Yahoo’s big mistake in buying Summly

The minute I heard about Yahoo’s acquisition of Summly, a news-aggregating website developed by a 17-year-old kid for $30 million dollars, I wasn’t surprised.

Summly Founder
Nick D’Aloisio, Summly Founder

Wait, yes I was. And all because I looked at the website and watched Nick D’Aloisio’s video and scanned his platform and realized at 17-years-old, the kid had it figured out. He had created an algorithm that had ‘thought differently’ than most other sites (that I knew of anyway) and he managed to package it in a sleek, clean, easy-to-navigate website. For as simple as it sounds, it’s awfully difficult to pull off in a world where designers and programmers seem to gum everything up with their inconsistent thoughts of what is truly needed in a website.

But my non-business brain started to wander. I thought he built this on his own, from his basement and he was simply just another genius who’s pay day has arrived. I was foolish to not realized that he started even BEFORE he was 17. The company was founded when he was 15. He had funding, nearly 1.5M upon launch from such Angle Investors as Ashton Kutcher, Mark Pincus and Yoko Ono. Not bad, kid.

But had ‘the Kid’ pulled the wool over Yahoo’s eyes? Early indications, tweets and pontificating seem to point to —> yes.

I was happy for the kid. I love a ‘buy-out’ story. But the first reply tweet I received after I sent out my tweet about the news was interesting…and got me thinking and researching.

This was a good point. There’s a lot of open source software out there that tackles what Summly has seemed to perfect. Would Yahoo been better advised to take that $30M and dump a 1/4 of it into a programming team to simply create their own version? YaSum? Yahoommery? Who knows. Maybe they had the money burning a hole in their pockets and they wanted to launch an app right now?

Then there’s the post I came across from the founder of Origami.com, Vibhu Norby, who can’t quite fathom why Yahoo’s board would allow for such a transaction. He lays out some pretty convincing bullets:

+  Summly raises $1.5 million in total funding, launches to significant fanfare.
+  Yahoo comes knocking, asks for their download numbers, revenue, technology overview, and the resumés of their 5 employees.
+  Summly comes back and says just short of a million, $0, licensed-technology from SRI, and here are the resumés.
+  Yahoo says great, we are looking to beef up our mobile team here. We are also interested in the future of news. You have 5 employees. But you don’t have enough downloads, technology, or revenue for this to be an attractive deal to us on the real M&A front. Tell you what, you guys have raised $1.5m. It won’t take a huge sum for us to pick you up. I think if all of your engineers pass the rigorous technical/CS interviews that Marissa has mandated, or at least a majority, we’ll hire your team and we’ll pay your investors back.
+  Summly says OK, let’s pursue that option. I think my team can pass your interviews.
+  Yahoo screens the employees, and tells the founder that 2 of them passed. And we’ll let the the founder skip the interview because he’s 17 and won’t pass it – but he probably understands mobile better than half the people at Yahoo.
+  Summly says dang, only 2 out of 5 passed? Umm…alright, well will you still buy us? What’s the number?
+  Yahoo takes the information back to PR and corp dev’s numbers people. PR calculates that they’ll get major press for the acquisition of a teenager’s company, values that press at $1m. Corp dev says they’ll pay $1m per engineer as is typical. And we’ll throw in $5m for the founder. That brings the total to $8m. Let’s ignore the hurt feelings that our employees will have about making a 17 year-old a millionaire.
+  Summly says no, $50m is our minimum. We need to pay back our generous investors.
+  Yahoo says $15m is fair. After all, we’re getting 3 employees, shutting down the app, and will have to rewrite the technology on our stack with a team of senior engineers.
+  Summly says $30m.
+  Yahoo says yes.

Norby says there are plenty of teams out there that could be hired to develop something in the mobile news/discovery space and I tend to agree with them. As to why Yahoo picked Summly? We’ll just have to wait and see if the story develops. You can either learn that by going to a neat news-aggregator like Summly, or come back to this blog.

Which is for sale, by the way. Lets start the bidding at $10. Anyone? Anyone? $9? Bing?

Subscribe to receive inspiration, news, and ideas in your inbox.

About the author

Josh Benson

Josh Benson writes about the web, social media, entrepreneurship, television news and life in general. He covers the days news as a news anchor for WFLA-TV in Tampa, Florida. He's also a web designer/developer. He lives in Tampa, Florida with his wife Tara and two daughters Bella and Brooklyn.

3 comments

Josh Benson

Josh Benson writes about the web, social media, entrepreneurship, television news and life in general. He covers the days news as a news anchor for WFLA-TV in Tampa, Florida. He's also a web designer/developer. He lives in Tampa, Florida with his wife Tara and two daughters Bella and Brooklyn.

Subscribe

Let’s Connect!

Categories