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Mayer tries to infuse Yahoo with startup game

Mayer tries to infuse Yahoo with startup game

By Jenna Wortham and Nicole Perlroth, The New York Times | Updated: 8 April 2013 09:46 IST

Since taking the reins at Yahoo, Marissa Mayer has been trying to convince customers and employees that there is still life in a company that Silicon Valley long ago left for dead. Yahoo, an Internet pioneer, missed the boat on social networks and mobile devices as the new gateways for information and, in recent years, had been losing advertisers and employees to rivals like Facebook and Google.

Critical to Mayer's turnaround effort is infusing fresh blood and ideas into the company by buying creative startups and integrating them into the company. So since she took over last July, she has been on a splashy shopping spree, spending tens of millions of dollars to acquire six startups.

But in many ways, it has been a tough sell.

In part, that's because of the past problems with acquisitions. Yahoo's neglect of Flickr, a pioneering photo service that was the Instagram of its time, and Delicious, an early social bookmarking tool that predated Twitter's rise, are prominent examples of the company's mishandling of promising acquisitions.

These days, too, Mayer has to compete against the deep pockets of competitors like Twitter, Google and Facebook, which are also trying to buy great technologies and hire top talent.

Still, there is evidence that she is making inroads.

Increasingly, entrepreneurs say, she is getting personally involved in acquisitions, focusing particularly on mobile-minded engineers. She is also trying to reverse Yahoo's reputation as a company that acquires talent and innovative technologies and then lets them wither.

Last month, Yahoo made headlines when it acquired Summly, a newsreading mobile app started by a 17-year-old in England, for an undisclosed sum. In October, it acquired Stamped, a mobile recommendation service.

Robby Stein, who sold Stamped to Yahoo, said he was willing to take a chance on the company given Mayer's solid track record at Google, where she helped perfect Web search and was largely credited with the clean aesthetic of the Google home page.

"After conversations with Marissa and others, it became very clear that this was a unique moment in time where we could have a phenomenal impact and affect millions of people," said Stein, a former Google employee himself, who worked alongside Mayer on Google's mail products. "There are few opportunities like that." (The New York Times Co. was a small investor in Stamped.)

Stein said he was now concentrating on building a "major mobile development center in New York" for Yahoo. He is determined to imbue it with the ethos of an agile, lean startup, not as an outpost of a large corporation.

Stamped's offices are covered in chalkboard paint and whiteboards, for scribbling down ideas and code, and also feature a fully stocked kitchen. They are decorated with posters of software applications the employees admire and aim to compete with. The team has also installed two large television screens for testing app prototypes and has built a gaming room with club chairs.

"I feel remarkably empowered and able to get things done," Stein said. "I'm supported to the fullest extent by Marissa and the executive team."

Mayer's other acquisitions include OnTheAir, an online video service; Snip.it, a clipping service for the Web; Propeld, a maker of location-based apps; and Jybe, a social recommendation site.

Despite the string of purchases, some say Mayer's pitch - which could be a part of the biggest technology turnaround since Steve Jobs' return to Apple in 1996 - seems as if it's still in rehearsal.

Shortly after Mayer joined the company last year, one Valley entrepreneur in acquisition talks with Facebook and Google reluctantly met with Yahoo on the counsel of advisers, who told him he owed it to investors to hear the company out.

At Facebook and Google, the offices were buzzing with activity, the reception desk checked him in using shiny new tablet computers and the executives working on the deal were so prepared they "basically knew what size underwear I wear," said the entrepreneur, who spoke on condition of anonymity because he is still in talks to sell his company. Yahoo was completely different. He arrived to an empty parking lot and deserted offices. He checked in on dusty, clunky desktop computers that ran outdated Web browsers Worse, company executives made it abundantly clear that they hadn't even bothered to read his resume.

"I found it depressing," he said. "It was disorganized, they hadn't done basic due diligence, and offered no clear incentive to go work there."

His conclusion "They would have to be willing to pay me twice what anyone else was willing to pay to work there."

Yahoo certainly has the cash, having reaped $4.3 billion from the first stage of its sale of half its stake of Alibaba back to the Chinese Internet company.

Analysts say Mayer needs to make smart acquisitions to quickly obtain smart young developers who understand the mobile world to help Yahoo compete against Facebook and Google, which have stolen its onetime lead as the biggest seller of display ads.

Mayer declined to be interviewed for this article, but she told analysts last October that the company was looking for "smaller-scale acquisitions" in the "size and scale of double-digit millions and low hundreds of millions."

She has promised some entrepreneurs that if they join Yahoo, they would have the option of working from Yahoo's satellite offices in places like New York, San Francisco and Santa Monica, Calif., instead of the company's corporate headquarters in Sunnyvale, Calif.

But she will have to do more than offer free snacks and cool gadgets to get Yahoo back on track.

"If you are a quality startup, Yahoo is still not the place to be," said Colin Gillis, an Internet analyst at BGC Partners. "It's hardly your first pick."

Entrepreneurs say that with Mayer's personal involvement, those on her team in charge of mergers and acquisitions are setting up meetings with as many people as possible, particularly the engineers with mobile expertise who could add muscle and fresh product ideas to Yahoo's core strengths, which include email, sports and finance.

And she is focusing on proving that Yahoo can be a good place for entrepreneurs.

After Yahoo's last big shopping spree - roughly 10 years ago, when it picked up some of the most promising Web properties of the time, including Flickr, Delicious and Upcoming.org, a social calendar - many of the startups languished, deprived of resources and guidance.

"When we got there, I realized we were at capacity and we needed servers," said Joshua Schachter, the founder of Delicious, who sold his company to Yahoo in 2005. "It was a process, a big deal to get them. I ended up sidelined for a year and a half."

It was a similar story with Flickr. After Yahoo acquired the popular photo-sharing site in 2005, it faded somewhat while other services like Picasa, acquired by Google in 2004, and Instagram, bought last year by Facebook, quickly gained a following.

That experience was not lost on other Valley entrepreneurs. In 2009, Yelp turned down an acquisition offer from Yahoo, that was 50 percent higher than what Google had bid, simply because the employees refused to work at Yahoo, according to one person who was involved in the acquisition talks but was not authorized to speak publicly.

But both Schachter and Caterina Fake, a co-founder of Flickr, said Yahoo appears to be a much different company than when they left several years ago. "There was a lot of defeatism and calcification at the time," Schachter said. "Would that happen now? I don't know."

Perhaps to address that question, one of the first things Mayer did at Yahoo was overhaul Flickr's mobile app, to the surprise and delight of its fans, who praised the new design.

Fake said that gesture could be interpreted as a sign of good faith that Yahoo has "changed a great deal since we were there."

"They do care about the developers now, which was less true than when we were there," she said.

It remains to be seen whether Mayer's purchases will be enough to right Yahoo's course.

For instance, eyebrows rose on news of the company's latest purchase, Summly. Analysts questioned the uniqueness of the app's technology and the high price paid to acquire the talent of the company's young founder, Nick D'Aloisio, who still has a year and a half left of high school.

"This kid is in London, still in high school, and there are questions about how good the technology is," Gillis said. "If you're not buying the technology and you're not buying talent, then what did you buy? PR? As a public company CEO, that's not what you do."

He added, "But at least she is doing something."

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