Seeking Alpha

del.icio.us "We're proud to announce that del.icio.us has joined the Yahoo! family. Together we'll continue to improve how people discover, remember and share on the Internet, with a big emphasis on the power of community. We're excited to be working with the Yahoo! Search team - they definitely get social systems and their potential to change the web. (We're also excited to be joining our fraternal twin Flickr!)"

So writes social bookmarking site Del.icio.us creator Joshua Schachter on the Del.icio.us blog, later to be confirmed on the Yahoo Search Blog.

How Much Did Yahoo Pay For Del.icio.us?
Joshua Schachter created deli.icio.us as a hobby while working as a trader for Morgan Stanley. He hasn't revealed how much Yahoo paid for his company, but it's fair to assume that the proceeds beat a trader's salary. Om Malik guesses that since del.icio.us recently raised $1.3 million for, say, 25% of the company, then the sale price was likely $10-15 million. The price was likely depressed by the fact that del.icio.us is more of a feature than a stand-alone business, and it's unclear how Schachter could ever have monetized the site. (Would you want contextual ads next to your bookmarks when you could switch to a service that avoided that?)

Yahoo's Strategy
Yahoo seems to be rolling up "Web 2.0" startups. Its strategy hasn't changed since the announcement of Yahoo 360: create a highly "sticky" bundle of communication, publishing and productivity tools, and glue them together with integration and social networking. In many cases, acquiring will be cheaper than building.

How Will Yahoo Use Del.icio.us?
Joshua Schachter pointed to the help del.icio.us would get from Yahoo in scalability (servers) and resources, something he needed given that del.icio.us has no revenues and growing costs. But the low-hanging fruit for Yahoo is to enable Yahoo users to sign in to del.icio.us with their Yahoo user names, and for Yahoo to add a "bookmark this" link next to search results. What's less clear is how Yahoo's own My Web will co-exist with del.icio.us. Jeremy Zawodny implies that del.icio.us and My Web will be kept distinct but My Web will borrow features from del.ici.ous.

Who's Next?
Dion Hinchcliffe has assembled an annotated list of the best "Web 2.0" software available. The list includes:

  1. del.icio.us
  2. NetVibes
  3. Voo2do
  4. digg
  5. flickr
  6. openomy
  7. memeorandum
  8. katrinalist.net
  9. writely
  10. calendarhub
  11. basecamp

Flickr and del.icio.us have now been acquired by Yahoo. Many of the others are candidates.

Is There a Chance of Competition?
Entrepreneurs and VCs will now be asking themselves this question: Is there any hope for the runners-up who aren't acquired by Yahoo? There are three options:

  1. Someone will try to roll-up the runners-up into a new bundle of social networking and productivity tools. But it will be hard to compete with Yahoo's installed base, particularly the 40 million users who already have My Yahoo IDs.
  2. AOL, Google or Microsoft will join the acquisition party. Certainly not unlikely, though Google seems more focused on technologies to find and access information rather than organize information.
  3. The runners-up survive as stand-alone businesses. That, of the three, seems the least likely.
Source: Yahoo Acquires Del.icio.us; Who's Next? (YHOO, GOOG, MSFT)