In Defense of Secrecy

In Defense of Secrecy

“We didn’t do anything wrong, but somehow, we lost.”

— Former Nokia CEO Stephen Elop

Over the last few years, as the lean startup methodology gained traction amongst the Silicon Valley and startup types, an interesting idea that runs contrary to how things have been done in the past took root — because the lean startup methodology encourages founders to quickly iterate and seek feedback, the implied assumption is that keeping secrets are bad. The lean startup methodology’s argument against keeping secrets is one that makes rational sense: the last thing founders should do is burn tons on capital on a product they’re building in a dark when they don’t even know if people are going to use it or not.

Because of the rise of Twitter, Reddit and platforms like those on the Internet, it’s now much easier than ever to solicit feedback, the thinking goes, so why not take advantage of it and seek feedback for whatever you’re working on?

Likewise, in recent years, the Valley and the startup community at wide has rallied against the idea of making others sign a non-disclosure agreement before sharing their ideas. This is a good thing. But I think the Valley at wide has tipped the scales too much on the side of transparency. When the scales are tipped too much on the side of transparency, founders are less likely to try radical experiments — indeed, ones that often make a much more significant impact in the world if and when successful than an idea based on a cycle of rapid but marginal iteration.

Before I go into defending secrecy (or at least, reclaim some semblance of a balance between secrecy and transparency), there are a few bad reasons why founders shouldn’t opt for secrecy over transparency: fear that someone will steal your idea, fear that someone else will beat you to the punch, fear that someone will patent your idea, etc. If you opt for secrecy because of these reasons, you’re putting yourself — and your company — at a disadvantage.

But there’s one scenario where secrecy should triumph transparency: if and when it allows you to run experiments you otherwise would feel uncomfortable, or embarrassed to tell people about. With any experiment, there is — or should have — a 50% chance of failing. Such failures tend to hurt the company’s image and reputation, and give an opening to the press to mock them, investors an excuse to pass on an investment, clients a reason to choose a competitor, etc. Therefore, a company, being fearful of these pitfalls, choose to do what is safe, and not experiment — but unknowingly, initiate their decline into irrelevance and obscurity. This is where secrecy can give founders and companies the room to experiment, without having to be accountable to those who are not immediately associated with the project.

For many, the fear of reputational damage is enough to err on the side of secrecy. Look at Amazon: the Fire smartphone was a very public and humiliating failure, one that Jeff Bezos was interrogated for in the press, on earning calls and on stages in conferences (a little inquisition, if you will). However, the Echo was a smashing success — and Amazon did the entire project in secret, spanning 1,500 employees over years of labor. Look at Apple: there’s a reason why (beyond showmanship) Apple guards its secrets zealously. For every iPhone or iPad that gets released, one can safely assume that there were a thousand failures that never made it out of the lab. Not making those failures public means not having to be accountable for them to irrelevant observers — thus speeding the learning and moving on process up much faster.

There’s another compelling reason why startups should try to keep their experiments secret, even after they release it: it helps them skip past the early-tech adopters crowd and get direct, honest feedback from other people (normal; lives outside of Silicon Valley) who would make up the bulk of their customer base. Furthermore, not knowing the identity of someone behind a product you’re using (this is different from the D2C e-commerce business model where such established relationships are advantageous; this works best for software products) allows you to provide more honest and crucial feedback — given how quick many startups are given birth to and dies, such feedback can often mean the difference between life and death (“talk to your users” is, after all, one of Y Combinator’s motto).

Ultimately, the purpose of a startup is to do more, with much less resources than would be normally available to achieve such results. The easiest way to do so would be to experiment radically (thus allowing the learning to happen non-linearly)— allowing one successful experiment (out of many embarrassing and failed ones) to contribute an outsized impact to the goal and mission of the startup. Startups — and the founders that lead them — can’t fulfill this mandate if they feel compelled to announce what they’re trying all the time, and have to answer for them. Many of these experiments will fail, but that shouldn’t stop founders from experimenting. A company that stops doing radical things — out of fear of being held unnecessarily accountable  — is one that is already on the decline, even if they don’t know it yet. And that is why secrecy is okay.

