2009 July « The Jason Calacanis Weblog

White House Beer Summit–Obama is impressive on so many levels… Thoughts?

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Jason@Calacanis.com | Mobile: 310-456-4900
http://www.calacanis.com | http://www.mahalo.com
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Yahoo committed seppuku today

Yahoo committed seppuku today.

The once proud warrior of the internet space laid down its sword, knelt at the feet of Microsoft and gutted itself today. There was no honor in this death, it was one brought by the shame of losing to Google and a lack of faith in one’s ability to compete in the space they created. To be clear, Yahoo didn’t need to do this deal, Microsoft did. Ultimately Yahoo will look back at this moment as the second–and perhaps fatal–mistake in their epic history.

Search is the most important business of the 21st century and owning a commanding lead in second place is not insignificant. At one time Yahoo was the number one search engine and portal. However, they didn’t see the value in search and decided to syndicate that piece of their business to a small company called Google. For a couple of years we all experienced Google in Yahoo’s wrapper. Our only indication of who made this wonderful tool was a tiny “Powered by Google” logo on the top right of the page.

We noticed and we learned. The thought leaders went directly to Google and dragged everyone but the laggards (Yahoo’s current 20% market
share) with us. Yahoo accelerated the ascent of the master. Had Yahoo not given their search franchise over to Google back then, there is a good chance that the race for the most important business of the 21st century would be a dead heat. Certainly it would be closer.

Today, with their Microsoft deal, Yahoo again undervalues their search asset. Again, they will be “Powered by…” and again they will destroy their brand and its value.

All that being said, Microsoft’s obsession with taking Yahoo’s second place position and adding it to their 3rd place position is not an indication that it’s time to sell. Far from it. When Microsoft is interested in a space it is a clear sign that you should be investing in it–not selling it.

Microsoft’s deep dive into a graphical user interface on an operating system, Windows, was a clear sign to Steve Jobs that his bet was correct. Steve doubled and tripled down and that is why Apple is Apple. Microsoft’s deep dive into word processors and spreadsheets was the clear sign to WordPerfect and Lotus 1-2-3 that this was a space worth fighting for.

Microsoft’s massive investment into video games, mobile operating systems and search are clear indications that Sony’s Playstation, Google’s Andriod, the iPhone, Google and Yahoo are very important companies.

Nintendo didn’t give up when Microsoft came into the video game space–they innovated. Now the Wii outsells the mighty XBOX 50 million to 30 million. That is how you fight Microsoft: you innovate. Steve Jobs knows this, Nintendo knows this, and Oracle knows this. Yahoo, apparently, did not get the 40-year-old memo.

Aggression and innovation wins. Period.

To say it clearly: Microsoft does not enter a market unless it’s important, huge and on the way to becoming even bigger. Microsoft is the buy sign, not the sell sign. The people at Microsoft are brilliant and not to be underestimated–history has shown this to be true.

The Right Move
==============
The proper move when someone wants something you own badly is to invest more in it. “Oh, you like my house and you’re willing to pay double what I paid for it? Did I mention I just redid the kitchen, bought the lot next door and put in a newHVAC system?” How much is it worth to you now? That’s gangster CEO-level poker playing. You raise and raise while you develop your hand and increase its value.

If I was the CEO of Yahoo I would have bought Powerset and five other innovative search-related startups in the past three years, taken bold steps to innovate in search design and spent $100m in marketing the service.

Oh wait, that’s exactly what Microsoft did! Zing! Pow!

What did Yahoo do instead? While playing tough guy with Microsoft’s war chest of money, debating $31 or $33 a share, they took their eyes off the prize and stopped innovating. The founders ofFlickr and Delicious left, Yahoo’s once promising think tank was shut down, the products didn’t advance and all the cool kids left. What a disaster.

While Rome was burning in Sunnyvale what did Microsoft do? The opposite: they invested in search, hired the cool kids and gave Yahoo, their shareholders and the public one very clear message: Yahoo is dying on the vine, incompetent and we’re solving the problem. You can sell to us or get run over by us. What did Yahoo do? They took a page out ofTimeWarner/AOL’s handbook and brought in someone who had never worked in the consumer internet before to clean up the mess.

[ Note: I've never met Carol Bartz so I can't speak to her abilities. Clearly she is a very competent deal maker and operator. However, she's not in the league of the growing "product genius" Google cabal of Larry, Sergey,Marissa, Chad and Salar. ]

Yahoo’s shareholders should be in full revolt right now, but the truth is the shareholders of Yahoo lost faith long ago. From the Yahoo shareholders I’ve talked to over the last couple of years–and I’ve met the big institutional ones who own large chunks of it–they want to get the best possible price out of Microsoft and move on. They were tired of the war and thought gutting the pig and selling the pork was better than building a farm. Well, maybe that isn’t the best analogy in the world, but I think you get my point: cut it up and ship it out. We’re done here.

Round Three
==============
And so ends the second chapter of search and begins the third.

