Ged Carroll

Category: innovation | 革新 | 독창성 | 改変

Innovation, alongside disruption are two of the most overused words in business at the moment. Like obscenity, many people have their own idea of what innovation is.

Judy Estrin wrote one of the best books about the subject and describes it in terms of hard and soft innovation.

  • Hard innovation is companies like Intel or Qualcomm at the cutting edge of computer science, materials science and physics
  • Soft innovation would be companies like Facebook or Yahoo!. Companies that might create new software but didn’t really add to the corpus of innovation

Silicon Valley has moved from hard to soft innovation as it moved away from actually making things. Santa Clara country no longer deserves its Silicon Valley appellation any more than it deserved the previous ‘garden of delights’ as the apricot orchards turned into factories, office campus buildings and suburbs. It’s probably no coincidence that that expertise has moved east to Taiwan due to globalisation.

It can also be more process orientated shaking up an industry. Years ago I worked at an agency at the time of writing is now called WE Worldwide. At the time the client base was predominantly in business technology, consumer technology and pharmaceutical clients.

The company was looking to build a dedicated presence in consumer marketing. One of the business executives brings along a new business opportunity. The company made fancy crisps (chips in the American parlance). They did so using a virtual model. Having private label manufacturers make to the snacks to their recipe and specification. This went down badly with one of the agency’s founders saying ‘I don’t see what’s innovative about that’. She’d worked exclusively in the IT space and thought any software widget was an innovation. She couldn’t appreciate how this start-ups approach challenged the likes of P&G or Kraft Foods.

  • Yahoo’s downfall

    I’ve seen a lot written about Yahoo’s downfall.

    Most of it lacks insight. And at the most basic level lacks precision. Yahoo is an employee who works at Yahoo! or Y! (the Y-bang). It was the best culture I ever worked in; and the most dysfunctional company that I ever worked for. I got to work with amazing people at a company that managed to fumble the ball on opportunity after opportunity. Most analysis you see comes from outsiders who lack insight.

    So when I came across this question on Quora and decided to post my answer. I’ve shared my answer on this blog with additional data points and information on ‘Yahoo’s downfall’.
    Yahoo! star
    This is a big question. In the answers that it will receive you are likely to see:

    • Difference of opinions about the reasons of the decline
    • Differences of opinion  about when the decline actually set in. Which begs the question was the downfall that drastic?

    Before we get into the why, lets think about the nature of businesses.

    Public listed companies generally don’t last forever

    The AEI said that 88 per cent of the companies that made up the Fortune 500 in 1954 are gone. Yahoo! is between 21 and 22 years old depending which way you count its age.

    Yahoo! has outlasted many of its peers:

    • Excite – merged with @Home Network in 1999. It went bankrupt in October 2001. It was sold in December 2001. By 2007, the business was broken up by territory.
    • Lycos – was sold three times, each time for a fraction of the purchase price
    • Hotbot – bought by Lycos
    • AltaVista – minority stake sold to CMGI in 1999. Bought by Overture in February 2003. Yahoo! acquired Overture in July 2003

    Only MSN remains of the original brands that it competed against. If MSN wasn’t a Microsoft business, its survival would be questionable. Microsoft’s online services lost money from 2006 through 2010. By comparison, Yahoo! has kept making a profit – despite its issues.

    Macro-effects

    The technology sector has become a hunting ground for active investors. Back in the 1980s, American publicly listed brands were attacked by investors:

    • RJ Nabisco – leveraged buyout by KKR
    • Gulf Oil & Unocal – T. Boone Pickens had failed bids for both oil companies but made a large profit on his holdings
    •  TWA – leveraged buyout by Carl Icahn. Icahn’s business practices were responsible for its bankruptcy in 1992 and 1995
    • Revlon – acquired in a hostile takeover by Ron Perelman, much of the business was broken up to pay for the deal

    In the 1990s, factors changed:

    • Credit lines for deals dried up as some leveraged buyouts proved to be bad for investors
    • Businesses developed more effective defences including poison pills, golden parachutes and greater debt
    • Overall value of the stock market increased. This reduced the amount of opportunities to get companies on the cheap

    Moving forward 20 years, the technology sector became in a similar place

    Historic technology businesses have moved from being high growth to value businesses. This changed the nature of investors interest in them.

