1 reply
  1. Greg Hluska
    Greg Hluska says:

    Great article!

    I think if you take a deep look at some of these companies, their declines make a whole lot of business sense. Consider Yahoo. Terry Semel made some critical errors in the last few years of his reign, then Jerry Yang took over. Jerry Yang is a great entrepreneur, but his term as CEO was full of strategic blunders (ie – he didn’t cut costs quickly enough and he was very slow to react to a softening ad market).

    Or there is Digg. I used to love Digg, but the service itself was marred with some serious problems. Ultra conservative groups were banding together to censor Digg and keep liberal articles from hitting the front page. They really should have caught that with an algorithm (it would be very, very easy to write). After that news broke, Kevin Rose had a choice. He could either redesign the service from scratch, or he could implement an algorithm to keep articles from being gamed. He chose to redesign the service and, as often happens, the magic was lost and users (myself included) ran away.

    Finally, consider the ‘decline’ of AOL. AOL hit its peak when the consumer friendly web was in its infancy. People needed a highly simplified simplified, curated experience and AOL stepped in to fill that void. Thing is, consumers quickly came up to speed, and other technology (ie – broadband access) became popular.

    These three companies ultimately provide a case study on why technology companies can go from heroes to zeroes. Yahoo fell victim to hubris – its leadership seemed to buy into the Yahoo legend and poor decisions began to flow. As a product, Digg had some serious problems and when these problems came to light, the product imploded and users found a better offering. Finally, AOL declined because its customers (and technology) changed.

    If you look at the other companies on this list, they all fall into these categories. MySpace wasn’t a very good product and so its users embraced an alternative. AltaVista was great…until Google came along and showed just how bad their search results were. Delicious and Flickr (which used to be great services) fell into the vortex that we call Yahoo.

    I can go on, but I think that the point is clear – companies usually decline for fairly predictable reasons. Facebook’s real challenge will be weathering these failure points. For example, I still don’t think they are terribly good at mobile. As mobile becomes a bigger part of peoples’ lives, Facebook could decline if a competitor provides a better mobile experience. Or, there is the problem of scale. What happens if all that fresh IPO cash turns into a buying frenzy? Will Facebook become another Yahoo, with products like Delicious, Flickr (and on and on) being both stagnant yet incredibly expensive and inefficient? Or, what happens if people suddenly decide, ‘hmmmm, I don’t like giving my information away for free.’??

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