Top Menu

The Pros and Cons of an Acqui-hire Strategy

Unless you’ve been hiding under a rock, you would have noticed that Yahoo is doing something big in a major way. Thanks to its hiring of Google executive Marissa Mayer, Yahoo is hell-bent on reinventing itself. There’s a lot on the line. As you probably already know, Yahoo has spent the past few years in the wilderness in regards to its stock price and more importantly its overall strategy as a tech company. Yahoo launched initially as a tech giant, as a mover and shaker and a harbinger of things to come in the tech space. As the years dragged on and many of its acquisitions turned out to be failures, Yahoo’s big game plan was soon revealed. It turns out that this huge company that a lot of people bought stock in and that used to cost a lot of money had a very simple strategy: find websites that have traffic and buy them. That’s all there is to it and that’s the bottom line. While that may have made sense back in web 1.0, it doesn’t make sense in the age of social media and it’s definitely bonkers in the world of mobile technology. The truth is we all know that traffic can come and go. If you need any proof, just look up Friendster and MySpace. A traffic should not be the end-all and be-all of a company strategy. Sadly, for many years ending with Jerry Yang, that’s been Yahoo’s strategy.

With Marissa Mayer’s entry, she focused on a completely different approach which is to direct Yahoo to rediscover its technology leadership roots. A key part of this is of course, finding the right talent. As you can well imagine, while Yahoo is floundering around, a lot of its key talent and up and coming employees bolted for startups like Facebook linked in and other companies . As a result, there is a talent and skill deficit at Yahoo that needs to be addressed for Yahoo to truly become the technology leader that it once was. Marissa Mayer’s technology can be summed up in one word, Acqui-hire. Based on this strategy, she would buy companies that have very interesting technologies and buy out the company based primarily on the technology and the people and not the actual service or the product produced by the company. It’s not a surprise that a lot of Yahoo’s recent acquisitions involved hiring the staff of the acquired company, paying some serious money, and shutting down the company’s operations. This is a bold move because it yields a lot of great advantages. Make no mistake about it. It puts Yahoo at the forefront of certain key technologies, gives these young startups an offer they can’t refuse and pleases a lot of investors who are looking to bankroll new technology because it gives them quick and easy exit strategy.

The downside to a Acqui-hire strategy is that there must be a strong synergy between the people that got acquired and existing Yahoo culture. This is just like any other organization that gets bigger throughout the years. Layers of bureaucracy get created, internal office politics pop up and there are all sorts of organizational headaches that need to be navigated. As a result, former high-flying and innovative companies like Microsoft have become so bureaucratized that a lot of their current products can’t get any attraction. If that’s the case, other technology companies might be saying it will not be the case at Yahoo as well.

Besides integration issues, another downside of the Acqui-hire technology is the want of incentive. If a startup genius puts up a company and is very passionate about his or her idea and gets bought out, there’s really no guarantee that the same level of passion when a person is hungry and determined to prove a concept right will be the same once that person has a few million dollars in the bank. Based on these serious considerations, it’s still up in the air whether Marissa Mayer’s Acqui-hire strategy would work. Still, it’s much better than the previous strategy which was just buying out companies, spending precious company resources and hoping that it will work out for the best.

, , , ,