    • Microsoft gave a seat on its board to an activist shareholder ValueAct Capital
    • Apple started paying dividends and raising the debt on its balance sheet to fend off Carl Icahn

    Google’s unique two-tier shareholding structure has proved to be an effective defence so far.

    A business like Yahoo! looks like a classic corporate raid target as its value is less than the sum of its parts. It has a regular cashflow that could service a lot more debt at current interest rates. It has assets that can be quickly sold.

    Capital has become much cheaper. This is partly a result of low interest rates set to keep the economy out of trouble in 2008. But there is also a lot of foreign capital and pension fund money looking for a home.

    Missed opportunities

    Given that we have the perfect vision of hindsight, Yahoo! missed key opportunities. Here are some of them.

    Yahoo! failed to buy Google

    Yes, Yahoo! did fail to buy Google. And their competitors failed to buy Google as well. Excite rejected the opportunity to buy Google for $750,000 in a deal arranged by Vinod Khosla. By comparison Terry Semel, then CEO of Yahoo! failed to buy Google for $5 billion. At the time Yahoo!’s entire market value was roughly $5 billion.

    Yahoo! failed to buy DoubleClick

    While Yahoo! was playing catch-up with Google on search. Google outbid the online industry to pay $3.1 billion for DoubleClick. DoubleClick provided advertisers with more opportunities to place banner ads than Yahoo! did.

    Yahoo! failed to buy Facebook

    Terry Semel offered $1 billion for Facebook in 2006. Semel wouldn’t go to $1.1 billion Facebook’s board wanted.

    Yahoo! failed to sell to Microsoft

    I don’t think that the Microsoft deal was a serious offer. There are  reasons to be suspicious:

    • Microsoft couldn’t make its own online business profitable at the time. The deal was unpopular with shareholders
    • Yahoo!’s contribution to the open source community would have been an antitrust issue
    • It would have to get through approval by Japanese competition authorities
    • It would likely have to get through Chinese antitrust authorities

    Yahoo! didn’t communicate these risk factors to shareholders. Which then left the door open for the Microsoft-funded Carl Icahn coup later on.

    Yahoo!’s board has failed the company

    I think that there is a stronger argument for this when you look at their selection of CEOs over the years

    • Tim Koogle – led Yahoo! on the upcycle of the dot.com boom. He resigned and replaced by Terry Semel during the bust that followed.
    • Terry Semel – was a senior media industry executive who bought the business out of the bust. He never got the product and never used email. He never managed to build a media company despite his Hollywood heritage.
    • Jerry Yang – history will look with more favour on Jerry Yang in the future. He did the Yahoo! Japan  and Alibaba deals which are the most interesting parts of Yahoo! today. As a CEO, his time was consumed by  Microsoft’s hostile bid
    • Carol Bartz – Bartz was a Microsoft approved appointee. Her deal on Facebook Connect saw the social network build its business on the back of Yahoo!’s user database. Bartz does the Microsoft search deal badly. She also launched mobile apps that were bad. The one thing she needs respect for is her approach to marketing. Bartz realised that she needed to promote the entire Yahoo! brand. Although there was a buzz marketing team in the US, most marketing was based around products. Unfortunately the execution of the brand campaign was poor. This was partly because it was led from the US with little engagement of regional and national marketing teams.
    • Scott Thompson – stayed for five months. Allegations were made about his education, better due diligence on his recruitment required.
    • Ross Levinsohn – Ross served as interim CEO after Thompson left. It is hard to know what CEO he would have made. But his successor seems to have borrowed his strategy.
    • Marissa Mayer – Despite the goodwill Mayer had going into the job she hasn’t managed to change Yahoo!’s current business. That the company’s strategy is being driven by activist shareholders says a lot.

    Problems in execution

    Yahoo! had its fortune hitched to brand display advertising. Growth has dropped in this for the past ten years. Yahoo!’s declining advertisng revenues started in Q2 of 2006. Part of the problem was that Yahoo! had been too successful to begin with. Yahoo! sold its display advertising for way more than it was worth.

    Yahoo! failed to monetise search as well as Google. And then handed its search business over to Microsoft, who failed to do as good as job as Yahoo! managed on its own.

