decisions

Did I Make a Mistake Selling My Social-Media Darling to Yahoo?

Joshua Schachter. Photo: Dave Morin

Joshua Schachter’s groundbreaking social-bookmarking site Del.icio.us, founded in 2003, popularized the idea of “tags” — organizing bookmarks by appending just a word or two. At its height, Del.icio.us was the toast of budding social sites known as Web 2.0, had millions of users, and served as a direct inspiration for sites like Reddit and Pinterest. Schachter talked to Intelligencer about his decision sell Del.icio.us to Yahoo in 2005 — and how it felt to watch as the company was mismanaged and sold off to a series of buyers before being permanently shut down in 2017.

In the late ’90s, I started a site called Memepool, and people would email me links. At 20,000 links, it got unwieldy. I’d copy and paste the URL into a text file on my Unix box, and then make a Unix comment mark — which is a hash — and a terse note, just a word or two. So, like, “# wifi.” A friend would ask, “Have you heard about this new Wi-Fi thing?” and I’d be like, “Yeah, I’ve been collecting stuff.” I would get the 15 links I had collected about Wi-Fi and paste them into a message. I turned that text file into a site called Muxway.org, which was for single users, and then turned that into Del.icio.us, which was for multiple users to use at the same time.

Del.icio.us was a way to save things while wandering across the web with low cognitive overhead. You could save and tag. Tags were something I invented, they weren’t a thing before that. Instead of carefully organizing your bookmark folder, you added a word or two. And you could see what other people were working on, and share and contribute with them as well.

I was working a day job at Morgan Stanley, so I couldn’t fix Del.icio.us during the day. I would go home to the Upper West Side, eat dinner, and then work on the site. I’d build a feature, think, That seems to work, and fall asleep and wake up, and I’d have rolled out a broken feature, so no one could save anything. It was very haphazard. I moved the site from one server to two servers over New Year’s Eve, when I figured there would be the lowest traffic. On New Year’s Eve, I was at my mother’s house and porting the site to new hardware. Good times.

I went to Union Square Ventures in the beginning of 2005 to raise money. The site was coming apart at the seams. It was down for something like two out of every five minutes. I could not keep up with keeping it alive, and I had an inkling that I maybe had something bigger on my hands.

We raised $1 million on $3 million in early 2005, and we just kept building. We were in a closet-size office in Union Square Ventures because landlords didn’t want to talk to us. We started to try to raise money again toward the end of the year, but it didn’t go well. People say VC is pattern matching, and we were so far out of the pattern that no one could really evaluate us. We got one or two term sheets, but they were small.

We had gotten maybe ten acquisition offers along the way. Before I even raised money, I remember that Yahoo offered me a job plus $250,000. Amazon offered me a job plus some cash. Someone else offered $500,000. So we had gotten acquisition offers all along, but they were all small.

After being unable to get a second round of funding, we had to start taking acquisition offers more seriously. There were several companies interested. Companies make you sign a “no shop” before they give you an actual offer, saying you won’t take their offer and turn around to a competitor and try to get a higher price.

The day we signed, Yahoo’s Jeff Weiner was in New York and came to talk to us. It was me and my COO, Albert Wenger. We were in this unmemorable conference room of an investment bank that was helping us a little bit, making introductions — we were too small-fry to actually deal with. We took a few minutes, and then signed on the spot.

We went with Yahoo partially because it was the first company to make a real offer, but also because it had already started a major push into Web 2.0. It had already acquired Flickr; it had acquired Upcoming — it felt like it was trying to make a big change in what it did.

There was also the technical consideration. The access to a search-engine indexer tech was super exciting. We were getting crushed by the traffic. We had like 30 or 40 machines in the data center, and we were adding to it every time we could. Yahoo told us, “We have a bunch of tech we could bring to bear.”

Negotiating with Yahoo was very awkward because it would disappear for days. It turns out it may have been negotiating with Facebook at the same time. Yahoo led with a number and a bunch of terms, and then the lawyers went back and forth on terms and payouts, but the initial sale price never changed.

The price of the acquisition was reported in the press at the time as $30 million … I’m fairly sure that “$30 million” is just journalist code for “We have no information; here’s our guess.” That’s the published number, and it’s a wild guess. The actual number is under NDA. It probably doesn’t matter now, since Yahoo isn’t even really a company, but it was definitely less than $30 million.

At the end of it, I was just exhausted. I had to tell the employees; I had to relocate. It was stress and upheaval. I had an integration to do with the company. The money was good, but if I had joined tech and risen through the ranks the normal way, it probably could have been about the same.

I’ve since become an angel investor, and I’ve done just shy of 200 investments. And when founders sell, they wanna go out and celebrate. As often as not, they’re weird and awkward anyway, so it’s not like … I think a lot of time that selling is not the victory it seems. It takes away all of your forward momentum. Do you take building a product and being vibrant and known and trade that for cash? It may be the intellectually correct thing to do, to ensure your financial stability going onward, but it’s not emotionally rewarding in the same way.

I did go out and buy — I had always wanted a flat-panel TV, so I remember that after I sold the company and before I moved, I went and bought a flat-panel TV because I had always wanted one. It was a terrible Samsung, if I recall.

Once we were acquired, Yahoo helped us on the tech side, but not as much as it said it would. I think this is common for acquisitions. Before you’re acquired, you’re an important visionary. Afterward, you’re a crazy person who just wants to burn money.

Any decision was an endless discussion. I remember once, we had to present to a senior vice-president. We had a 105-slide deck prepared, and we didn’t get past the second slide because they ratholed about one fucking slide. It was a miserable environment.

It took a year for reality to set in. If you wanted to get hardware, you went to the “hardware request committee” with your proposal. They assumed that engineers liked spending money for no reason, so you’d have to go back and present again in two weeks. So there’s a month gone.

On top of that, leadership had no vision or mission, so they couldn’t evaluate any decision. Upper management wasn’t taking risks, and everyone else was just optimizing to not get yelled at or stay at work late. My contract was that I had to stay for two-and-a-half years. At the end of my time at Yahoo, I woke up screaming a few times. It was a grind and super demoralizing.

I don’t regret selling to Yahoo. But I do wanna know where it could have gone if I hadn’t sold at that point. Could it have been Pinterest or Facebook? Probably not Facebook. But clearly, the urge to collect is a broader thing than I satisfied with my product. What we had built was pretty narrow; it could have been broader and bigger. And I am frustrated about what happened with Del.icio.us at Yahoo. Yahoo Answers ended up being this huge thing, and the engineering team was doing both, and they ended up de-staffing Del.icio.us in favor of Yahoo Answers. Del.icio.us had, like, one engineer.

There’s a saying: “You can be rich or be king.” You can sell your company for as much as possible, or you can be in charge. Though maybe neither is entirely possible. When I founded my second company, we had seven people, and we still argued over what to do and how to do it. I was CEO and I still didn’t get my way.