
Yahoo!, eBay and Amazon: The three survivors - maurycy
http://www.economist.com/business/displayStory.cfm?source=hptextfeature&story_id=11580247
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edw519
_Those who cannot remember the past are condemned to repeat it._

\- George Santayana

There was a time in the 60s and 70s when the bean counters convinced the
bosses that "economies of scale" was the lever needed for the big boys to
clobber the competition: thus the "conglomerate". Every Fortune 500 company
had to get into every business, being all things to all people. Even Exxon got
into the copier business.

So you had companies like Midland-Ross and Allegheny International that
weren't companies at all; they were collections of acquisitions that had
nothing in common except for infrastructure and support functions (including
IT). They were into heavy industry, consumer products, real estate, you name
it. Imagine the convenience of buying your tractor and your toaster from the
same company!

Fast forward 30 years. Except for General Electric, with its immense defense
contracts, the conglomerate is dead, long sold off when its parts became more
valuable than the whole. The entire "economies of scale" myth has long since
been blown away by technology when smaller nimbler players have taken over the
world.

Today, its hard to tell the difference between Yahoo and those conglomerate
dinosaurs. When your balance sheet is still healthy but you have trouble
answering the question, "What business are you in?" it's time to beware the
raiders.

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aneesh
You mean "economies of scope".

"Economies of scale" are a great idea - it refers to the concept that the more
of one thing you produce, the better you get at it (and the cheaper you can
make it). Take Google and online ads as an example.

"Economies of scope" are when you try to be everything to everybody.

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mrkurt
One interesting thing about those three companies (if I'm not totally on
crack) is that Yahoo and eBay have made a whole ton of really high profile
purchases, to the point where it almost seems like flailing. Amazon's always
seemed a whole lot more deliberate about that stuff, and generally ended up
buying small, complimentary companies.

None of this "Skype is cool! we might be able to do something with it!"