    Yahoo! failed to execute in mobile, despite some smart early efforts. Photo community Flickr was the default photo app on Nokia’s N73 blockbuster smartphone. The N73 launched at the end of April 2006. It was was one of the last things I worked on before leaving. Given that headstart Flickr could have been Instagram. Instead its a more specialist community of ‘proper’ photography enthusiasts. Yahoo! Messenger and Mail both worked on Nokia handsets from the mid-2000s. Yahoo! Go was an app which provided access to services including:

    • Flickr
    • Address book
    • Calendar
    • Email
    • Maps
    • Search
    • Content: news, weather, finance, sports, entertainment

    It could have provided the same function that Android provides for Google, but Yahoo! considered as ‘beta software’ right up to it’s demise in January 2010. Yahoo! has been providing Apple with weather information and stock data for the iPhone. Yet it hasn’t managed to build a successful iPhone app.

    One way of illustrating the decline of Yahoo! in mobile is to look at the user numbers of Yahoo! mail, which seems to have peaked around September 2011.
    Yahoo! Mail, Hotmail and Gmail users over time
    Hotmail shows a linear increase over time, likely due to organisation changes as it has moved to the cloud and Gmail takes off, presumably on the back of Android – though iOS users also have Gmail accounts.

    Yahoo!’s acquisition process was broken. Ever since Yahoo! wasted 1 billion dollars buying Mark Cuban’s Broadcast.com the business slowed down. Broadcast.com was a scare on the collective memory. Capital decisions took longer, acqusitions took longer. The cheque book was harder to open. Under Marissa Mayer, it was finally let loose, but the purchases seem to have made little difference.

    Yahoo! failed to become a media company. Back when I was at Yahoo! we launched Kevin Sites in the Hot Zone – a sort of proto Vice News in 2005. Despite Semel’s Hollywood background, he and following CEOs never made it work. Despite the fact Yahoo! had joint ventures with TV networks in Australia and Canada. When Marissa Mayer finally managed to get talent in the door, audiences had moved to other sites:

    • Gawker Media
    • Buzzfeed
    • Daily Beast
    • Aol’s blog network
    • Huffington Post

    Yahoo’s downfall in social is spectacular. Yahoo! owned pioneer social brands, any of which could have been the Instagram, Facebook or WhatsApp:

    • Yahoo! Chat – chatrooms were the Facebook Groups of yesteryear. Yahoo! was doing social before it was a thing
    • Delicious – neglect, internal politics and corporate interference meant that Yahoo! never capitalised on Delicious. Despite its tribulations there are some people who still use it, though I am not sure why
    • Flickr – corporate interference and neglect destroyed the potential growth of photo sharing site Flickr. The site is kept going as a photographic enthusiasts community. It could have been Instagram. Thankfully, Yahoo! only spent $30 million on it
    • Yahoo! Messenger – Yahoo!’s Messenger had a poor mobile client, but could have been WhatsApp. Facebook dominates the sector along with Tencents WeChat, NHN’s LINE and Daum Kakao’s KakaoTalk
    • Tumblr – Yahoo! was forced to writedown the value of Tumblr to nothing. The company failed to monetise the popular blogging and curation platform. Tumblr is one of Yahoo!’s few products that attracts a millennial audience

    Yahoo! products had a poor experience. I launched over 14 products at Yahoo! in just over a year. I only ever used 2 of them on a regular ongoing basis – Delicious and Flickr. Other products like Yahoo! 360, Yahoo! Answers or Yahoo! MyWeb 2 – fell into three categories:

    • Dogs to use – particularly in the set-up part of the process
    • Not particularly useful – Yahoo! Answers, great idea in prinicple but poor cultural fit. That poor fit meant that it filled up with noise, Yahoo! Answers isn’t as useful as Quora
    • Strangled soon after birth – so it became frustrating to commit your time to them as a user

    Politics paid a part in this process. The Communications group (responsible for Messenger and Mail) had a lot of duplicate products. Yahoo! Photos was a bad version of Flickr. For storing your bookmarks there was:

    • Yahoo! Bookmarks
    • Yahoo! MyWeb
    • Yahoo! MyWeb 2
    • Delicious

    This all bogs management down and sucks away resources. There were also so many projects that never saw the light, due to constant changes in priority. More Yahoo!-related posts here. What do you think brought about Yahoo’s downfall?

