Wednesday, December 14, 2005

Why Yahoo! Will Go For The Hat Trick & Acquire Digg In The Process!

Yahoo! is on a monstrous roll within the social networking realm of the internet with their services of Yahoo! Groups, 360, and acquisitions of Flickr less than a year ago and more recently social bookmarking website

What has not been yet clear to the naked eye is their rationale although most users of the above services have been extremely passionate about Yahoo's activity one way or another.  There is no one occupying the sidelines in terms of having an opinion.

Competitors such as Google, Microsoft, Amazon (which has a social networking community built in through its wishlists, reviews, affiliates, and marketplace programs), and even newer competitors such as eBay (with its purchase of Skype) have been rather slow to understand Yahoo's intent and where social networking is going to take Yahoo!.

Yahoo! is cleverly assembling the pieces of the puzzle to combat the challengers of its original turf on the search engine front while changing the doctrine of the online war itself.  The VOIP activity is not the forefront of Yahoo's strategy either but a industry designated checkpoint to maintain the status quo.

Yahoo's social networking activity is not so much about Yahoo! acquiring companies than it is Yahoo! becoming the platform for the merger of companies that serve both early adopters and social butterflies who extremely value social capital (although there are slight nuances to compare and contrast between the two groups).

Google leapfrogged Yahoo! years ago and added search engine advertising in a way that its stock price now far exceeds Yahoo! and several other online companies combined.

But through social networking, Yahoo! will be able to balance the chemical equation to regain (some, not all) lost ground in terms of search engine submissions but more importantly earn greater revenue from better placement of advertising opportunities within its social networking communities.

Yahoo! has also discovered the hard way the important lesson of not killing the goose with potential to lay golden eggs until it is known that there are multiple geese with the same ability (a' la the aftermath of Flickr users when Flickr was first acquired by Yahoo!).  Yahoo's competitors would not have demonstrated the same level of patience if the roles were reversed.

What Yahoo! has within a bigger and better footprint than Google and most other online companies can be found within Yahoo! Groups.

Yahoo! acquired years ago a company named eGroups (which had acquired or merged with its primary competitor Onelist) that made creating and maintaining mailing lists easier for the general internet user.

Now those communities within Yahoo! Groups will soon have the overall ability to do several things far above what they were initially envisioned.  Yahoo's competitors saw the importance of the online communities based around common interests, hobbies, and professions and created similar tools as well.

But Yahoo's acquisition of Flickr, and eventually Digg is going to repeat history where Google , Amazon, and Microsoft will still occupy a copycat role.

The importance of acquiring and eventually Digg has been demonstrated within history with the merger of the NFL and AFL.  By combining and Digg into a single league, the inherent weaknesses of both entities separately will be negated through their combined collective strengths.  Neither one can create a single Super Bowl experience alone while the other still exists.

This combination would also work to more appropriately target the data mining capabilities within major corporations and governmental agencies than other service providers have been able to do.  Immediately corporations and governmental agencies would be better equipped to deal with the corporate grapevine and governmental bureaucracies that have put a damper on corporate profits and mistakingly aided terrorists in their efforts to threaten national security.  But these opportunities will be (or should be) first implemented for the online communities within Yahoo! Groups in a more seamless fashion than is possible now. 

Everything about the experience says that it should be quickly applied to Yahoo! Groups as soon as possible.  The same holds true for Digg as well. 

The most significant hurdle and barrier to new users within Digg alone is that its community of users seems extremely willing to cannibalize itself and squelch new opinions and/or dissenting thoughts through often inappropriate comments about what other users deem important.  Although this may occur within the communities of Yahoo! Groups, I believe (maybe through rose-tinted glasses at that) that the sentiments and impact will be lessened there.

Once and Digg are combined, new markets will immediately open for Yahoo! than can be reached via alone and/or Digg within the hands and control of another corporate entity.  Leadership of corporations and governmental agencies will demand the technology if the vision is not aborted through normal bureaucratic policies and tendencies.

Although it and its community of users (even though I frequently use Digg myself) may think otherwise, Digg's greatest potential will be actualized within Yahoo! versus any other company.

The combined ability to effectively pool collective intelligence and value is what has been desired within the knowledge management and data mining community.

I further predict that Yahoo! is even going to acquire Ning on their way to gaining "One for the Thumb" as fans of the NFL Pittsburgh Steelers would say.  The fourth social networking championship that needs to be completed within the short term is Yahoo's acquisition of TiVo.

After acquiring Digg, Yahoo! is better positioned to capitalize on the recent announcements made by TiVo for its new online services.

Yahoo! is now so deeply engrained into TiVo that I unequivocally know that Yahoo! must have a first-right-of-refusal provision within its venture with TiVo before TiVo can be acquired by anyone else.

Otherwise to consider life without Yahoo!, TiVo appears to prolong its time on life support before its stock can implode.

One surprise move to further mask its intentions, I surmise that Yahoo! might have TiVo acquire Digg and then have TiVo get acquired by Yahoo! (at the prevailing stock price of TiVo before the Digg acquisition or at a premium price) before the ink dries.  Within the real estate industry, this double close happens everyday.

The overall strength and focus of Yahoo! moves would further cement its ability to effectively mine data and place advertising in front of its social networking users based upon the products and services that the users are already interested within versus the search engine strategy Google has become known for.

As a result, both Google and Yahoo! will remain fierce competitors while having different objectives to achieve success.

Digg will be able to increase its acceptible selling price in the short term as well as know that its future ability to complement within Yahoo's stable is going to take it where it always felt it could go.

Join me soon as I read the tea leaves on XM Radio and Apple and what roles they will play within all of this. 

Now if I can just get a 140-hour Series 2 Tivo, an Apple iBook G4 with an 80 GB hard drive, and a XM Radio unit with a lifetime subscription under the Christmas tree before or as the market fulfills my words;) Tags:
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Anonymous said...

Interesting read! Thanks for posting :-D

Roney Smith said...

Thanks jaffa! I cannot wait to see what Yahoo! does with its social networking properties.

Anonymous said...

Did you say terrorists?

Anonymous said...

Real good analytics

Anonymous said...

Interesting thoughts. I do believe Yahoo is taking some steps that are needed.

Roney Smith said...


Thanks for your comment!

For someone to effectively buy Digg other than Yahoo, they would have to "get it" and have a strategy in place to effectively capitalize on the opportunity.

Fortunately or unfortunately depending upon your position, copycats do not usually "get it".

Having enough money to acquire Digg simply because Yahoo! acquired would mean that the money could and should have been "burned" literally.

Thanks again for your comment.

I did mean terrorists from the standpoint that without any data mining system in place, the various governmental agencies were not able to connect the dots as it related to the terrorists' attacks on 9-11.

A system like and Digg combined would allow Yahoo! to provide corporations and governmental agencies the ability to better determine what news is important or at least allow individual users to submit the news, link, or articles for further attention.

On the general public side, Yahoo! should use both companies (after Digg would be acquired) to its Yahoo! Groups since these groups are already based upon a common interest.

Yahoo! Groups would allow such tagging to advance the collective history of the online communities.

I made a comment on Dan's blog about his perspective and what I see for Digg's users regardless of Digg being acquired.

Digg has to be essentially acquired in order to reach its potential and get out of first gear of the techie and geek community of early adopters it currently serves.

Thanks emilyang and wally for your comments as well.