TL;DR: Secrecy allows you to fail quickly and learn from those failures without having to go through a parade of shame and humiliation. That is necessary to produce outsized returns. 


Ignore Silicon Valley’s advice about ideas and execution


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Spend enough time in Silicon Valley and you will hear the phrase (or some variation thereof) “ideas are cheap, execution is the only thing that matters” hundreds, if not thousands, of times. It’s one of those phrases easy enough to throw around while still sounding somewhat sophisticated and intelligent. Most of the time, the person giving the advice don’t have much to back it up with, because here’s the truth: great ideas paired with poor execution can almost always succeed, while the inverse simply isn’t true.

So here’s a contrarian idea to keep in mind next time someone tells you that your idea is worth nothing if you can’t execute it perfectly: they’re wrong.

By now, you have probably heard about the hype surrounding Pokémon Go. The idea is a great one: mix light augmented reality with an all-time beloved classic game, and allow people to download the game directly into the smartphones they already have. The execution, however, by all accounts, was an utter disaster. The game is buggy as hell, buttons work erratically and inconsistently, sign-up takes way too much time and effort (and is insecure too), servers are unpredictably unstable and a planned international rollout had to be killed to prevent the servers from melting down. Yet, by any measure, the game had been (and still is) an astounding success.

Less than two weeks into launching the game, Pokémon Go has surpassed Twitter’s daily active users count and is rapidly closing in on Snapchat’s. Daily active user estimates for the game range between 9.55 million (Recode estimate) to 21 million (SurveyMonkey estimate). By now, the game has become a social and cultural phenomenon… despite having botched the execution. As technology analyst Ben Thompson writes, “Pokémon Go is a useful reminder that the actual quality of an app or its associated services often has little or nothing to do with success.”

There are a number of other apps in recent history that crystalizes the thesis of this post: that ideas do matter, and often times, even more so than execution. A recent example that comes to mind is the Down to Lunch app, which has captured the interests of college students all over the country, as well as the attention of Silicon Valley’s venture capitalists. When the app first launched, it only had one button for one functionality: to notify your friends that you’d like to hangout. No mechanism to invite friends, options to choose the hangout’s purpose (lunch, dinner, drinks, homework, etc.), integrate with Facebook’s social graph, etc. Just one button, with one purpose.

As Nikil, one of the co-founders of DTL said in his own words, “it was SUPER ghetto in the beginning.” But that didn’t stop thousands of kids around the country from downloading the app – because the idea was great enough that the subpar execution did not hinder its viral growth.

On the flip side, pairing a mediocre product with the best execution has never, and will never, work in the long term. There’s only so much oxygen you can prop a bad product up with before it flames out on its own. It’s like expecting the best salesmen in the world to sell a mediocre product: sure, there’s no doubt that a few customers can be persuaded to purchase the product, but those sales will eventually stop once the customers realize they’ve been fleeced. A great recent example of this is the struggles of Rocket Internet, a company that specializes in ripping off other startups’ ideas and business models and exporting them to different international markets.

By any standard, the folks at Rocket Internet are execution machines – they’ve incubated and spun out hundreds of copycat startups.* If anyone in the world has refined and perfected the execution playbook, it is the mercenaries at Rocket Internet. Yet, a recent article in the Wall Street Journal reported they’re struggling to flip a profit on many of their ventures. As it turns out, many of these ripped-off ventures have horrendous unit economics – so it doesn’t matter that they have the best team in place to execute… if the product/venture/business model is shitty, then it’s already on the path of failure. It is possible, in the bull market, to disguise these ventures with bad product and great execution as good companies with “organic” demand, but as the tide recedes, the truth can no longer be ignored: the emperor has no clothes.

This entire post is, of course, not to say that execution doesn’t matter at all. There are a few startups with great ideas/products that have gone bust because of a failure in execution. So, execution matters. But not as much as having a great idea – because if what you’re building is fundamentally great, then odds are, people will be willing to overlook most (if not all) of the shortfalls in execution.

