible for Yahoo to go ahead.
  - michael_dorfman 16y ago
    They have a fiduciary responsibility to consider the offer, and as the offer was significantly higher than the Google offer, they'd also have a fiduciary responsibility to pursue the offer, even when obstacles (such as management resistance) arise.
    - zumda 16y ago
      I think the point he was trying to make is that the offer from Yahoo only will go through if Yelp brings their team with them. If the management bails, Yahoo won't buy Yelp. This is pretty common, since it is an easy way to get talent into the company without all the recruiting.
      - michael_dorfman 16y ago
        I understand that. The point I am making as that Yelp was obligated to consider the offer (even if it ultimately was doomed). In this case, that caused Google to bail, and Yelp was screwed-- but not because their board screwed up. The board only did what they had to do.
        bambax 16y ago
        But as part of their diligence to consider the Yahoo offer, could they not have come to a conclusion such as this one: "given the fact that the management won't go, and that Yahoo won't buy Yelp without a management team, it follows that the Yahoo offer is void and nonexistent. So, let's pursue the Google offer"...? If for example I offered 3 trillion dollars for Yelp, would the board consider my offer (as opposed to laughing it off)? I guess my question is, What is the "reality threshold" of an offer?

ck2 16y ago

Yeah, that's a tasteful expression to use in a tech article title.

htsh 16y ago
I came here to say the same thing. This sort of misogyny is exactly why the tech world has difficulty attracting / retaining women.
peterbessman 16y ago
I think the title indicates that you are less a member of their target audience than you might have suspected. It was pretty funny and effective to me? And to the poster who called that "mysogyny"...really? Hatred of women? All women? Not just the ugly ones who screw up your attempts to get with the hot ones? And hate? A little strong. This article is about how yahoo is pitiable, and something you don't want to associate with. Kinda like ugly girls at dances. Reality is cruel. Mea culpa.
- ericabiz 16y ago
  "Hatred of women? All women? Not just the ugly ones who screw up your attempts to get with the hot ones?" You know, it honestly didn't occur to me that the title of this article could be construed as misogynous. But your comment...that type of comment is why I hate the tech industry sometimes.
  - peterbessman 16y ago
    I can understand not liking that attitude, but that's as much Jersey Shore as it is anything else. It's not particular to the tech industry, it's not even predominantly in the tech industry. Take that comment I made, shop it around to 10 random techies, and then 10 random stock brokers on wall street. Which of the two groups do you expect it to resonate more strongly with? Reiterated and refined: that comment is neither in poor taste, nor indicative of an attitude particular to the tech industry. It is not in poor taste because (I take this a priori) TechCrunch does not target an audience offended by remarks like that. And it is not indicative of an attitude particular to the tech industry because there are many other industries where that attitude will, on average, resonate more strongly (again, a priori).

SkyMarshal 16y ago

Is it really so bad at Yahoo? Or are a bunch of fanbois just blowing things out of proportion?

wh-uws 16y ago
I think the universal conclusion is that engineering is good - great but management needs alot of work. As a former intern... I concur.

Tichy 16y ago

I can't imagine working for Yahoo is so bad - not worse than other big corps anyway. Seems to me they actually provide a lot of cool things, too. For example, YUI, Hadoop, lots of internet services, BOSS,... Also, I think they came up with internal Hackathons first? Just to name a few things - I am not a specialist on all things Yahoo, but I don't get why everybody seems to hate them.

deleted 16y ago
[deleted]
staunch 16y ago
Google has vastly more interesting software and services, so if that's the basis for a decision the winner is obvious. Of course that has nothing to do with their decision. They're probably much more concerned with who's more likely to make Yelp successful going forward. That's also pretty obvious. They'd bet $200 million that Google is a better bet. Talk about putting your money where your mouth is.
- Tichy 16y ago
  If they are working for Yelp, it seems unlikely that after the acquisition, Google will move them to the core search engine team. Good point about where are the better chances. They must really care for their product, then. I would assume it is a given that after an acquisition, you just try to get out of the company asap.
  - eru 16y ago
    We still have lots of the original XenSource team at Citrix.
- gaius 16y ago
  Google has vastly more interesting software Well, that's certainly the public perception, but I think the reality is more subtle. Like BigTable and MapReduce are just whitepapers outside of Google, but you can actually download and use Hadoop, and who wrote that?

deleted 16y ago

[deleted]

bigbang 16y ago

Maybe working at Google is better than Yahoo!, but both companies are notorious for killing acquired startups. Its hard for me to see any reason for the Yelp management team to take the Google offer when Yahoo! offer was almost 40% more. I suspect there is more to the story.

neilk 16y ago
I'm not sure we should really blame either of them for "killing" startups. In truth, often times, the startup just fails to grow much, or fails to complete a rewrite to be more scalable. But that might have happened anyway. We can say that they both have a history of not giving startups what they need to succeed, especially social startups. However, at Yahoo it's largely related to internal power struggles on the order of Europe in 1913, and it can seem much more personal.

