The social media world is buzzing with the news that Yahoo is suing the pants off Facebook over patent infringement. In somewhat of a repeat of their 2002 move against the pre-IPO Google, Yahoo is essentially extorting money from Facebook during the run up to their IPO.
Patent Litigation for Losers 101
What a foolish strategy.
Some will argue that the 2002 Google suit was legitimate - and Yahoo did get some 8.2 million Google shares which they sold for $1.4 Billion out of the deal.
A lot of good it did Yahoo - Yahoo's market capitalization has dropped in half since the Google settlement. Meanwhile the NASDAQ composite is UP by 50% in the same period. Oh, and Google is up about 450%.
One funny thing is that if Yahoo had just retained those Google shares, they'd be worth $5 Billion right now - almost a third of Yahoo's current $17.5 Billion market capitalization.
Does the word "Loser!" mean anything to you? This isn't as bad as the SCO lawsuits in the 2000's - where SCO sued just about every Unix vendor on the planet as well as a number of innocent bystanders (such as AutoZone and DaimlerChrysler) after it managed to somehow destroy its own thriving business through years of mismanagement and poor execution. But it sure reminds me of that sad situation.
Getting Social Media Priorities Straight
This kind of litigation is for losers. It's for companies who have given up on "success" as a priority, and instead have focused on trying to salvage something...anything out of the situation.
I've never seen a technology company succeed by employing layoffs and cost-reductions as a strategy for growth. And I'll venture the same thing for lawsuits.
The path to success in social media does not lie in patent-related litigation. It lies in having a vision and a strategy, solid execution, great timing and lots of luck. Yahoo has none of the above. They (along with HP) are the poster children for "Clueless Technology Companies That Used to be a Big Deal".
Yahoo is desperate for any kind of success or innovation. They need to be pouring all their energies and resources into re-invigorating themselves, re-igniting the flame and rebuilding their public perception as a leader.
Instead, they squander their resources on a Facebook lawsuit - and hurt their public image and ability to acquire/retain top talent to boot.
I'm sure Yahoo will manage to extort something out of their Facebook legal ambush. But based on a cursory view of the patents, they appear to be similar to the famous "toast" patent - Patent US6080436 - Bread refreshing method - "A method of refreshening a bread product by heating the bread product to a temperature between 2500 degrees F. and 4500 degrees F. (in other words, this guy patented "toast").
The Washington Post (among other sites) has a great run-down of the 10 "Facebook killers". I'd love to see Facebook fight this, as they appear to be silly things such as:
- Sending an instant message
- Customizing ads based on user behavior
- Sharing items with only selected people
- A customized home page
- Messaging your friends
It's sad to see a former high-flier cruising down the path of self-destruction, but I guess if you can't innovate and succeed, sue someone who did.