*From the WSJ article on Rocket Internet’s troubles and how it rips off other companies’ ideas: “On the top floor of its seven-story headquarters, employees monitor tech startups world-wide for businesses to copy. When an idea is approved, Rocket assigns marketers, engineers and managers. As the business develops, it moves down floor-by-floor, eventually making it to the ground level, where managers start to look for offices outside the building.”

Startups are sinking. Will Facebook drown because of them?


One thing is no longer arguable among Silicon Valley observers: a time of reckoning has arrived for startups. Many startups, whose growth has been fueled not by profits, but by venture capital dollars, will fail – not because they don’t provide good services or because their platforms don’t fundamentally make our lives better, but because they’re inherently bad businesses, with no hope of ever turning a profit. The unit economics, for many of these unicorn startups, just do not – and will not – work out.

These startups are bound to sink. But the damage might not be contained to the individual companies. If history is any indication, then these companies might just bring Facebook, the de facto social network of the 21st century, down with them.

At the height of the dot-com bubble, Yahoo! was worth $128 billion. Less than five years later, the company’s market cap shrank to less than 10% of that – just a mere $10 billion.

What happened?

As it turns out, the advertisers fueling Yahoo!’s hyper growth were not traditional, decades-old businesses, as you might expect to see in print/TV ads. They were, instead, venture-backed businesses themselves, who decided that Yahoo! was a valuable enough partner and growth engine for them to pour tens, or even hundreds, of millions into the company’s advertising business. When these dot-com venture-backed (although some of them did IPO, they were more or less worthless) businesses imploded, so did Yahoo!’s main revenue stream. And with that, Yahoo! drowned along with those crappy businesses.

While Facebook’s new products and ventures are exciting and all, Facebook still makes all of its money through a familiar revenue stream: advertising. Now, we’re facing a rather steep correction in Silicon Valley – or as Kholsa Ventures’ Keith Rabois puts it, “the price of oxygen has increased”. VCs are getting increasingly selective as to which companies they’re extending their life lines to – and companies without a clear path to profitability are going to be left out to dry. This acute pullback in VC money is something most startups have yet to experience, and with this sudden and abrupt change, many would have to change their growth acquisition strategy. They can no longer spend as much money buying growth on Facebook, which, until now, has been the most brainless (or logically straightforward, depending on how you view it) tactic that a company looking to juice their numbers could execute.

This loops Facebook into the vicious cycle: less VC money equals less money to pursue aggressive growth, which equals less money to dump in the easiest channel to buy growth and user acquisition (read: Facebook), which equals to a slow at first, then rapid decrease in Facebook’s revenue stream from these venture-backed startups. Eventually, this equals to Facebook’s market value plummeting.

This confluence of events: a cooling demand for private technology stocks, the tightening of many startups’ user acquisition costs to ensure that everything they do can be proven out in the customers’ lifetime value, and the unwillingness for VCs to back new businesses (preferring to deploy remaining capital to keep startups they’ve previously backed afloat) will tank Facebook’s stock.

There are two reasonable oppositions to this view: 1) Yahoo! imploded because their user base left them; the same could happen to Facebook if and only if their user base left them too and, 2) Venture-backed startups will be the death of Facebook if and only if it has a huge, unrecoverable exposure to these sort of companies.

Then there’s also the view that Facebook simply wouldn’t sink, for the same reasons Google, another advertising business, wouldn’t. That’s flawed: there are some startups out there who have raised tens of millions but do not have a single person on their teams who have any experience placing ad campaigns on Google. The incredible ease with which someone can place an ad on Facebook makes it leaps and bounds a more attractive platform for newer startups when compared to Google… But this ease may also have increased its exposure to these venture-backed startups. But I digress.

The first opposition view, that Facebook’s user base would not leave them the way Yahoo!’s did, is rather presumptuous, and confuses Facebook’s pervasive reach for its users’ loyalty.

