Why We Should Mourn Yahoo

The Web giant will probably fall to Microsoft, and that’s too bad, because it could have become the model for a new-media empire

To say that a lot has already been written about Microsoft’s (MSFT) proposed Yahoo! (YHOO) takeover would be understatement in the extreme. But I’m offering my two cents anyway, from a perspective that’s uncomfortably unique.

Starting on Feb. 11, I’ll be spending part of my time as the Silicon Valley host of Yahoo Finance’s new show, TechTicker. (Not to worry; I’ll still be in print as BusinessWeek.com’s Valley Girl and as a contributor to Henry Blodget’s SiliconAlleyInsider blog). Part live news cast, part video blog, TechTicker will cover the technology industry from Wall Street and Silicon Valley.

One guess as to what’s the biggest story we’ll be reporting right out of the gate.

It’s not like reporters at other outlets aren’t placed in similarly awkward positions. Consider The Wall Street Journal reporting on News Corp. (NWS), CNBC covering General Electric (GE), or BusinessWeek writing about The McGraw-Hill Companies (MHP). But the comparison only illustrates what I consider lamentable about Microsoft’s irresistible bid for my new employer.

There’s plenty not to like about Yahoo’s predicament. I agree with those who have said this deal will go through. No, it’s not a good thing for Yahoo, the Valley, or the Internet. And no, in the long run it may not do Microsoft much good either. I don’t agree with Google’s (GOOG) alarmist view that Microsoft will monopolize the Internet, but I am concerned Yahoo won’t flourish under its new owner. I’m equally concerned that the best employees won’t stay. But Yahoo didn’t leave investors any other choice. Former CEO Terry Semel blew it, and current CEO Jerry Yang didn’t do enough to help. Yahoo has simply run out of chances.

Snapped Up

Yet given my new role as a television journalist, I can’t help but consider this deal from the media angle as well. And it’s from that perspective that I find Microsoft’s acquisition most troublesome—and tragic. Web companies revolutionized the way we distribute and consume news and information, yet none has been able to emerge as a standalone media titan.

MySpace was snapped up by News Corp. And as much as I’d like to think TechCrunch, Gawker Media, or even Digg could become the model new-media empire, they’re more likely to get flogged to old media names. CNET Networks (CNET) may not long be able to resist pressure from the consortium of activist investors agitating for board control, and Time Warner (TWX) is still unraveling the debacle that was its takeover by AOL (BusinessWeek.com, 2/7/08).

Yahoo is (or was) the closest we’ve come to creating a media empire on the back of the Web. Granted, the bulk of its content is aggregated, not homegrown. Yet that content is a big reason Yahoo draws hundreds of millions of visitors a month. Yahoo Finance is among the biggest personal finance portals on the Web, and some of the world’s most prestigious publications depend on Yahoo for a big chunk of traffic. I’d argue Yahoo is the biggest force in media that’s not called a media company.

This is one reason I took the job at Yahoo. Sure, I could have joined a hipper startup or a storied print publication. But the traditional media business is disintegrating and in desperate need of a new business model that supports high-quality journalism and makes money. People want the brevity of a blog, the vibrancy of video, and the in-depth reporting of magazines and newspapers—all via the Web. Yahoo was one of the few sites poised to bring those elements together, to put original and aggregated content in front of more eyeballs than a printed paper or TV screen could promise.

As a business, it’s hardly Google-sexy, but Yahoo wasn’t going to beat Google in search anyway. At least Yahoo was making money and growing. And if that, along with one of the largest audiences online, wasn’t enough for Wall Street, will any public company ever have sexy enough numbers to become the next great media empire? Time was, they didn’t have to. Media companies were frequently private, there were fewer activist hedge funds demanding over-the-top growth, and empires were often built by families who felt a thriving press was vital to national interests.

Not that I’m letting Yahoo off the hook. But as a reporter, I’m sad to see a media platform that could have been so promising turn into Microsoft’s latest conquest.

Sarah Lacy has been a business reporter for 10 years, most recently covering technology for BusinessWeek. Her book on the new generation of Internet moguls and the rise of Web 2.0 will be published by Penguin Publishing in 2008.

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Posted in Corporate World, Internet, Money, Technology

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