Is Del.icio.us a Yahoo Success Story, or Not?

Yesterday, venture capitalist Fred Wilson of Union Square Ventures wrote a post expressing concern that Web startups tend to languish after they are bought by big companies. To help make his point, Wilson reproduced the comScore chart below (click image to enlarge), which suggests that the number of people visiting the bookmarking service del.icio.us, which is owned by Yahoo, has dropped off considerably over the past nine months. Wilson was an investor in del.icio.us and profited from its sale to Yahoo in December, 2005. Yet he still laments its apparent struggles under Yahoo’s ownership.

But how bad is del.icio.us struggling really? Yahoo execs always point to it as an internal success story. We asked founder Joshua Schachter, who still runs the service as a Yahoo employee. Despite the stats bandied about by his former investor, Schachter responded by e-mail:

We continue to grow normally.

Unique users is not a good measure of our growth, though.

Much of our traffic is through the Firefox and other browser extensions, which is not measured by these systems.

Additionally, we cut off search indexing several months ago, which also hurts the UU [unique user] numbers.

Since our goal here is not to grow traffic but instead provide a way for people to save things, it’s not something I am really worried about.

That certainly is plausible. Whenever I use del.icio.us I simply save Web pages from the plug-in on my browser, and rarely actually go to the site. I’d estimate that my ratio of saving things to going to the site is 10 to 1, maybe even 20 to 1. As long as people keep saving things to del.icio.us it could prove to be a boon to Yahoo in better search results alone—no matter what the traffic situation is.

But del.icio.us has bigger problems. It has not changed much in years and cannot seem to get its 2.0 version out the door. This despite the fact that Schachter’s team of engineers has been working diligently on improvements since last September. The new version looked like it was ready to go in January, but then the launch was mysteriously pulled. There are rumors that scalability issues were plaguing the project. Hell, it’s been so long that Delicious 2.0 is news again (and, oh yeah, the periods are going away).

While I still do find del.icio.us a useful service, I don’t use it as much as I once did. The Web has evolved and del.cio.us, for whatever reason, has been held back. Here’s to hoping it can push out Delicious 2.0 before Yahoo gets acquired. Because, although Wilson probably won’t be shedding a tear for Yahoo, it is not only small companies that get stifled in acquisitions.

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