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Facebook (and Facebook-owned Instagram) is still in the lead here, but by no means should it be impossible to envision a future whereby a new startup overtakes Facebook’s reach and popularity (check out Snapchat’s bar in the spring of 2014 vs. Facebook’s, and then compare the companies’ 2015 bars). Unlike other businesses where incumbents are slowly disrupted and overtaken in decades-long processes, social media companies posses the (dis?)advantage of having a growth structure that is both asymmetric and exponential.

More simply: find me someone less than 18 years old today who still finds Facebook an important site to check on a daily basis and I’ll show you someone who hasn’t been exposed to the wave of new social media apps from just the last year alone.

The second opposition point makes, in reality, a whole lot of sense: Facebook will only drown when other startups sink if it has a huge exposure to these startups. And so the question is: does it?

Sheryl Sandberg has avoided that question every time she’s been asked it.

But in the fourth quarter, Facebook’s biggest advertiser was Wish. A startup that has taken in $578.8 million from investors.

So, does it?

How do you build a Tencent for the West?


Today, in China, Tencent functions as a door to the Internet: it often is the very first app people download when they get a smartphone. It connects them to banking services, games, e-commerce sites, taxis/ride-sharing services, hotel and flight booking services, and much more. This metaphorical door manifests itself in real life in the form of a messaging app with more than 1.2 billion active users (2014 numbers).

For the longest time, VCs and industry observers have wondered why no one has attempted to build the Tencent for the West — a single platform (preferably messaging) that opens up to an enormous, money and attention sucking ecosystem. Facebook comes the closest to this vision, but even they have fallen short of what Tencent has achieved.


There are a few reasons that come to mind: infrastructure, socioeconomic and radical demographic differences. But the biggest reason of all, for better or worse, has got to do with something that cannot be quantitatively measured or easily changed: culture.

China, governed by the Communist Party, never had the opportunity to build a robust advertising and media infrastructure. Out of fear that these technological mediums could accelerate the propagation of ideas that threatens the Communist Party’s ideology and rule, the government in China has, for the longest time (and they still do) kept innovation in these mediums to the bare minimum — even if the opportunity cost is huge to their citizens.

The priority for the Party is the ability to maintain a stronghold over its citizens, not ensure that they have access to the latest technological innovations. So from day one, if a business decided to go digital, they had to find a revenue stream that was not subsidized by advertising. Realistically, there’s only one other alternative: to get money directly from the consumers, either through e-commerce sales or commissions from sales to third-party partners.

From day one, businesses in China have internalized the mindset that in order for them to survive, much less thrive, they would have to rely on their customers opening up their wallets.

Now, contrast this with how consumer mindset is in the United States. We expect anything and everything online to be completely free of charge, unless we’re making a purchase for a physical good. We expect songs, movies, apps, services and news to be available to us without any charge. If there’s a charge, we find a way around it either by torrenting, circumventing paywalls or gaming the system. Hell, we don’t even want to pay a comparatively small charge in exchange for gaining free information: viewing ads. Previously, the mentality goes something like this: if you don’t want to pay for (nonphysical) goods and services on the Internet, there’s a little trade you can make… you can watch/click on an ad that takes up a small fraction of your time, and you’d get the product without cost. But since the advent of ad-blockers, we don’t even feel the need to view ads. It’s not like the New York Times or the Wall Street Journal is going to shut down tomorrow if I turn my ad-blockers on.

So in the West, because of how robust, complex and intelligently we’ve build our advertising networks to be, we expect to be able to receive (nonphysical) goods and services online without having to open our wallets, ever.

If Tencent were to replicate the way it operates in China and offer their services to customers in the United States tomorrow, there’s a huge chance that they will fail. As it turns out, building a messaging or gaming app alone is simply not enough to create the necessary inroads to build that proverbial door.

Not without a radical change in culture, at the very least.


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Source: KPCB’s Internet Trends 2015 Report

There’s no other way to put it: Apple failed

tim cook boring apple

Steve Jobs treated every Apple event like an Apple product: masterful, deliberate, and often times, surprisingly delightful. Every act in a Steve Jobs presentation was calculated to maximize the audience’s attention and joy. No one doubted that the products Jobs was going to unveil in each event was going to be anything less than great… but they were there to see him unveil it, because the audience knows that the act of unveiling the product is as great, if not greater, than the products themselves.

