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But is it del.ove.ly?
Yahoo! hopes purchase of 'social media' company Del.icio.us is del.ight.ful weapon vs. Google.
December 12, 2005: 2:01 PM EST
By Erick Schonfeld, Business 2.0 editor-at-large

NEW YORK (Business 2.0) - Joshua Schachter is surrounded by lawyers and his phone is ringing off the hook. He just sold his two-year-old company, Del.icio.us, to Yahoo!Friday for an undisclosed sum (estimated to be in the range of $15 million to $20 million).

"All I want is to go home and sleep right now," says the 31-year-old entrepreneur, who started the site as a hobby before quitting his job at Morgan Stanley to build the company.

His nine-person startup has 300,000 registered users, and in the past month or so traffic to Del.icio.us has tripled as more and more people get hooked on posting, sharing, and "tagging" Web bookmarks with each other.

Tagging, a trend Del.icio.us helped popularize, is a practice where Web sites let users assign keywords to Web pages, photos, books, music, online journal entries, and more. Tags help make it easier for other users to find items of interest—which is why Yahoo, in its competition with Google (Research) to provide the best search engine, is interested in the field.

Schachter may need to get some sleep, but he is far from done. One of the main reasons he is packing his bags to move from New York City to Yahoo headquarters in Silicon Valley is for access to more resources: more engineers, more technology, more traffic.

"I will get to build the product I want to much faster than I could otherwise," he says. "There is a big plan. We are not even close to done in what I want to build."

While he won't go into details, a part of that plan is to take the phenomenon of social bookmarking which Del.icio.us pioneered and make it mainstream.

Yahoo (Research) is snatching up Del.icio.us to add to its arsenal of "social media" properties, including photo-sharing Web site Flickr, My Web 2.0 (an experiment with improving search results by letting people essentially program their own search engine through tagging and sharing searches with friends), and the just-launched Yahoo Answers (where you can ask any question, and another Yahoo visitor will answer it).

Eckart Walther, vice president of product management for Yahoo, explains, "The whole notion of social media is very important to us. We've always been huge Del.icio.us fans. It is a great brand, a category leader, and expanding rapidly."

Walther notes that Del.icio.us will maintain its own separate identity, as Flickr has done. "This is not about taking del.icio.us and jamming it into the middle of Yahoo," he says. And although My Web 2.0 also offers a way to share bookmarks, it too will remain separate from Del.icio.us.

Yahoo ran into protests when it tried to force Flickr users to sign into the Web site with Yahoo usernames. That incident taught the company how the value of a social media Web site is tied to the loyalty and happiness of its users, says Walther. If anything, he says, "this time we may be even more careful."

That's a wise tack. Yahoo does not want to do anything to turn off the users who give Del.icio.us all of its content (bookmarks and tags) and all of its value. But the fact that Schachter has figured out a way for people to organize the Web themselves is what's most appealing to Yahoo.

In contrast to Google, which takes more of an algorithmic approach to organizing the Web, Yahoo believes that it can make search better by tapping into the collective intelligence of its users. And buying Del.icio.us represents yet one more step in that direction.

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For more on Yahoo's push into social media, see "The Flickrization of Yahoo".

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