Yahoo! Vs. Facebook
Yahoo! has spoiled Facebook’s plans for a smooth IPO by taking them to court over alleged patent infringement. Yahoo! allege that many of the features on Facebook’s platform are copies of patented Yahoo! technology. Whilst patent wars are common in the hardware space, with Apple, Android and most of the major handset manufacturers involved in multiple suits and counter suits, many in the tech-space believe that Yahoo! has crossed a line by actively pursuing another start-up, albeit one that is 7 years old and could soon be valued at close to $100 billion.
Yahoo! is claiming that Facebook has infringed 10 patents covering a host of Facebook’s features:
- Being able to view your profile/timeline as if you were a friend (seeing what info is visible)
- Generating feeds based on a user’s interests and actions (events you’ve RSVP’d to)
- Ad placement based on factors designed to drive clicks/engagement
- Allowing users to customize privacy settings
What soon becomes clear is that many of these patents are so vague, that Yahoo! could easily use them to sue a host of websites, from Google+ to Quora to Pinterest to Twitter. However, none of the others is about to float on the stock exchange for a very cool amount of money.
Yahoo! has been struggling to find a new direction in recent years, since before it rejected a take-over offer from Microsoft back in 2008. More recently Carol Bartz was unceremoniously ejected from the CEO’s chair and her replacement, former PayPal president Scott Thompson, has said that he planned to refocus the company around data. Not many people would have imagined that by data he meant how other companies collect and use that data, and whether it infringes rather vague patents awarded up to 10 years ago.
Facebook could certainly afford to pay Yahoo! off. However, the fact that Yahoo! apparently didn’t notify Facebook in advance suggests they may actually want a day in court. The real question is whether Facebook wants anything to get in the way of its IPO and whether they think they can defend the case. Yahoo! have history in this area, having agreed to take shares in Google just before its IPO as a settlement in a case regarding Google copying Yahoo’s ad technology. Yahoo! might be looking for a similar result, but the question is whether their case is as strong this time round.
For marketers, there may be some implications to Yahoo’s aggressive strategy to integrate the Facebook social open graph into their content and advertising, which promises to give advertisers incremental reach off of their media spend. If relations spiral downward between the two, it’s possible that Facebook may actively seek to hinder Yahoo’s ability to further integrate into the Facebook ecosystem, thus putting Yahoo at a disadvantage compared to Microsoft who have much more amiable relationships with Facebook, including a small equity stake.
Yahoo! is a company clearly in need of a revised strategy and direction: being widely reviled by the rest of Silicon Valley as an alleged ‘patent troll’ seems like a strange direction to take. And considering the fact that many of Yahoo’s recent success stories have been built on integration with Facebook, any short-term benefit from a pay-out could be negated by being left behind by companies that concentrate on innovating rather than suing their competitors.
Author: Ciarán Norris