But yesterday’s Apple event, where the company showed off a smaller iPhone and iPad and some new Watch bands, was anything but a Jobs-like presentation. There’s no other way to describe the event: it was boring.

Absent was a visionary product.

Absent was a “one more thing”.

Absent was any excitement in Apple’s product roadmap.

I’d go as far as to argue that the event yesterday was pointless; Apple could have achieved the same objectives with the simple distribution of a press release. While people went to a Jobs presentation to see a show, which came with all the theatricalities one would expect, people who saw yesterday’s event saw nothing more than a typical company presentation unveiling new products to keep Wall Street happy. Until now, Apple had been anything but an ordinary tech company.

At the end of the day, let’s be real: what Apple, and all other soulless tech companies, are releasing are nothing more than slabs made out of glass, metal, plastic, and silicon with screws. It’s all that it is, and it’s all that it will ever be. But deep down, we believe that Apple is giving us more, and we believe so because we see the way they talk about those products in their events. They believe in the magic of their products to change and transform lives. That magic did not appear yesterday.

And then there’s another glaring problem — a problem that goes beneath the surface of just the presentation. The naming problem. Years ago, I argued that Apple’s iPad line was getting increasingly fragmented, and that the company should work to consolidate the line. Well, that hasn’t happened. Instead, when customers visit Apple — either in person or online — they’re confronted with tons of choices, without much information about the differences that separate one product from the other.

As Mike Murphy from Quartz notes, “Apple now sells 55 different Apple Watch bands and watches made out of five different materials, in two sizes. (That’s not to mention the myriad Hermès and Edition versions it also sells.) Apple sells iPads in five sizes and three colors, and has five iPhones in three sizes and four colors. It has laptops with 11, 12, 13 and 15-inch screens, some of which are available in multiple colors.”

Apple fans used (righteously) mock the Samsung crowd for having smartphones and tablets with names like the “Samsung Galaxy Tab 2 10.1” and “Samsung Galaxy S II Epic 4G Touch”. He who fights monsters should see to it…

One of Apple’s core values has always been delighting customers.

Delighting customers starts at the top: understanding the kind of experience customers are supposed to get when the shop at Apple, not overwhelming them with mundane choices, and understanding that sometimes, making the decision for the customers about what they can have is better than leaving the decision up to them.

Delighting customers should also show care: the care that customers should see the products in the best light possible, and caring that the products will get the customers excited.

Apple could have done better.

Peak iPhone? Not so fast…

Analysts on Wall Street have declared: 2015 is the year the iPhone peaked!

Apple’s stock has lost over $160 billion as analysts forecast a decline in iPhone sales.

Top analysts from Morgan Stanley (led by ultra-bull Katy Huberty), Stifel, Credit Suisse, JP Morgan, Baird, Pacific Crest and other investment firms have released reports over the last few days stating their belief that because of a weak demand for the iPhone 6S/6S Plus, Apple’s iPhone sales will drop for the very first time in the FY2016 and CY2016, for the very first time since the iPhone’s release in 2007.


Huberty, the first analyst to sound the alarm, thinks that iPhone sales will drop by nearly 6% in FY2016 (equivalent to 2.9% in CY2016). More specifically, Huberty is convinced that Apple will only sell 218 million iPhones in FY2016 (a 5.7% drop), which is a rather steep decline from the 247 million she predicted previously.

What changed?

Although each firm gave different reasons*, they all revised their predictions downwards after a single event: Dialog Semiconductor, a company that earns more than 90% of its mobile revenue from Apple, recently brought down its Q4 revenue guidance from the range of $430m—$460m to the range of $390m—$400m because of an unexpectedly weaker demand in its mobile business.

*Credit Suisse’s reasoning is the most interesting of all, and it basically boils down to: since everyone’s got a smartphone already, it’ll be harder for Apple to sell more iPhones.

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If Wall Street’s smartest analysts are resting their predictions on the business of Dialog Semiconductor, then perhaps it is a good idea to ask if supply chain estimates are accurate.