ErrantX 16y ago

The Yelp board of directors, faced with a fiduciary duty to act in the best interests all stockholders, couldn’t approve a Google deal when a competing deal was available at a $200 million higher price. If it became clear that the management would not work at Yahoo (for whatever odd reasoning) then surely the best interests of the stock holders is to take the deal that works.. Rather than let it go down the pan!

coryl 16y ago
Not when you're selling your stake in the company. $200 million is a helluva lot of money. They're tabling offers left and right, shoulda woulda coulda.
rms 16y ago
I agree with you, but the courts of the State of Delaware do not.
- skorgu 16y ago
  I don't doubt that this is true but do you have any more information on precedent for this type of thing?
  - bl4k 16y ago
    (Note: IANAL but I am, or have been, the founder or co-founder or director or board member of multiple Delaware-based corps). If the company is in distress, or a sale is considered inevitable, the main precedent often cited is Revlon: http://en.wikipedia.org/wiki/Revlon,_Inc._v._MacAndrews_%26_Forbes_Holdings,_Inc http://en.wikipedia.org/wiki/Revlon,_Inc._v._MacAndrews_%26_.... If a company is not in a distressed state (referred to as 'Revlon circumstances') then the directors not only have a responsibility to accept the higher price, but also have to weigh price above all other parameters and have an obligation to shop or auction the deal to find and establish the best market price. This falls under Smith: http://en.wikipedia.org/wiki/Smith_v._Van_Gorkom http://en.wikipedia.org/wiki/Smith_v._Van_Gorkom Cases where a lower offer is accepted over a higher are very clear cut, most decisions are around having two equal offers, but where a decision is made against weighing up the future value and/or burden of any debt that makes up one of those buyout offers. ie. if you get two offers of $500M each, but one of those carries a debt burden, you must take that into consideration when making your decision. Also, any offers made to any directors in terms of future employment are a conflict of interest, and those directors or managers must be excused from the negotiation or must make the interest known to the board. The standard legal advice with Delaware companies is as follows (since most startups are based in Delaware, it is good to know this): "When it becomes clear that the target corporation will be sold, the board of directors of the target owes a fiduciary duty to the shareholders to obtain the best value reasonably available under the circumstances, and may even have a fiduciary duty to run a fair auction. The board cannot favor one bidder over another when both bidders are offering an adequate price." from: http://www.hogefenton.com/eblast_3-5-08.html http://www.hogefenton.com/eblast_3-5-08.html Other than Smith, there are plenty of cases where shareholders have sued and won after a company is sold and they feel that either the best price wasn't obtained, or that the directors had a conflict of interest (ie. they went on to gain employment with the acquirer at above-market/ridiculous terms - in effect a bribe for acquisition). If you have raised money, and you get an offer from a company where they will give you a small buyout but will offer you personally stock in their company and a great salary etc, you have to be careful because you may be neglecting your duty (Ron Conway mentioned last year that this was happening a lot with Facebook). Also related is the talk around the Parakey acquisition (though nobody sued, so no suggestion of any wrong-doing): http://techcrunch.com/2007/09/25/parakey-did-investors-get-left-out-in-the-cold/ http://techcrunch.com/2007/09/25/parakey-did-investors-get-l...

hackoder 16y ago

I interviewed at Yahoo and I didn't think it was that bad. I met some really cool/smart people and the technologies that they showcased were, again, really cool. I felt very little difference between the engineering culture at Yahoo vs other "popular" companies. And Yahoo's products are good- think YUI, Yahoo Mail (client side stuff), Hadoop, etc. They asked me one thing that Yahoo! could improve upon and I suggested that they focus on making one service really really great, which can then, in turn, drive traffic to other services. And to drop poking their head into everything (My yahoo, groups, games, social networking etc can be dropped). Its sad to see how Yahoo's value has fallen recently, since internally it seemed very vibrant and had the kind of atmosphere I would've liked to work in.

