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July 5, 2016

Why Facebook survived mobile and Yahoo hasn’t

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This article originally appeared in The Huffington Post.

Former search giant Yahoo was born in the early days of the Internet and quickly established itself as a leader in the emerging online advertising industry. Its search technology was a game changer. Its portals were extremely popular destinations. Its mobile offering, Yahoo Go, was by far the best one out there.

At the time, advertising was still in the Mad Men era. It was almost impossible to track the effectiveness of advertising campaigns. Marketers were deemed “creative,” which was a way to say that campaigns were sometimes successful, sometimes not, and that nobody really understood why. Advertisers paid ad agencies extraordinary amounts of money to come up with cool banners.

“We make our money from people being shown ads,” said Yahoo founder Jerry Yang at the time.[i]

Instead of disrupting that ecosystem with its search technology, something Google would do soon after, Yahoo embraced it and set out to become one of these old-school media companies. Inexplicably, the board was convinced that people would never get tired of ad banners. They thought search was a fad that would go away by itself and as a result, the company turned its back on the very thing that had made it successful in the first place.

As early as the 2007, people felt that Yahoo wasn’t keeping up. The company had four CEOs in one year. By then, the battle for search had been long lost to Google. The new battle was mobile.

“With mobile, we move from Mad Men to Math Men,” says Will Kassoy, CEO of global mobile advertising platform Opera MediaWorks. “Everything is measurable and as a result, almost everything is predictable.”

Mobile allows marketers to enter the “math men” era. They can precisely measure the effectiveness of their campaigns across multiple channels. For instance, they can find out which ad in which app was the most popular among men aged 35–44 in New York City. That’s a pretty valuable piece of information if this group represents your target customers, don’t you think?

Yahoo! reacted too late again, by partnering with Internet giants like Google and Alibaba and by bringing on Google’s heralded executive, Marissa Mayer, as CEO. Mayer acted quickly, aggressively, bringing in mobile talent through over 30 acquisitions. Unfortunately, Yahoo wasn’t able to catch up, it had lost its edge.

I can’t help but compare Yahoo’s fate through the mobile revolution with Facebook’s. You may remember articles from a few years ago with headlines such as “Facebook Doesn’t [Get] Mobile and That Spells Disaster.”[ii] At the time, it wasn’t clear whether Facebook was going to survive the mobile revolution.

But while Yahoo wasn’t able to recognize that behaviors had changed and refused to adapt, Facebook went through a rapid and profound cultural transformation.

“Technically, it was easy,” says engineering executive and Silicon Valley veteran Jocelyn Goldfein, who led Facebook’s mobile-first transition.[iii] “The hard part was the change in culture.”

To adapt to mobile, Facebook had to change its core values, acquire dozens of mobile companies, set up company-wide mobile training programs and more.

Most important, it internalized that adapting is a matter of survival in the mobile revolution. Inside Facebook, there is a sense of absolute urgency. One thing that struck me when I worked there, is the speed at which things were happening. I’d go to a colleague and ask for information that I knew would require some effort to compile. I expected them to respond something along the lines of, “Got it. Let me work on it and get back to you in a week or two because right now, I’m wrapping up these other three projects.” Instead, my colleague would say, “Wow, let me look into this right now. It might take me a couple of hours to compile the results. Is that okay? If that’s too long, just let me know and I’ll get someone else to help out.”

For mobile companies, learning fast like this isn’t optional. On mobile, user behavior changes at an accelerated pace, as does the technology that caters to it. Every few weeks, people become more proficient with their mobile products. What worked a month ago no longer works today. What seemed worth selling is suddenly offered for free from a competitor. Every 18 to 24 months, they upgrade to a new one. There is no slowing down. Mobile companies know that they cannot move at a leisurely pace. They need to learn and get better fast. And Yahoo’s denial is someone else’s opportunity.

Now the company is being auctioned for sale. But is this too late once again? A year ago, Verizon acquired AOL as part of a wave of consolidation in the consumer internet space (I wrote about it for HBR.[iv]) Yahoo received solicitations from interested bidders, but chose to ignore them. Today, Verizon remains in a financial position to buy Yahoo, but few operators are. This represents a serious risk for Yahoo’s board and shareholders.

To learn more about how your company can survive the mobile revolution, read my book, mobilized: an insider’s guide to the business and future of connected technology or visit scmoatti.com.

 

About

scmoatti-500-bwSC Moatti is a technology visionary, early stage investor and fmr Facebook executive. Today, she invests in products that transform lives and create value at scale. Previously, she built mobile products that billions of people use. Andrew Chen, one of Uber’s top executives, called SC “a genius at making mobile products people love.” Moatti is the managing director of The Angels’ Forum, an early-stage investment firm, and the founder of Products That Count, a community of 15,000+ product managers and innovators. She also serves on boards of both public and private companies, including mobile technology giant Opera Software (OPERA:Oslo). A bestselling author, Moatti frequently keynotes on mobile transformation and business growth, and has been featured in The Wall Street Journal, The Harvard Business Review, and on NPR. She lectures at Stanford Graduate School of Business, where she earned her MBA and has a Master of Science in electrical engineering.

© 2017 SC MOATTI. ALL RIGHTS RESERVED