Lessons from the decline of Yahoo! [VIDEO and INFOGRAPHIC]

News and Views

Yahoo! is the company that brought us web search, and many other innovative tools like Yahoo! Site Explorer (for analyzing web sites for SEO), SearchMonkey, BOSS (Build your Own Search Service), Yahoo! Pipes (mashup and filter RSS feeds). It is also the company that failed to meet revenue projections for the past quarter, and has slowly and then quickly lost search market share over the years to upstart Google, who now holds a scary 65% of the search market.

My how the mighty have fallen. Wait, quite a lot of mighty have fallen lately. There’s the monstrous financial firms on Wall Street that came tumbling down at the beginning of the latest economic crisis. How about Apple overtaking Microsoft in May as the world’s most valuable technology company? Or Blockbuster – remember them (we still have them here – till Netflix comes to Israel…we’re waiting)? Unable to keep up with Netflix their stock was recently delisted from the New York Stock Exchange. And then of course there’s Amazon, the online book store that everybody said would never beat their brick-and-mortar competitors. Etc.

Warren Buffett and Companies with “Moats”

All of these companies were “too big to fail.” And yet they did fail – spectacularly. Why?

Warren Buffett talks about how he likes to invest in companies that have a “moat” around them. What he means is that they are so strong and well defended, their competitors can’t threaten them. These moats should preferably surround a fancy castle, which is run by an honest, hard-working and able duke. If the moat is big and full of alligators, even better. See the video below where Buffett expands upon this idea during a talk to MBA students in Canada (it’s worth watching all 10 videos – Buffett’s awesome):

Buffett on choosing companies to invest in

But note how he says that companies need to defend their moats. Just because you have a moat, you can’t sit back on your laurels and assume you’ve won. Defending the moat involves innovating, and making the right management and business decisions.

Dear Israel: please have mercy on small businesses

Aside from that lesson, there’s one more lesson that I wish governments, particularly Israel’s, would heed: don’t put all your eggs in the big-business basket. Governments and banks tend to favor the big guys – with credit and tenders and good interest rates and overlooking accounting inconsistencies. But there’s no mercy for the small business. Between all the taxes, the lack of financing and the “take-no-prisoners” attitude, it’s a tough ride. And yet it’s known that small businesses employ the most people in our economy.

So elected representatives: please consider going easier on small businesses. We are, after all, the lifeblood of the economy.

Yahoo!’s demise in pictures

To sum this all up, here’s a snazzy infographic depicting the rise and fall of Yahoo!:

The Brutal Decline of Yahoo!

Research by Scores.org