    More information
    Fortune 500 firms in 1955 vs. 2014; 88% are gone, and we’re all better off because of that dynamic ‘creative destruction’ | AEI Ideas
    Microsoft’s Bing/MSN Results Truly Horrifying — Loss Rate Balloons To ~$3 Billion A Year | Business Insider
    Stupid Business Decisions: Excite Rejects Google’s Asking Price | Minyanville 
    A Microsoft First: Activist ValueAct Gets a Board Seat – WSJ
    How Yahoo! Blew It | Wired
    Yahoo! Could Have Bought Facebook For 2% Of Today’s Valuation | Business Insider
    Sorry Microsoft, Yahoo — Google Just Got Bigger | Ad Age

  • Bots won’t replace apps + more

    Dan Grover | Bots won’t replace apps. Better apps will replace apps. – great analysis around conversational UIs and the designs of OTT messaging platforms from a a product manager at WeChat. The question I have is while bots won’t replace apps, will bots write better apps?

    Chinese Conglomerate LeEco Wants To Give Away Its ‘Tesla Killer’ Electric Supercar For Free – Slashdot – going directly into zipcar type offerings. One has to wonder how stable the business is. LeEco has business across a wide range of business interests. It is curious how it will get on and how it is funded. More China related posts here.

    Google Preps New Corporate Incubator — The Information – Google does Yahoo!’s Brockhouse model, even with Bradley Horowitz onboard again (paywall). It will be interesting to see where this takes Google. Historically innovations like Gmail, Orkut and Google Reader were invented within the business. Though a lot of Google’s advertising business came from outside the business or relied on intellectual property held by Yahoo!.

    Bangladesh Bank exposed to hackers by cheap switches, no firewall: police | Reuters – did not have a firewall and used second-hand, $10 switches to network computers connected to the SWIFT global payment network. Hacking is about being slow and methodical rather than being completely ‘elite’. This was quite shocking. I suspect this bank won’t be the only one with this kind of set-up.

    Business Forecasting & Planning Software | Quantrix – best spreadsheet ever. Interesting modelling capabilities, but I am skeptical of it being a cloud service.

    The top 100 most expensive keywords in the UK: new research | Search Engine Watch – I was expecting to see insurance and mortgages dominate. Previously insurance companies had over-paid for leads. Instead it was gambling, and financial instruments that are close to gambling as to be indistinguishable, big data related technology and legal representation for compensation claims.

  • Evolution of search

    Danny Sullivan did a talk a few years ago on the evolution of search, it’s worthwhile taking 9 minutes out as he plots it:

    Library/librarian – whilst web search has become ubiquitous there are still people graduating from library studies courses. The role of librarian still brings a lot to the table

    The electronic catalogue for library augmented the work of librarians and allowed library users to do at least some searches themselves

    LexisNexis database – proprietary business databases augmented the work of lawyers and financiers

    Yahoo! – created a curated guide to the nascent web. It started off as a list of links and then got categorised over time. It is surprising how long the Yahoo! directory lasted for into the age of search.

    WebCrawler – automated the process of finding websites and exploring their content which then opens up the door for modern search as we know it.

    Modern search engine progress can be seen as the rapid transition between pre-eminent engines in a relatively short time.  You also saw specialist tech companies like Inktomi sell web search hardware upon which media companies built their services. Yes, Google built the pre-eminent search engine, but it wouldn’t have been possible to keep going if others hadn’t come up with the crucial pieces of the online search advertising model. That’s why you see a transition from InfoSeek > AltaVista > Ask Jeeves > Google in the evolution of search. More posts on Google here.

  • Thin film electronics + more things

    Coal redefined for thin film electronics | Electronics EETimes – sounds like a graphene connection. Thin film electronics is going to be key for wearables

    Web Summit 2016 | Approach to marketing – it does beg the question why should a marketer support this and go to their conference?