raganwald 16y ago
You're describing Yahoo's engineering culture. Have you looked into their management culture?
ahi 16y ago
For some reason Yahoo has incredibly talented engineers, all working on things that don't make Yahoo any money. When it comes to the paycheck, Yahoo is just a web publisher; not much more tech focused than AOL or IAC.
- kscaldef 16y ago
  For some reason Yahoo has incredibly talented engineers, all working on things that don't make Yahoo any money My observation was that that was because the divisions that did make money were a cesspool of internal politics, back-stabbing, and constant re-orgs and re-writes as different managers gained power. For a while Yahoo held onto some good engineers in those divisions by throwing lots of money at them, but in the long run I think that just enabled those engineers to negotiate fat compensation packages at other companies.

deleted 16y ago

[deleted]

statictype 16y ago

I find this story a little hard to digest. I would think that the board of directors are supposed to act in accordance with the company's best interests and in a way that Enhances Shareholder Value. In this case, since management supposedly refused to join Yahoo, it was in the shareholder's best interest to take the deal from Google. If it's true that the directors squashed the deal then they dropped the ball and failed at their job.

unexpected 16y ago
Google would enhance the long-term shareholder value, to be sure, but what about the short-term value? Yelp's board is probably mostly composed of top Yelp management and the VC's that put the initial money. If the initial VC's can cash out early for $200,000,000 more, why wouldn't they? Long-term, it wouldn't matter what would happen to Yelp (if it was all cash) - they'd be able to wipe their hands clean and give themselves the biggest exit. It'd kind of like selling your house. If you were moving from Seattle to SF, you would try to sell your house for the biggest price. Say the best offer comes from someone with a bad history - they want to tear down the house, build a mcMansion, whatever. If this offer was 25% higher then the next competing offer, you wouldn't care - you would just sell it, move on, and then let the neighbors deal with their new problem. Kudos to the Yelp team that cares about the 5-10 year value of the company, as opposed to the 1-3 month valuation!
- pbhjpbhj 16y ago
  >If this offer was 25% higher then the next competing offer, you wouldn't care - you would just sell it, move on, and then let the neighbors deal with their new problem. Love you neighbor. It's possible that someone somewhere amongst those simply trying to screw these businesses for every last cent they can get is someone who thought beyond capitalism and decided that being bought out for more was not the be-all-and-end-all but that they should hold to some other moral. Sadly, I find that unlikely though.
  - unexpected 16y ago
    It's not just businesses though - at the end of the day, it reverts back to a game theory type question. Hindsight is 20/20, but I wonder how Yelp feels right now. Google/Yahoo are probably out now - who does that leave for a potential big exit? Microsoft? Amazon? Facebook? Yelp is an interesting business, but not a "change the world" type business - at least not on its own, with its current revenue model. What if nothing else pans out, the founder's stakes get further and further diluted, and they end up with nothing? Are they going to end up kicking themselves? Even Friendster had an offer from Google to be acquired... Yahoo has a notorious track record of poor acquisitions, to be sure: Flikr, Delicious, etc. I'm sure that's what Yelp was worried about - but Google hasn't done that much better either. A lot of Google's acquisitions have languished after being acquired. I wonder if there is still turmoil within Yelp management after this whole episode.

kujawa 16y ago

I had a very promising interview at Yelp right around that time last year. I have a feel for this sort of thing, and I was damned sure I got the job. Great fit for my experience and skills. Never heard anything back from them. I'm gonna guess that this was at least partially related.

neilk 16y ago

Could this be a rational financial decision from an employee's point of view? I'm not smart about financial things, so perhaps someone can school me. As I understand it, startups are usually acquired through stock swaps. So that $X million really means $X million in company stock. The investors cash out immediately, but employees vest years afterwards. So the employees are the only ones who care about the future value of the acquirer's stock. If Yelpers had calculated that 3 years hence, the difference between Yahoo and Google stock moves would have erased the difference in initial price, then does the Google deal become the rational choice? The difference wouldn't even have to be that large. If we assume a three year vesting period (with no partial vesting earlier on), and that growth rates are constant, then by my calculations the Google deal works out better for employees if (for example) Google grows by an average of 6% per year while Yahoo shrinks at 3.5% per year. But this is just my rambling, I don't actually know much about this stuff. Informed comment?

cwalcott 16y ago

To me the most interesting part of this article are the comments: many people questioning Arrington's impartiality since Yahoo is a competitor to AOL. It'll probably subside over time but still interesting.