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April 02, 2005
Flickr — What was Google Thinking??
10:03 AM | Permalink | Comments (0) | TrackBack (0) ~ Biz - Internet
I’m sure that everyone has heard that Yahoo! recently acquired Flickr. In my opinion, this was a brilliant, strategic move. Flickr has the “feel” of an early Hotmail or Paypal and maybe even Ebay (hey, with those tags you can definitely see some network effects going on).
Sure Flickr’s not making money now, but who cares when you are acquiring users like mad? It’s like homesteading right now. Land, that is users, will never, ever be this inexpensive to acquire, so “Internet companies” better make the most of it RFN.
It’s interesting that Yahoo! would buy Flickr in that Yahoo! already has Yahoo! Photos. Yahoo!’s been in the online photo business for many years now, and is probably doing pretty well. However, the Flickr acquisition could end up making them the online image archive of choice.
Google’s Picasa is a fine little application, but that’s it. It’s not an online image store (yet?), and doesn’t have any network effects (yet?).
So WTF was Google thinking in letting Yahoo! snatch up Flickr? You go IPO to generate a pile of cash that you use to grow the company (oh, and to make a bunch of insiders rich). With Google’s P/E ratio, investors want to see that IPO cash working… not sitting in some bank earning a negative real interest rate (heard of inflation lately?).
In other words, Google needed Flickr more than Yahoo!. And more along that line of math: everyone will own a cellphone in the future + every cellphone will have a camera + everyone loves photos + everyone loves sharing photos = a really, really big, strategic market.
Acqusitions are like movies. Out of 10, 7 will be duds, 2 will break even and 1 will be mega-hit. I’d say there’s a better than 10% chance that Flickr will be a hit, and make Yahoo! a pile of cash in the future.
Google, what where you thinking???
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