Chapter one was inception up until the launch of Google.

Chapter two was Google’s rise and Yahoo’s death.

Chapter three will be the two-horse race of Microsoft and Google, with the inevitable emergence of a third and fourth player.

That’s the silver lining for startups in all of this. As Google and Microsoft lock into a dog fight for revenue and market share, leaving the Yahoo carcass on the side of the road, the bevy of crafty startups will get their chance to take the third, fourth and fifth positions in this very important race.

The lesson for all startups–and BDC’s (big dumb companies)–is that innovation is all you have. Once you stop innovating you lose your talent and you lose the race. Never. Stop. Innovating. Never. Never. Never.

Man I love this game.

Question: Who got the best of this deal and why? (replies are considered ok for reposting unless you say “not for republication” or “ok to republish, just don’t attribute to me”).

all the best,

Jason@Mahalo.com

http://www.twitter.com/jasoncalacanis
http://www.calacanis.com

Note 1: To unsubscribe hit reply and put unsubscribe in the subject line.

Note 2: Sorry for the delay in getting you a newsletter. I’ve had some major life events go down recently and I’ve been suffering from massive writers block. Perhaps today will open the flood gates up again.

Note 3: If you haven’t tuned in to This Week in Startups it is going well, we’ve done almost ten episodes. www.thisweekinstartups.com

Note 4: Thanks to C.K. Sample for the last minute edit.

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Message from Silicon Valley Bank on stability…. thoughts?

———- Forwarded message ———-
From: Ken Wilcox, SVB Financial Group
Date: Tue, Jul 28, 2009 at 1:15 PM
Subject: Bank Stability: Frequently Asked Questions

Bank Stability: Frequently Asked Questions

Boards are understandably concerned about the stability of the banking
industry. I wanted to offer a few points that might help you reassure
your board that your bank is strong and address related questions that
they, or you, may have.

The most frequently asked questions we receive are below, and please
do not hesitate to contact us, if you have any other questions we can
help you address.

Why are you banking with Silicon Valley Bank?

SVB Financial Group (SVB), the bank holding company for Silicon Valley
Bank, is responsible, healthy and growing its market share
Financially speaking, SVB has high levels of capital and liquidity and
is well-positioned to support us throughout this downturn and beyond
SVB has been working with companies like ours for more than 25 years,
and as a result truly understands not only our business but also how
to plan for and manage risk though economic cycles

Is our money safe? How do you know?

Yes. SVB is in a strong financial position
SVB has a solid capital position and is participating in the
government’s Capital Purchase Program to further strengthen its
capital levels
SVB’s tier one capital ratio was more than double the Federal
Reserve’s minimum for a well-capitalized institution at June 30, 2009
SVB currently holds investment grade ratings by Moody’s and S&P
Silicon Valley Bank continues to participate in the FDIC temporary
Transaction Account Guarantee Program

Can we count on Silicon Valley Bank moving forward?

Yes. SVB’s strategy is tied to the technology, life science and
venture capital sectors
SVB is realistic about the current economic and banking environment
and has positioned itself to withstand expected credit losses
SVB is continuing to lend and grow its market share. In Q2, Silicon
Valley Bank added 234 new, active borrowers

Please find more detail in the included simple one-page overview of
our financials, and a PowerPoint slide you can put into your own board
presentation.

We want you to know, as our client, that we will remain committed, as
we have been for more than 25 years, to the technology, life science,
venture capital and wine industries, particularly in these turbulent
times. We are here for you and will do our best to help you succeed.
Please don’t hesitate to let us know how we can help your company. We
thank you for your business.

Sincerely,

Ken Wilcox
President and CEO
SVB Financial Group

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Paul Tudor Jones in 1987 PBS doc “TRADER” — simply brilliant

This is the most brilliant and disturbing thing I’ve watched in a long time.

The legendary Paul Tudor Jones documentary on PBS has finally been leaked to the interwebs and it is genius. this could have been released last summer (without the suspenders I guess).

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Free ticket to TechCrunch50 for retweeting/spamming your friends!

From TechCrunch today….

In order to build excitement for theTechCrunch50 conference we’ve convinced the bean counters at TechCrunch HQ to let us give away one $2,500 ticket a day for the next 45 days. That’s more than $100,000 worth of TechCrunch50 tickets.

So, if you’re broke, laid off or too cheap to buy a ticket, all you have to do is hit your followers with the hashtag #techcrunch50 at the end of each tweet. Every Tweet you send out is another chance to win the ticket being given away that day.

Every day we will pick one of the tweets from the previous day with the #techcrunch50 hashtag at random.

Some rules:

If you do something insane like create 20 accounts and spam twitter with 1,000 tweets a second we’ll bounce you from the drawing (and they will turn off your account!).
You can only win one ticket.
We will announce the previous day’s winner each day at noon pacific or thereabouts on the@techcrunch50 twitter account.

Good luck and we appreciate your support in this attempt to leverage social media to promote the conference. :-)