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The Other Yahoo: How Protecting Its Core Business Doomed Innovation

This week, you’ll hear a lot about Yahoo’s failed media ambitions. How it couldn’t monetize a show like “Community,” how it had to sell ads for its NFL live stream on the cheap and how even Katie Couric didn’t turn things around for the struggling company.

But there’s another part to the story about Yahoo’s decline from internet juggernaut to cheap acquisition target for Verizon that’s just as important: Yahoo didn’t just fail as a media company, but also as a tech innovator — despite at one point having all the right people working on all the right projects.

The story of how Yahoo bungled innovation leads us all the way back to 2005. Bay Area startup employees who has lost their jobs during the first dotcom crash were done with licking their wounds, and new companies popped up left and right. Pundits called that new wave of tech innovation “Web 2.0,” and Yahoo quickly emerged as a key player, spending aggressively to snap up the new web’s crown jewels.

In March of 2005, Yahoo acquired photo sharing site Flickr, the most popular of these Web 2.0 startups. Half a year later, the company acquired concert and event database Upcoming.org, only to follow with the acquisition of social bookmarking site Delicious a few weeks after that.

Yahoo didn’t just want to use these new companies for their web properties, but also give the newly acquired talent a way to keep innovating and essentially become the internet giant’s R&D unit. To that end, the company unveiled a San Francisco-based internal incubator dubbed Brickhouse in 2008. Away from the Sunnyvale campus, startup founders were supposed to help remake the company without feeling like being part of a big machine.

On paper, all of this sounded great, and Yahoo quickly became the place where the cool kids would go to work with the web’s leading innovators. And Yahoo did actually push the envelope on some fronts, unveiling a geeky and ambitious way to program web applications with its Pipes service, and even jumping into the location-based services market with developer service dubbed Fire Eagle. The Brickhouse team also unveiled a live video streaming service dubbed Yahoo Live years before Periscope and Facebook Live.

But all of that commitment to innovation only went that far. Yahoo was immensely protective of money makers — the homepage with its billion monthly active visitors, Yahoo Mail and other legacy properties. With the exception of Flickr, none of its new acquisitions was ever turned into a core Yahoo product, or in any meaningful way exposed to Yahoo’s huge audience.

At the same time, Yahoo wasn’t content with just leaving those startups alone. Instead, it forced them to adopt some of the technology that Yahoo was using for its own properties, leading in some cases to huge migration projects, only to invest little into new feature development after that.

Many of the key players working on Yahoo’s internal startups left disillusioned. Some are working for competitors now, others have since founded hugely successful companies. Bradley Horowitz for example oversaw Yahoo’s advanced development efforts, including its Brickhouse incubator. In 2008, Horowitz left for Google, where he now leads the company’s social efforts, including Google Photos.

Flickr co-founder Stewart Butterfield left in the same year, and went on to found Slack, the booming enterprise collaboration tool that’s being used by everyone from NBCUniversal to the Wall Street Journal. And Chad Dickerson, who at one point or another led Brickhouse and the Yahoo Developer Network, went on to become Etsy’s CEO.

However, this isn’t just about a few high-profile executives. Instead, it’s about Yahoo having all the right pieces for the next wave of consumer services, only to completely drop the ball. Flickr could have become Instagram before Instagram, or pre-empted Google Photos.

Delicious could have laid the groundwork for a social news sharing service akin to Twitter. Yahoo Live could have led live video, if the company had only stuck with it. And with Upcoming and other bits and pieces, Yahoo could have built a social network capable of competing with Facebook.

Instead, Yahoo dropped the ball on all of it, and decided it would rather be a media company to put expensive content on its aging homepage — a decision that set it on a path that eventually ended with the Verizon acquisition this week.

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