By Verne Kopytoff
FORTUNE -- Flickr, the online photo sharing service, seemed to be heading for the big-time when Yahoo acquired it eight years ago. The site already had a lot going for it: legions of devoted users, a team of respected founders, and a headstart on the social media phenomenon. But Yahoo screwed up its potential bonanza. Executives starved Flickr of resources and tangled it in bureaucracy while other photo sharing services like Facebook and Instagram gained traction.
Marissa Mayer, Yahoo's (YHOO) chief executive, is now trying to avoid those pitfalls with Yahoo's latest acquisition, Tumblr, the fast-growing online blogging service. The planned $1.1 billion deal, announced Monday, is intended to reignite Yahoo's stagnant business by making its services more appealing to young people. Mayer's plan is to give Tumblr the independence that Flickr lacked. It's a strategy, she pointed out, that paid off handsomely for other companies and their big acquisitions.
"When we look at super-scale acquisitions like eBay-PayPal (EBAY), Google-YouTube (GOOG), a meme arises," Mayer said at a press conference Monday after being asked about how she'll avoid the past mistakes with Flickr. "Those companies have so much momentum, and they often do better when operated independently. Learning from that history is why we made a commitment to operate Tumblr independently."
The ghost of Flickr -- along with a number of other failed acquisitions over the years like GeoCities, Broadcast.com, and Delicious -- haunts Yahoo to this day. Until recently, startup founders thought twice about selling their companies to Yahoo for fear that their hard work would be left to whither on the vine or killed off. Mayer, who became Yahoo's chief executive last year, long after Flickr's struggles started, has gone to great lengths to repair the company's image. Over the past few months, she's acquired several startups, most notably, Summly, which automatically summarizes news articles for people using mobile devices.
Tumblr is Mayer's biggest bet so far. It will remain in its own New York office, apart from Yahoo's other New York staff, to preserve its culture of innovation. David Karp, the 26-year-old high school dropout who founded the service, will remain in charge and report directly to Mayer.
How much autonomy he'll have is unclear. Spending unlimited amounts of money is unlikely. Big companies have limited budgets and a lot of priorities. On its own, Tumblr is believed to have little revenue, although that is supposed to change in 2014, according to Yahoo.
In acquiring Flickr, Yahoo executives also promised the service's founders that they would have some autonomy. To a certain extent, Yahoo kept its word by letting Flickr remain an independent site and keeping Yahoo branding on it to a minimum. However, Stewart Butterfield, who co-founded Flickr with his then wife, Caterina Fake, and continued to lead the service until leaving in 2008, complained that Yahoo executives pinched pennies when Flickr needed upgrades. Inaction slowed Flickr's international expansion, Butterfield said, and stalled a project that would have given more visibility to photos of breaking news events.
After Butterfield's departure, Flickr continued to stagnate. A late push into mobile, for example, left the market wide open to a number of new rivals like Instagram. Flickr didn't release an iPhone app until 2009 -- two years after the first iPhone -- while its first Android app premiered in 2011.
Mayer made a point to say that Yahoo has installed an entirely new management team in recent years. The implication is that executives will be much more attentive when Tumblr needs resources. "It all comes down to people," Mayer said. "We have an all-new executive management team."
Tumblr gives Yahoo a springboard into social media, an area in which it has failed to make much progress. Instead, Yahoo has had to watch as others like Facebook (FB) reap the rewards. Flickr, with its once-tight community of photo enthusiasts who commented on each other's images, could have been a launching pad for a social network. But Yahoo executives, who discussed the idea publicly, never carried through with it as they instead focused on keeping up with Google in search.
Flickr lives on, of course. In fact, Mayer's press conference Monday focused on upgrades to Flickr including 1 terabyte of free storage, high-resolution images, and a new page design. Whether it's too little too late remains to be seen. Mayer effused optimism, saying: "Flickr was awesome once, and it languished. We're going to make it awesome again."
Benchmark's Bill Gurley has provided wise counsel to some of Silicon Valley's most successful entrepreneurs.
