Jeff Weiner left Yahoo! for a VC firm (two in fact). So did former Paypal and Facebook executive Matt Cohler.
This would seem like a good thing, but the fact is, the VC world is in decline and shrinking:
According to VentureSource, a research unit of VentureWire publisher Dow Jones:
- There were 844 venture firms investing in U.S. companies last year, 40 fewer than in 2006
- That is down 30% from the bubble year of 2000, when there were nearly 1,200 active investors.
- The total includes a substantial number of firms–224, or 27% of the total–who didn’t back any new companies last year, an indication that the ranks of active investors will continue to thin.
- Less than half–45%–completed four or more investments.- 29% made just one investment:
- About 550 firms have made at least one investment in a U.S. company this year.
- In all, the NVCA has about 470 member firms representing 90% of the venture capital under management in the U.S.
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WatchMojo NewsletterWhy is Yahoo!’s management falling apart?
Well, for one, the board and its most senior leadership are inept and borderline white-collar criminals.
But more importantly (since in Western capitalist cultures few seem to mind working with borderline and actual criminals) Yahoo!’s mishandling of Microsoft’s offer made one thing clear:
Yahoo! - the stock - is not worth a warm bucket of spit… and for its executives, this means YHOO’s is worthless.
A stock price is the reflection of a company’s current income-generating ability plus the growth potential. In Yahoo!’s case, growth has been stagnant and its income somewhat abysmal considering how many users and market share it has.
Basically, if you are to plunk money in a stock, there is better places to do so.
I owned YHOO shares but Jerry Yang’s douchebaggerie made me sell everything between $28-30 recently. I feel sorry for anyone holding YHOO stock because Yang makes the criminals at Enron, Worldcom and Arthur Andersen seem like shareholder activists.
But back to management: why are they leaving?
Like many stocks: Yahoo! had embedded in its stock price a takeover premium. Given YHOO’s high valuation ($25B to $45B in the past 6 months) there were only two options:
- private equity
- MSFT
In today’s credit climate, private equity is a non-starter… the only option then was MSFT.
And how did that fare? Not well. Tack to that YHOO’s disgraceful capitulation in search to Google and any self-respecting YHOO executive will see no reason to stick around.
YHOO down the road will most probably be worth less than YHOO today, no matter how much revenue it generates because the takeover premium had left the building.
In 2006, right before YouTube got acquired by Google, I wrote that YouTube could generate $15M per month off display ads alone, multiply that by 12 months, and you get $180M per annum.
Ultimately, YouTube was thinking more of selling the company then selling ads, clocking in a mere $15M throughout all of 2006.
But, those numbers have begun rising. While everyone is looking for the equivalent of the 30-second ad (pre-roll, overlay, PiP) I’ve long argued that the good old fashioned display banner will probably be most material in driving online video revenues from $1.25B this year to $7.1B in 2012, in the form of a companion ad.
Rationale is simple: with text content, you scroll down quickly and zoom by the display ads, whereas with video, your eyes are focused on the video player - and companion ad - for 1-3 minutes. Call me crazy: but the value of that ad is far more than a traditional display banner in text content, and considering that pre-rolls turn off viewers, then you are left with no choice but to start spending more and more moola on the companion ad.
Apparently, the people paid to come up with this kind of thinking - analysts - finally agree:
Earlier estimates pegged YouTube’s 2008 revenue around the $100 million range, but last month Forbes floated a $200 million estimate for this year, and $350 million for next year. Now Citi’s Mark Mahaney says YouTube could generate up to $500 million in net revenue next year.
Google famously hasn’t figured out how to sell ads in the video stream itself, though it keeps promising that it will. Doesn’t matter, Mark says: It can get most of that $500 million from run-of-the mill display ads.
Good to see people coming to their senses.
Disclaimer: WatchMojo.com provides video content to YouTube.
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