    The VR idea maze — Benedict Evans – worthwhile read. I think the point made on content is particularly pertinent. We may have the hardware but it could take decades for the craft of content creation to come to full fruition

    China’s government sounds out international PR agencies about how to polish nation’s image overseas, sources say | South China Morning Post – A spokesman for WPP, which owns Hill+Knowlton declined to comment. Ketchum also declined to comment. Fleishman Hillard Inc, Ogilvy Public Relations and Edelman did not respond to messages requesting comment – Weber Shandwick attracted negative attention working for China during the run up to the 2008 Olympics and Ketchum had a similar experience working for Russia

    Microsoft’s Silver Lining Is Shrinking — The Information – not surprisingly moving a cloud model disrupts Microsoft’s margins in comparison to package software (paywall)

    Off the grid – Official site of Stephen Fry – interesting essay on the perils of social media

    China Unicom bets on turnaround as net profit plunges 85pc | SCMP – 4G network capital costs and increased marketing costs

    “Overpaid and underperforming”: An anonymous investors’ letter lashes out at Nikesh Arora — Quartz – there are other shoes to drop on this. Looking that the shareholders hold ADRs rather than SoftBank shares – this is a US led charge. It is also interesting that this happening right before the Yahoo! shoe drops. SoftBank,  and its Yahoo! Japan joint venture are a key part of Yahoo! Inc’s value

    Korean TV Dramas Are the Best Export Since ‘Gangnam Style’ | Digital – AdAge

    Pirate Bay Founder: Streaming Model Could Ignite New Piracy War – TorrentFreak – really interesting essay. I had a similar experience with Apple’s iBooks. I bought James Michener’s Mexico for a long flight and trip, tried to download it a week later and it was no longer available. I now buy mostly paper books

    Brands rip up media plan in the face of disruption – it decided last September, in consultation with MediaCom, to take more radical action. Tesco slashed its media budget for newspapers to practically zero and shifted most of the money into online and social media. TV and other traditional media have also been heavily cut (reg wall)

    Can audio go viral on Facebook? Here’s what happened when NPR ran an experiment for a month » Nieman Journalism Lab – Sharing audio on social media is hard to do. Stan Alcorn documented many of the struggles two years ago in a widely cited Digg story

    Elisabeth Murdoch’s Vertical Networks creating ‘Brother’ Snapchat Discover channel – Business Insider

    IRIN | Spies Sans Frontières? – the ethical conundrums around this are particularly interesting. More security related posts here.

    Is Programmatic Expertise Moving In-House? – EContent Magazine

  • Facebook Live + more things

    Facebook live

    A Facebook live streaming service (a la U-Stream and YouTube) was newly launched this week. You can stream on your page or in-group. There is a map to discover streams going on in realtime. I already  found one seminar by Nu-Skin a multi-level marketer of wellness and beauty products in Hong Kong as an example of where Facebook Live was being used from a commercial perspective.

    The Stanton Warriors embraced the new Facebook live streaming service to promote further fan interaction whilst they were in the studio. It will be interesting to see the best and worst that brands do with this medium. From a piracy point-of-view I would imagine that it is likely to be used for streaming live sports coverage – expect the Premier League to be very unhappy.

    RUN and RUN

    Not exactly the same sound but J-Pop act lyrical school’s debut track RUN and RUN has a really clever smartphone optimised video with amazing breaks of the fourth wall.

    UPDATE: Our James pointed me in the direction of an even better link for the RUN and RUN video on Vimeo that I hope works here

    RUN and RUN / lyrical school 【MV for Smartphone】 from RUNandRUN_lyrisch on Vimeo.

    If you can’t see anything point your browser here.

    Godzilla

    Japan’s king of all monsters, Godzilla returns from chilling out on Monster Island for his 31st outing in the Japanese cinema. This new trailer is interesting as the visuals evoke Fukushima Daiichi  nuclear disaster and the Great Tohoku Earthquake of 2011. Check out the Cloverfield-esque shots in the 30 second trailer below. There is a longer trailer where Godzilla appears fully in shot leaving no mystery to how bad ass he is this time. This means that the film is likely to go beyond his usual mayhem and might touch on contemporary issues.

    Vintage CGI

    Last, but not least; a vintage show reel by 1980s CGI shop MAGI Synthavision in its full neon wireframe magnificence and southern country rock soundtrack. More similar visual stuff here.