Back in 2000, at the height of the dotcom bubble, it would have made a better than average April Fool's joke. Running a story that the Daily Mail was thinking about taking over the web giant Yahoo would have raised some wry smiles, in much the same way as the Brighton Argus buying Apple might do today.
Back then, the internet colossus could have bought the British publisher, and half the FTSE 100 as well, and dismissed the cost as loose change, hardly worth putting on the balance sheet.
![Yahoo CEO Marissa Mayer has introduced a lot of new ideas, but can't stop the inevitable.](/web/20160413111832im_/http://www.watoday.com.au/content/dam/images/g/m/j/6/k/0/image.related.articleLeadwide.620x349.go45sl.png/1460497125420.jpg)
And yet, as it turns out, it is true. With the company in the early stages of exploring "strategic alternatives" — usually investment banker speak for "selling some other mug the thing before it all goes pop" — the Daily Mail has cropped up as one of the companies exploring buying part or all of the business.
We will see what happens to that bid over the next couple of weeks. There are a few other potential buyers. And yet there is an important lesson. We constantly get told that the likes of Amazon, Apple, Google and Facebook are becoming too powerful, threatening to take over the world as they rapaciously expand, and trample over rivals in the process.
But, in fact, internet giants are subject to the same laws as any other business. Sooner or later they start to decay and die, just like most huge corporations. We should worry about their power far less.
Yahoo was one of the first great superstars of the internet era. It was created back in 1995 by Jerry Yang and David Filo as "Jerry and David's Guide To The World Wide Web", which was given the slicker name of Yahoo a year later — it stands for Yet Another Hierarchical Officious Oracle". It was the first successful way to make sense of all the information that was suddenly available on the internet, and became the portal through which people started to surf. It listed in 1996, funnily enough exactly 20 years this week. Very quickly it expanded into games, email and web hosting. At its peak, it had market value of $US128b ($168b), a level it hit in January 2000. To take just one example, that was double the value of Walt Disney — not bad for a five-year-old business.
If it had managed to keep that up, it would now be worth $US300b, or slightly more than Amazon. Instead it is worth just $US33b, and a huge chunk of that is accounted for by its stake in the Chinese web giant Alibaba. Some analysts reckon the rest of the company is worth slightly less than nothing. Over the last decade, it has been through more changes of management than Chelsea, although with even less long-term success. The latest, Marissa Mayer, arrived with great fanfare from Google but, despite lots of initiatives, has never managed to get it growing again. With break-up predators circling, a sale, either as a whole or in parts, now looks the best option.
In reality, its fate was sealed when Google came along with a simpler and more effective way of searching the web. Its core product started to slide, and after that there was not much it could do. The interesting point, however, is that it will be the first of the major internet giants to disappear. Sure, there were flaky dotcom companies that crashed soon after they were launched. But Yahoo was not like that. It was a decent, smart company, with real customers, that simply got over-taken by an even smarter competitor, and never recovered.
We hear a huge amount about the power and reach of today's web giants. Amazon is unfairly bulldozing small retailers. Google is trampling on newspapers and publishers. Apple is bullying suppliers and locking down whole industries. Facebook is controlling vast quantities of personal data for its own greedy ends. None of them pays fair amounts of tax, or respects local communities.
Inevitably, there are calls for them to be regulated more closely, or even broken up — mostly from the European Union.
And yet, the lesson of Yahoo is surely that, no matter how powerful they may look right now, they too will eventually start to go into decline — just as General Motors, or Kodak, or Xerox, or any one of dozens of once all-conquering global businesses, did. It might be the 2020s or 2030s, but sooner or later the rot will start to set in. It isn't hard to see their weaknesses. Amazon doesn't make any money. That's fine for the moment, because Wall Street doesn't care, but if it needs to generate normal returns and increase profit margins, it will be very different. Its customers expect incredible value. Apple charges very high prices for products that in any other hands would have turned into commodities by now. That's great while it works. But if the brand value starts to slide, it won't be pretty.
Alphabet, as Google is now formally known, spends crazy amounts on R&D; on a whole range of products, but it is still only its core search unit that makes any real money. There are whole blogs, some of them very amusing, devoted to the genuinely terrible ideas backed by Google. A robot that climbs ladders? A space elevator? A jetpack so you can hop around town like Sean Connery in Thunderball? It's hard to believe that anyone ever signed off on projects that bad, but someone within Alphabet thought they were worthwhile.
If its search business ever goes into decline, jetpacks certainly won't save it. As for Facebook, the company is completely reliant on the billion people who provide its content every day, and their willingness to do that for nothing while being pestered by ads. If they tire of that, or if the teenagers decide that something else is cooler, then it could quickly run into trouble.
That may or may not happen. Some companies have an incredible ability to endure and change with the times. IBM has been through major incarnations, and even if it is not quite the force it once was, it is still a major business. And yet the important point is surely this. We don't need to worry about these companies growing too big or too powerful. There is even less need to regulate them to curb their reach, as the EU wants to, or to break them up, or to stop them moving into new markets, as many of their rivals would like. In an open economy, very few companies have any real lasting power. There is always a smart competitor with a better way of doing things. The natural laws of the market will take care of them eventually — just as they did for the once-mighty Yahoo.
The Telegraph, London