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Is Facebook too big to fail? Let’s ask Yahoo…

Yahoo! used to be king of the hill, but innovation from smaller startups and a failure to adjust led to its downfall. Can the same happen to Facebook?

UX writing

It wasn’t too long ago Yahoo! was on top…

So many people believe that Facebook is invincible, while others think they’re just the flavor of the month (or decade, whatever). No matter where YOU are on the spectrum, consider this – Yahoo! has evolved into something totally different than what their core competencies once were. And ironically, their old functions look a lot like Facebook’s (groups/chat rooms, email groups, messenger/email, news streams, and so forth). Yet, here we are, talking about Yahoo’s demise, so what makes Facebook so immune?


It’s tough to be king

Consider: Almost since its beginning, Yahoo! has dealt with a classic innovator’s dilemma. It got so huge so quickly, it became trapped by its own success. When you have hundreds of millions of mainstream users you don’t want to do anything that rocks the boat.

So what happened? Smaller companies with a lot less to lose because they are/were not yet dependent on big business took the risks and rolled the dice, and eventually those smaller companies (Google and Facebook are great examples) became much bigger companies that ate into Yahoo’s revenues.

It’s good to be king

Now, Facebook may be dealing with the same problem. It can’t, for example, redesign its site in a really cool, modern way that will appeal to users of 2017, because it would annoy the billion users it picked up starting in 2004 that are still using low-end laptops or inexpensive mobile devices (especially in developing nations).

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This leaves it vulnerable to startups that can build social sharing tools optimized for tablets, phones, and computers built with today’s technologies. Those startups don’t need a billion users today to keep growing until they can start taking ad dollars away from Facebook.

The good news, says industry insiders, is that Facebook CEO Mark Zuckerberg seems to realize how much his company looks like Yahoo from circa 2005 and he’s doing something about it.

What’s Zuck doing to keep it 100?

Zuckerberg continues to use Facebook’s massive market cap to make stock-rich acquisitions of startups doing the risky, innovative things Facebook can no longer do with

Zuckerberg, in the last few years, has spent freely, purchasing Instagram, Whatsapp, and Oculus.

Additionally, as lawsuits pop up against Facebook over exposing children to inappropriate content and so forth, the brand responds. Unlike Yahoo whose chat rooms were the source of many pedo cases and lawsuits which ran that function into the ground as Yahoo drug it out over years. That alone points out a culture difference between the two big boys.

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Learning from one’s mistakes?

So why didn’t Yahoo do the same thing a decade ago? The truth is, they tried to. But they made one big mistake that Zuckerberg isn’t making: Yahoo execs worried too much about paying the exact right price for big-ticket acquisitions.

Facebook may find itself (heck, maybe it has already discovered) that it’s core demographic grew up. But before said demographic decided to move on, FB can sleep well knowing there isn’t really anyone who can take it’s place.

Facebook has a unique asset that will grow in value over time – the lifestories of millions of people as they themselves wrote them – and it has barely begun to monetize this asset. As for the interfaces, surely there’s plenty of room for innovation on new screens like mobile phones or through entirely new experiences like Paper. Maybe the PC just isn’t where the action is going to be.

Facebook reminds us of Yahoo, but I say the similarities (at this point, anyway) are strictly cosmetic.


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Written By

Nearly three decades living and working all over the world as a radio and television broadcast journalist in the United States Air Force, Staff Writer, Gary Picariello is now retired from the military and is focused on his writing career.



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