FORTUNE -- When Silicon Valley's smartest people want to get smarter, they often turn to Benchmark partner Bill Gurley. For instance, he recently advised Travis Kalanick, CEO of startup Uber, on a less expensive version of his rapidly growing limo service. Says Kalanick: "He really pushed us to lower the price so there's no room for MOREJessi Hempel, writer - Feb 11, 2013 5:00 AM ET
A generation of popular apps is being defined by how brief their use cases are.
FORTUNE -- New apps are pushing the boundaries of brevity. Not Angry Birds-esque, which could eat up five minutes of time, but far less. The question is, if mobile apps increasingly are all about "snacking" -- using them in even shorter bursts -- just how brief can their functionality get?
I first encountered this trend last Thanksgiving, MOREJP Mangalindan, Writer - Feb 8, 2013 11:56 AM ET
Also: Why Instagram CEO Kevin Systrom's testimony doesn't add up; former Yahoo CEO Scott Thompson on his startup.
Why Xbox failed in Japan [EUROGAMER]
Doing business in Japan is not the same as doing business in the US, and the Xbox team learnt the hard way. In the US businessmen meet, discuss a contract, terms, sign and then get to work. In Japan business is done based on the strength of a MOREJP Mangalindan, Writer - Dec 17, 2012 5:30 AM ET
Also: Larry Page on Google; Russia backs down on Internet regulation proposal.
Fortune exclusive: Larry Page on Google [FORTUNE]
There's many areas [of Google] that are working very well. Payments seem to be an area where the uptake is a little slower. Are the challenges there technical or are they [the result of] this ecosystem of partners, banks, payment providers, et cetera? I guess you're talking about Google Wallet?
Yeah, Wallet. I think that's an MOREJP Mangalindan, Writer - Dec 11, 2012 11:04 AM ET
The latest dust-up between Instagram and Twitter will have lasting consequences.
FORTUNE – If your Instagram photos look wonky on Twitter, remember that's not by accident. It's by design.
Earlier this week, Instagram CEO Kevin Systrom announced onstage at Europe's tech conference Le Web that the popular photo-sharing start-up was killing support for "Twitter cards." As Twitter explained in a post, this basically means when users click Tweets with an Instagram link, photos MOREJP Mangalindan, Writer - Dec 6, 2012 11:11 AM ET
Also: why eReaders are on the decline; another look at the "mobile first" development philosophy.
Twitter loses ability to properly display Instagram photos [THE NEW YORK TIMES]
"We've decided that right now, what makes sense, is to direct our users to the Instagram Web site," Mr. Systrom said, noting that Instagram images will soon no longer be visible on Twitter. "Obviously things change as a company evolves."
Mr. Systrom did not say when images MOREJP Mangalindan, Writer - Dec 5, 2012 1:50 PM ET
Apple Maps is taken to task (yet again); Instagram has more users than Twitter.
It's a hits business: Silicon Valley and Hollywood share more than Ashton Kutcher [VENTURE MINDED]
The evaluation of whether to invest in a startup and the decision of whether to greenlight a film are also startlingly similar. From a diligence perspective, financial projections are primarily reviewed for the purpose of a sanity test. Do the financial projections coincide with MOREJP Mangalindan, Writer - Sep 27, 2012 1:28 PM ET
Facebook's earnings disappoint; Amazon's profit drops.
Instagram hits 80 million users, with 4 billion photos shares [THE NEXT WEB]
Regardless of the opinion of pundits, though, Instagram continues to grow at a massive rate. And it shows no signs of stopping now.
Facebook earnings: Good, but not good enough [CNNMONEY]
Shares of Facebook fell more than 10% to around $24 -- nearly 40% below the company's initial public offering price. Facebook did beat analysts' revenues expectations MOREJP Mangalindan, Writer - Jul 27, 2012 12:11 PM ET
The results of Facebook's IPO last week may indicate there isn't -- at least not in the public markets.
By Kevin Kelleher, contributor
FORTUNE – Does anyone want to talk about a bubble now?
In the weeks leading up to Facebook's (FB) much-trumpeted IPO, a debate simmered over whether Silicon Valley was entering another bubble. Some cited "bizarre activity" like spending big on companies with no revenue. Others dismissed fears of a MOREMay 21, 2012 11:04 AM ET
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