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."
Startup hopes new verified ID badges will attract more users.
FORTUNE -- Starting April 30, Airbnb will go to even greater lengths to insure you are who you say you are, online and in the real world. The apartment-sharing site will begin rolling out a verified identification program that matches digital identity -- via social networking sites -- with real-world proof -- a photo ID. Once members have been verified, Airbnb MOREJessi Hempel, writer - Apr 30, 2013 12:00 PM ET
Last's week's Twitter-fueled crash erased $136 billion in value in minutes, underscoring concerns about companies' use of social media.
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FORTUNE -- A fraudster hacks into a company's Twitter account and posts a phony announcement about sales reaching an all-time high. Shares in the company soar and then quickly crash after investors realize the news was merely a ruse to manipulate the stock price. Companies must, of course, be vigilant MOREApr 29, 2013 6:28 AM ET
Can a successful exit by one Canadian tech firm jump-start innovation north of the border, a la Silicon Valley's PayPal Mafia?
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FORTUNE -- In 2002, PayPal, the online payments giant, was sold to eBay for a cool $1.5 billion. Overnight, many of PayPal's core employees got very rich. Rather than calling it a day, however, the so-called PayPal mafia went on to found and invest in a MOREApr 24, 2013 7:18 AM ET
Social media analytics firms such as Dataminr are trying to take on Bloomberg in the race for fast-paced business news updates.
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After a splashy launch, is Facebook's attempt to become the guide to users' mobile digital lives catching on?
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Teenagers are easily bored and attracted to the new. That should be troubling to Facebook, which wants to be the center of everyone's digital life.
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Brad Paisley's duet with LL Cool J sets off a firestorm on social media - and that could make it a hit.
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FORTUNE -- Country singer Brad Paisley set Twitter ablaze Monday with the release of "Accidental Racist," a tune that starts with a vignette about wearing a confederate flag t-shirt in a Starbucks ("When I put on that t-shirt, the only thing I meant to say MOREApr 9, 2013 12:00 PM ET
The web gets an early taste of Home, Facebook's next big thing.
By Matt Vella, senior editor
FORTUNE -- Facebook's much-hyped mobile phone software, Home, has slipped into the world early.
Home, which will operate exclusively on Google (GOOG) Android handsets, is set to be released to the public on April 12. Smartphone news site MoDaCo has leaked a pre-release version of the software.
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The state-run media attacked as "a brain-dead product of the Cultural Revolution"
FORTUNE -- In the middle of a war of words between his customers and the government of his second largest market is probably the last place CEO Tim Cook wants to be right now. But that's where Apple (AAPL) finds itself today, according to Popularity helps buffer Apple from Chinese state-media attacks, an item that moved on the Reuters newswire Wednesday morning.
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