Facebook’s response to Yahoo’s patent lawsuit

Like many in tech, I believe all software patents should be abolished. That said, I think Facebook made the right move by filing a lawsuit against Yahoo’s patent attack.

As I see it, Facebook had 4 choices:

– Settle. Given their pending IPO, this would have been the easiest route. But, by rewarding Yahoo, settling would have encouraged more frivolous patent lawsuits.

– Defend without countersuing. On the surface this would have been the “principled” stance, but it would have severely weakened their legal position, and therefore would have made it more likely that Yahoo profited from the lawsuit.

– Countersue without signaling any aversion to patent lawsuits.

– Countersue and signal that they are averse to patent lawsuits, which in turn signals that they will drop the lawsuit if Yahoo does. This seems to be what Facebook has done:

“From the outset, we said we would defend ourselves vigorously against Yahoo’s lawsuit,” Ted Ullyot, Facebook’s general counsel, said in a statement. “While we are asserting patent claims of our own, we do so in response to Yahoo’s short-sighted decision to attack one of its partners and prioritize litigation over innovation.” [emphasis added] – NYTimes

Countersuing gives Facebook the best chance of fending off Yahoo’s lawsuit – and therefore not rewarding patent lawsuits. And signaling they are only doing so in response to Yahoo (hence might drop the suit if Yahoo does) keeps them on the right side of innovation.

Good bizdev cannibalizes itself

A few successful websites were built almost entirely through viral growth. The vast majority, however, started off by partnering with other, already successful websites. Even Google began by partnering with Yahoo. As superior as Google’s search algorithm was, it was very hard to get the masses to switch to a new search engine.

In the web 1.0 world (approximately pre-2004), integrating two web services involved lots of manual work, such as negotiating legal contracts and custom technical integration. Creating these kinds of partnerships is usually referred to as “business development” or “BizDev” (personally, I usually just call it “BD”). In the web 2.0 world, it became common for websites to create fully functional, self-service API’s with standardized legal terms. This made it possible to drastically reduce the friction of integrating services. My Hunch cofounder Caterina Fake coined the term “BizDev 2.0″ to refer to this idea (and of course Flickr was a pioneer of super robust APIs).

There is no question that removing legal and technical hurdles is a win for everyone (except lawyers). However, unless your service is extremely high profile and its value is easily understood, it still needs to be marketed to potential partners. Many websites won’t consider using a self-service API until they’ve seen it working on other sites with measurable results. So how do you overcome this particular kind of chicken-and-egg problem?

During his interview process, Hunch’s Shaival Shah, said something that struck a chord with me: he didn’t want to be called “VP BizDev” because, he said, a good BizDev person makes BizDev irrelevant. The idea is to create a number of BizDev 1.0 partnerships while simultaneously building and marketing a full service API.  If you can do BizDev 1.0 with some number of (ideally high profile) websites and demonstrate that it is valuable to them (ideally quantitatively), you can then scale your service BizDev 2.0 style. Maybe this could be called BizDev 1.5.

Shaival wrote up a much more detailed post on self-cannibalizing BizDev that is well worth reading.

Yahoo should invest in products, not advertising

For 10 years, Yahoo was my default home page.  Now I can barely stand using the site.  I still use it for Finance and Flickr, but that’s it. The new home page design has windows popping up everywhere and mind numbing celebrity gossip up top.

Now we learn Yahoo is going to spend $100 million on an advertising campaign.  The slogan is “It’s Y!ou” which sounds like one of those meaningless taglines invented by PR firms.  I’m quite sure no one will remember it and their money will be wasted (quick, name the tagline of any big tech company).

By CEO Carol Bartz’s own admission, Yahoo is incredibly well known, especially outside of techie circles:

When you get outside of New York City and Silicon Valley, everybody loves Yahoo…. We do great things for [users] and we’re excited about what we are.

Yes, Yahoo has one of the best brands on the web. Which is precisely why they shouldn’t be spending $100M on branding.  That’s the last thing Yahoo needs.  What they need are new technologies, new revenue streams, and new products that people love.  If they can’t build those things themselves, then they should acquire them.  They’re coasting on inertia right now.  As we saw with AOL and countless other tech companies before them, that inertia will be lost if they fail to innovate.

I think the Yahoo-Bing search deal is a great thing for startups as it potentially makes search competitive again.  But as a longtime Yahoo user it makes me kind of sad.  Between the branding campaign and the search deal, it feels like Yahoo has thrown in the towel.

sunbelt blog

Alex Eckelberry has for years been one of the best bloggers on internet security. Personally I can say that I learned a lot about internet security by reading his blog (in addition to, among others, Ben Edelman’s). Today he posted about Yahoo’s announcement that they would use SiteAdvisor to help block certain sites from Yahoo’s search results. I have been reading Alex’s blog for years and get the sense that beyond his business interests he truly cares about protecting ordinary internet users from spyware, phishing, spam etc.