Yahoo, The Future!

One of my favorite movies is “Broadcast News.” Holly Hunter starred as a TV news producer. An executive sniffed it must be wonderful being right all the time.

“No,” she replied. “It’s awful.”

I felt that way during the Internet bubble. To make myself feel better, today I did some research on Yahoo.

Here’s what I wrote in April 1998: “When a company like Yahoo trades at 29 times its sales (not earnings, its sales), and even average stocks trade at 25 times earnings, it’s time to be a scourge. When Market Guide surges in value nearly 600 percent on word it’s got a deal with AOL, so even James Cramer, who’d just signed a similar deal, raises red flags and no one hears, what you’ve got is a mania.”

Three months later I added this: “Joseph P. Kennedy (father of J.F.K., R.F.K., etc.) said he got out of the market before the 1929 crash when he heard shoeshine boys trading stock tips. The current speculative fever in search-engine or ‘portal’ stocks like Yahoo, Lycos, and Excite will be seen by history as the shoeshine-boy bubble.”

Again, in 1999 I wrote: “Yahoo’s position depends on the continual growth of the Internet stock bubble. People buy Yahoo because they figure someone else will take them out for more later. When that assumption comes under question, the bubble bursts, and when you fall, there is no bottom because there is no conventional valuation.”

It’s easy to dump on Yahoo now, to call Tim Koogle a sack of hair and engage in 20/20 hindsight. My point today isn’t to harp on the past but to talk about the future.

Irrational depression is as foolish as irrational exuberance. There’s a growing belief that nothing should be free on the Internet. This is dangerous nonsense.

It’s true that every content business should have an upsell, and that the old rules still apply. Tiny newsletters should cost more than thick newspapers because their stories are tightly focused and their circulation is tiny, too.

That doesn’t mean that the Internet is dead and everything should have a cash register attached to it.

The reason micropayments haven’t worked as a technology is simply that a micropayment technology has always existed, called advertising. No newspaper or magazine pays its writers from subscription fees — those just pay circulation costs. Every newsletter gives away free samples. Every business magazine has “controlled circulation” where people get it free in exchange for data.

If you apply the old rules to the new medium in a coherent, meaningful way, you will prosper. We’re not killing trees. We can do databases. This is still the greatest new medium to hit the world since the printing press. It’s more powerful than even television because it can be anything you want it to be — a TV, a radio, a newspaper, a database, a game, a bulletin board, a mailbox, a telephone.

Now that the boom is over, look beyond the bust. I think that when you do, you’ll say what I say about the future: Yahoo