From the Facebook results:
Facebook, which was founded in a Harvard dorm room in 2004 and joined the stock market in 2012, reported a 59pc rise in quarterly revenues to $6.44bn, while net income increased 186pc to $2.05bn. Both were ahead of forecasts.
Meanwhile, costs were up a third to $3.7bn. Spending on research and development rose 25pc to $1.46bn.
Yes, obviously, this doesn’t translate directly to Yahoo. But the general point stands. A large chunk of the costs of running these internet thingies is in trying to develop what to do next. If you accept that the basic idea is done, that you’ll not pivot to something else, then there’s good money to be made by simply running what already exists. Sweat the extant business that is, invest nothing in it. Pull that R&D spending out and profits do rather rise, don’t they?
The poster child for this is of course AOL. Their dial up business (no, seriously) still throws off rivers of cash.
To Yahoo, there’s an argument, which obviously I’ve not gone and checked but I think it could well be valid, that if Mayer had just said “Yahoo will die in a decade” therefore we’ll invest nothing and just send the rivers of cash to shareholders then those shareholders would be better off. That billion spent on Tumblr for example, but also just the general underlying spending on trying to advance things rather than just maintain and extract.
Or, as many have found before, sweating a dying business can be much more profitable than trying to reinvent it.
The same could even be true of Microsoft……forget mobiles, search and all that, Windows and Office, sweat them for two decades and let the thing die.