The answer is (unsurprisingly?) a definite no.

Supply chains have historically been incredibly bad indicators of how Apple’s business is doing. It is safe to say that analysts pegging their predictions on the business of Dialog Semiconductor and “channel checks” are misguided and will ultimately be wrong.

Deriving product or revenue guidance from sources within the supply chain, or even an official statement from a supply chain operator, have led to disastrously wrong predictions in the past. There are a few examples of this from recent history:

Exhibit A: In June 2013, analysts downgraded Apple’s stock after “channel checks” showed a slowing demand for the iPhone 5s. A few weeks later, the company crushed expectations with its sales report.

Exhibit B: In October 2013, the Wall Street Journal reported that Apple had cut supply by about 20% at Pegatron and one-third at Foxconn. A few hours later, the Journal more or less retracted its story, and Apple did just fine that quarter.

Numerous people familiar with the thinking of Apple’s executives have also indicated that the “2015 peak iPhone” belief is one  which is not widely-held in the company. As growth slows, Apple is increasingly reliant on sales from the Greater China region and from Android converts, and have redirected some of its efforts to focus on maximizing its reach in these two areas. These early efforts (such as giving Android users an app to import all their data to a new iPhone) have been promising, and though it has yet to materially bear fruit, sales of the iPhone are not falling fast enough to concern the upper-management. Profits from iPhone sales account for two-thirds of all of Apple’s profits, but there is no need to sound the alarm and start taking drastic profits yet.

“It’s laughable,” one senior Apple employee told us, “[the analysts] have got it all wrong. Talk about a herd mentality.”

The road ahead for Yahoo! (Who will buy the core business?)

Laughing my way to the bank!

News just came in minutes ago that Yahoo! has declined to move forward with the Alibaba spinoff, and will instead examine a spinoff of its core Internet business, CNBC reported citing anonymous sources.

Such a move could mean several things…

  1. Marissa Mayer has realized that she can’t effectively turn Yahoo! around.
  2. Mayer is prepared to leave Yahoo! If Mayer gets canned due to a sale, she’ll receive a severance package worth nearly $160 million (!!!). However, if Mayer can’t secure a sale and the board decides to fire her anyway (which is very unlikely, given that she handpicked the board), she’ll instead receive a relatively tiny severance package of ~$36 million.
  3. Mayer does not think that she can that can avoid the massive tax on the Alibaba spinoff (analysts have pegged the figure at $12 billion, if Yahoo were to distribute the Alibaba shares to each of its existing shareholders).
  4. Mayer does not believe that, for one reason or another, she can win the fight against Starboard’s Jeff Smith (just a few days ago, Mayer was telling people around her that it’s unlikely she’ll sell Yahoo!’s core business, according to superstar Yahoo! reporter Kara Swisher).

If Yahoo! is exploring a sale of its core business however, there are a couple private equity shops and businesses that have already showed some interest (nothing concrete, but expect offers to start coming in soon):

Silver Lake Partners (P.E.) is not interested in the deal.

KKR & Co. LLP (P.E.) is not interested in the deal.

TPG Capital (P.E.) has sniffed around and made contact with the team at Yahoo!, but nothing concrete has come out of the “soft” discussions (this may change soon!). Kara Swisher believes that TPG is the most serious, “though none are far down any path to buy all (or even part) of Yahoo!

Apollo Global Management (P.E.) like TPG Capital, it has shown some interest and made contact with Yahoo! executives, but nothing concrete yet from the “soft” discussions.

Barry Diller’s InterActive Corp (business) has showed moderate interest, but is unlikely to have enough money (would also be an unwise decision, given that IAC just IPO’ed).

Comcast has sniffed around, but left the table without any intent on pursuing a deal.

Tencent is reportedly also interested, but it would be an incredibly hard deal to seal for a plethora of reasons (including taxes and international trade regulations), given that Tencent is incorporated in China.

