As Yahoo Starts Buying Again, Some Lessons From Past Deals

Yahoo (NSDQ: YHOO) did something striking last week: It actually bought a company (Xoopit). After spending $1.2 billion on acquisitions in 2007 and 2008, it had been moving in the reverse direction the last year, shutting down or selling off startups that it once had excitedly purchased. More acquisitions could now be on the way, with CTO Ari Balogh saying recently that the company was interested in buying something in the social-networking space.

So now that Yahoo is back to buying startups again, what can we learn about it by looking at the companies it bought and then dumped? Most of the startups that Yahoo gave up on were in retrospect either non-core businesses, duplicative of existing Yahoo services, or had become outdated.

Read on for some of the major purchases that Yahoo recently pulled the plug on — and what went wrong in each case.

Name: Maven Networks
Business: Video platform company
Price: $160 Million in Feb. 2008
What happened: In purchasing Maven, Yahoo said it would expand the company’s “video monetization services” and “advanced technologies for delivering consumers more relevant advertising experiences.” But a year later, expansion was no longer on the agenda, as Yahoo said it wanted to focus on its core video offerings, which did not include supporting videos for third-party publishers.
The moral: Being a non-core business in the Yahoo portfolio isn’t a great position to be in.

Business: Free website hosting
Price: $3.6 billion in 1999
What happened: The brand may still have been famous, but in closing Geocities, Yahoo was acknowledging that the site had become outdated in an age of free ad-supported blogging platforms. The company said that people who wanted web hosting could still get it from Yahoo — as long as they paid. (Ironically, even that is not so clear anymore since Yahoo’s web hosting business is reportedly on the block.)
The moral: It helps if a startup has a forward-looking business model

Name: FareChase
Business: Travel comparison site
Price: Undisclosed in August 2004 (25 employees)
What happened: Why man your own travel search engine when you’re already outsourcing the work on your other travel site (Yahoo Travel)? Yahoo decided in March to close down FareChase, which was operating separate from Yahoo Travel.
The moral: Being the poor stepsister to an in-house brand isn’t a recipe for success.

Name:Jumpcut: Video editing, sharing
Price: Undisclosed in Sept. 2006. Reportedly around $15 million.
What happened: The video-sharing space was already dominated by YouTube even before Yahoo bought Jumpcut. Yahoo also let people share videos on Yahoo Video. Last April, it introduced video sharing to Flickr. In short, Jumpcut was duplicative.
The moral: Like FareChase, it was competing with some corporate siblings.

Business: Blog tracking
Price: Undisclosed in June 2005
What happened: Yahoo sold to Automattic in April for an undisclosed sum in what Automattic’s CEO described as a “refreshingly quick” process.
The moral: It’s the non-core-business problem again.

Name: Bix
Business: Online contests
Date: Undisclosed in 2005
What happened: Yahoo purchased Bix only four months after it launched. It continued to exist as a standalone site — but went offline as of June 30.
The moral: See Maven and entries.

Any other startups that Yahoo has cut? Let us know and we’ll add them to our list.