Today’s edition of the Wall Street Journal reports that Yahoo’s acquisition discussions with social-networking site Facebook have bogged down.
The context of the report is the implied contrast between Google’s alleged decisiveness in pursuing and closing acquisitions and Yahoo’s comparative slowness and tentativeness. The following paragraph, excerpted from the WSJ article, is illustrative of the theme:
Yahoo’s failure to date to secure a deal for Facebook highlights the slower pace of its efforts to expand, following Mountain View, Calif.-based Google’s swift agreement to purchase online video site YouTube, of San Bruno, Calif. Yahoo had recently held discussions with YouTube concerning an acquisition, according to people familiar with the matter.
Yahoo is under pressure from the business media, and perhaps from many of its investors, to make a move that will counter Google’s big-money acquisition of YouTube. Yahoo is being compared unfavorably with Google, since — at least in some respects — they compete directly for web-based advertising revenue, with Google widening its market advantage in that area.
Not only has Yahoo stumbled recently in upgrading its advertising system, it also has announced that slowing sales of Internet advertising would impair its ability to meet third-quarter revenue targets, and it was involved in unsuccessful acquisition talks with YouTube before Google swept in to take that prize. As a result of all these factors, Yahoo’s stock price has stalled.
One could make a plausible argument that Yahoo is right to exercise sober, measured due diligence in its acquisition-related business processes and negotiations. It is better, after all, to make the right move slowly than to make a disastrous move impulsively. Then again, the other problems, with the upgrade to its advertising systems and the advertising-related revenue hiccup, argue that perhaps Yahoo is suffering from a broader malaise.
In that context, perhaps the inability to move more decisively, in its own tactical execution as well as in strategic matters, is an institutional problem that Yahoo will need to correct if it hopes to keep pace with Google on the balance sheet as well as on the M&A front.