Rupert Murdoch is quite evidently interested in a deal (the WSJ has been publishing reports after reports that imply Yahoo! should sell its core business despite weak and often misleading sources — the most egregious example is a report published that Alibaba is not interested in Yahoo!’s core business… when no one said that Alibaba was in the first place; make of that what you will), although how he can or will finance the deal remains to be seen (highly unlikely).

Out of all the PE shops and companies that have sniffed around, Verizon appears to be the most serious candidate, and its executives have met with some of Mayer’s close associates. Verizon’s CEO Lowell McAdam also said, earlier today at Business Insider’s Ignition Conference, that the company would be interested in purchasing parts or the whole of Yahoo!’s core business if it goes up on the auction block.

Some other things to keep in mind as news on Yahoo! continue to pour out in the coming days and weeks…

  1. Most people undervalue Yahoo!’s core business (it’s almost like a cool thing to do now). Yahoo! current market value is $32.9 billion (as of publication). Some analysts believe that once you subtract what Yahoo! owns (a stake in Alibaba worth $32.4 billion and a stake in Yahoo! Japan, a completely independent entity, worth $8.7 billion, ~$1.3 billion cash, $5.5 billion in securities and $1.2 billion in debt), the core business is worth less than zero. This cannot be further from the truth. Yahoo!’s core business, which is comprised of the website properties, apps and digital adstack it owns, must be worth something, right? But how much? If hedge fund Starboard Value’s estimations turn out to be right (and there’s no reason to believe otherwise), then once the taxes are taken in account, the Alibaba shares’ true value to Yahoo! shareholders is closer to $19.6 billion, and the tax-adjusted value of Yahoo! Japan is $5.3 billion. Therefore, Yahoo!’s core business is actually worth north of $2 billion (it is, however, very unlikely that Yahoo! will sell its core business for a mere $2 billion. People in the industry say the figure will most likely be somewhere around $6 billion). 
  2. How can Yahoo! command a ~$6 billion price tag on its core business? Because it’s a sleeping giant. Despite having not grown in years, Yahoo!’s core business was still able to produce $4.3 billion in revenue in the last 12 months (that’s a lot more than what other companies — a lot of which are darlings in the eyes of the media and investors — can say).
  3. The only reason why Yahoo! is valued less than its competitors is because investors are not optimistic about Yahoo!’s future… a sentiment that can be changed with a legitimate restructuring plan initiated post-sale.
  4. ComScore pegs Yahoo!’s global audience at 618 million, thus making it the fourth largest company in terms of reach, just behind Google, Microsoft and Facebook. Despite being criticized just about daily by the media and investors, Yahoo! is still the third biggest destination in the United States, just behind Google and Facebook (something you wouldn’t expect if you only read the news!).
  5. Yahoo! is in no rush. Despite consistently declining revenues, Yahoo! has an EBITA $832 billion (2.6x forward earnings). Comparatively, when Tim Armstrong sold AOL to Verizon earlier this year, Verizon purchased AOL 8.5x its projected 2015 EBITA earnings. This alone should give Yahoo! some negotiating leverage. Despite what some may believe, Yahoo! (given how much cash and other assets it has) can negotiate from a position of strength.
  6. Yahoo!’s core business can be spun out into an entirely different company, one that is independent from the management running the Yahoo! that is a shell for the Alibaba spinoffs. But in any event, I expect Mayer to leave with her severance package intact post-spinoff and sale.
  7. Mayer really cares about her image (who doesn’t?). The fact that she, the glamorized Google executive, had failed in her job to turn the company around will always be a sticking point for her. But! She can still salvage her reputation if she negotiates a more than fair price for Yahoo!’s core business in the event of a sale. The tech world is filled with people who refused to sell their companies when it was worth something, and then regretting it later (BlackBerry being the prime example). If Mayer can shock the world with how much she can sell the perceptually worthless Yahoo! core business, she can save her legacy at the same time. No one’s going to remember about the sale a few years after, when Yahoo! has been dismembered, but everyone will remember Mayer for the success of the sale.

READ NEXT: Can Someone — Anyone — Please Explain To Me Why Marissa Mayer Is Still Employed? (PS. No one will remember this as long as she sells Yahoo!’s core business for a good price!)