Actually this is a very common scheme in Silicon Valley -- public companies "throwing away" money on relatively worthless startups. It is a good way to siphon money out of the stock market and into the pockets of VCs and founders -- and I would not be surprised if the person who pushes the acquisition gets a cut of the money too, or other "favors" in the future. The company knows its going to can the product and the founders will leave after their stock vests -- why else would it make the acquisition?

That's a perspective that hadn't occurred to me (I'm not actually in startups or Silicon Valley). Sounds like a conspiracy theory, but it's believable.

It does not, however, mean shareholders can't/shouldn't complain about throwing money away, though.

I'm sure Yahoo employees are asking questions too.

$30 million could be spent on building daycare for all Yahoo mums and dads who can no longer work from home.

Yep, it sounds like a conspiracy to me as well. :)

The one thing that I have learned about corruption is that at least small instances of it occur everywhere, even if its not "the norm." Wherever there is way to make money, people might very well be doing it.

And yes you are right although I tried to imply that shareholders were the ones being screwed - this is obviously unfair to shareholders, whether the transaction is corrupt or not.

It might be something like that but with less malice. First, Summly and the entrepreneur are far from worthless. But to your point, a bunch of decent angel investors just got a pretty nice check from Yahoo. The "deal guy" builds some reputation but unlikely benefits monetarily in any nefarious way.

I think the OP sentiment and many comments here are mostly classic HN resentment of success.

I agree - sorry I think I should have chosen better wording. (Where I said "relatively worthless" I should have said "overly-valued")

Seeing these acquisitions, it always seemed like that what's very often happening is the folks who make the Buy decisions (NOT the owners of the buying company) are basically stealing from then owners to hand money to their friends)

Or, when the bizdev team is told to spend a billion dollars this year, (1) is is easier for them to like in extra money into each deal than to find more smaller deal, and (2) they don't get bonuses for only spending 500million and saying there is nothing else worth buying.

That's the part I don't understand capitalism: on one hand, big corps try to save every dime by downsizing and outsourcing, and on the other hand, they pour money like this.

That's not capitalism, it's poor valuation, managerial inefficiency/stupidity, and fad/reaction behavior (among other things, I'm sure). It's counterintuitive, counterproductive, a massive waste, contrary to the penny-pinching you mention, and obtuse.

It's also just kind of how people are. You can't reasonably expect a large corporation -- which is just a big group of people who are all trying to make decisions and getting in each other's way -- to be able to make logical choices when they're subject to every large stakeholder's whim and every bit of incompetence that happens everywhere along the line.

Is it happening in a capitalist setting here? Yes. But it happens in all settings all over the world, so to suggest it's unique to this system ignores the actual nature of the issue (which is the Human Condition).

Just be careful to not fall into the "if it's good, it's Capitalism, if it's bad, it's human nature" fallacy.

It's all just incentives.

The downsizing and outsourcing is driven by incentives to remove cost from the balance sheet. If there's no incentive to do so wisely, if there's no disincentive against doing so poorly, people will inevitably make bad 'outsourcing' deals, just to have made them. Quality might take a hit, direct billings might skyrocket, products might have to be scrapped, etc. But if you don't fix the incentives, it will happen over and over.

Similarly, if you incentivize a person to make deals, if they have a stronger incentive to make deals than to make good deals (e.g. if they have no effective disincentive against making bad deals) bad deals will get made.

It's a control issue under the guise of a cost-saving effort. Contractors and vendors are easier to hire and fire compared to employees. Generous advances in worker productivity mean that the same permanent internal workforce is no longer required.

The are buying traction. That's 30 million dollars worth of it. It could make them back that much money by getting people to start using Yahoo again.

Maybe.

But:

1- Is the traction convertible to any Yahoo properties?

2- Are the 1 million "downloads" legitimate interested users? Do any of them still use the app?

3- Did the "traction" come from paying firms to get them to the top of app store(s)?

I assume Yahoo knows more about this stuff than I do, and I'm not a Yahoo shareholder. Still, I didn't get the impression that the article was just complaining about rich teenagers.

According to Alexa, yahoo is the 4th most visited website in the world. They have innumerable ways to generate traffic. "Traction" implies a company that is not being visited at all trying to get a jump start, and is just not accurate.

Not all traction is created equal. I'm not sure how simply Yahoo could convert its users, who tend to be more conservative, to mobile.

Technical parity is a bad way to price a company, i.e. the value of Summly cannot be approximated by what it would take to replicate the technology in-house.

What happened to the good ole days when a huge corporation would just implement the app on their own and cut out the need for an aquisition?

For $30 million, even an order of magnitude less, I think a lot of us could put together a team good enough to implement the Summly app. That's what's being questioned by the blog post.

I have no faith whatsoever that Yahoo will productize or promote anything they create and there's no real evidence that anyone else should think that either.

But at only 1 million downloads, they've paid $30 per download. If they were mostly interested in the traction, that would seem quite excessive to me.

I can tell you as a founder of a startup with about a million users, the rule of thumb right now is 10 million is the new 1 million. No VC cares.