Yahoo CEO Marissa Mayer is trying to infuse the company with talented, entrepreneurial engineers and product managers.
One tactic she’s using to do that is something called an “aqui-hire.”
In an acqui-hire, Yahoo buys a failed startup in order to hire its employees.
Usually, they cost about $1 million per engineer.
Since the beginning of this year, Mayer and Yahoo have complete about a dozen or so acqui-hires.
Last night, Kara Swisher reported details on two more deals.
- Yahoo made an offer to buy a startup startup called Xobni for $30 million to $40 million. That will be a tough offer for Xobni to take because it’s raised $40 million from investors. On the other hand, Xobni doesn’t have a lot of options. It makes address book apps, and they aren’t very popular. Yahoo probably wants Xobni so it can put its people to work on mobile versions of Yahoo Mail. Two reasons: 1) Yahoo is way behind in mobile, and 2) it needs to protect its massive Yahoo Mail user-base, or it’s pretty much hosed.
- Yahoo wants to buy New York-based startup Qwiki for $50 million. Qwiki has technology that turns Web search results into videos. It’s tried to apply this technology to a bunch of different kinds of use cases, and consumers have never really shown much interest. The first plan was to use the tech to make informative videos from search results pages. The latest effort is an iPhone app that turns photos, music, and video into clips. Mayer keeps saying that the innovations in search these days are user-interface innovations. Maybe she thinks the Qwiki team has some good ideas for how to make Yahoo Search results pages look better.
As we’ve noted in the past, not everyone thinks Mayer’s acqui-hire strategy is so smart.
Venture capitalist Mark Suster – who is famous in his industry for selling two companies, and the joining GRP Partners – says that Mayer’s acqui-hire strategy is actually really terrible, because it will drain morale from existing employees.
Why Acquihires Hurt the Acquiring Company
How about if we look at it from the “rest of company” perspective.
You have been at Google, Salesforce.com, Yahoo! for years. You have worked faithfully. Evenings. Weekends. Year in, year out. You have shipped to hard deadlines. You’ve done the death-march projects. In the trenches. You got the t-shirt. And maybe got called out for valor at a big company gathering. They gave you an extra 2 days of vacation for your hard work.
And that prick sitting in the desk next to you who joined only last week now has $1 million because he built some fancy newsreader that got a lot of press but is going to be shut down anyways.
What kind of message does that send to the party faithful who slave away loyally to hit targets for BigCo?
I’ll tell you what is says.
It says if you want to make “real” money – quit.
Go do a startup. Get some famous angel or seed money. Get yourself in a big demo day competition. Woo the press. Hire legions of young, impressionable graduates from the top engineering universities. And then come back and sell me your company.
I know many rank-and-file employees. I’ve had the chats with them. You rarely meet people who don’t resent the scores of entitled acquihirees of their company.
Does Yahoo! et al really have to keep up with the Jones’s to build its future?
For the 200 new employees they’ll get through acquihires do they unleash 2,000 unhappy existing employees? Sure, most won’t quit. Because they know that it’s not a slam dunk to start a business and get acquired. But the most talented of those 2,000 will.
What if the $100 million you’re going to spend trying to win this alleged “war for talent” in stead went into big retention plans to keep your most talented employees.
You can’t “Roll Out the Red Carpet When Your Best Employees are on the Way Out the Door” as I wrote in this post. So why not announce big, hairy audacious goals on recruiting the best mobile talent with sign-on bonuses and retention plans? And reward your existing top 10% of employees handsomely.
I’ll bet the ROI would be higher than acquihires.
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