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???

Here’s my feelings on digital printing. Home printers suck… too expensive and hard to do (and is reflected in the dropping market share of home printing vs. retail and online). Online services (like Shutterfly and Ofoto) are nice, but cost more than retail, and have to be mailed to you. Retail printing is great, but do you really want Costco or Walmart to store all of your photos? Are they going to have cool tagging services like Flickr. Ahhh, I think not.

So the best “solution” is for Yahoo! and the retailers to get together, and allow Yahoo! Photos/Flickr digital images to be printed at the retailer of the user’s preference. I don’t want Yahoo! to have some sort of “preferred,” exclusive printing relationship, I want choice. For example, I’d love to upload all my images to Flickr, and have them printed out at my local Costco (which you can’t beat for price and quality). In addition, I am not so wild about having Yahoo! print my photos, and mail them too me. Costco et al., are always going to beat Yahoo! in cost, convenience and probably quality.

However, the retailers probably are still thinking it’s 1998, and they can become the center of a person’s digital image world. That is, they think their brands equal “cool, online, trustworthy, perpetual digital-image store.” Again, I think not. Do you really trust Wal-Mart to store all of your images forever? Yeah, right… lemme offshore that to where ever, and, oh and sorry, you’ll have to upload all of your images.

Yahoo! probably thinks it can own the world and that all of it’s users will want to use their online service. This, of course, is myopic.

I’m waiting for the day when reasonable minds prevail, and everyone figures out that:
Yahoo!’s brand = cool, progressive, perpetual, trustworthy, future-proof digital image archive
Retailers’ brand = great price, convenience, transaction for digital images

Update:2005_04_22
Yahoo! and Target have announced plans that will allow Yahoo! members to print their online photos at Target (Flickr will probably be included too). I imagine that Target paid Yahoo! a “distribution” fee (perhaps payable in advertising on the Yahoo! Network), will have to promote Yahoo! Photos in their stores and will share some of the print revenue with Yahoo!. Yahoo! will most likely have to offer some promotion of the Target service within Yahoo! Photos. Yahoo! probably had leverage in this deal, since it was widely reported that Target has been late to the online photo game.

I think this is a good deal for both companies. It’s a good brand match… both companies are upbrand-mainstream (that is, an up brand from the likes of WalMart).

In the future (assuming Yahoo! plays it’s card right), Yahoo! should be able to capture a disproportionate share of the online digital assets market. This will increase their leverage over retail printing shops, so they should be able to demand a large revenue share of the printing fees.