Yahoo! Going Native in New York

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NEW YORK ( TheStreet) -- For over a year now, Yahoo! has been building a major presence in New York, buying up New York-based tech companies, even renting out a big part of the New York Times building.

I've been backing these moves, both editorially and with my own cash. My cash has done well but now my editorial side is beginning to wonder why.

That's because, rather than trying to create compelling, mobile, cloud-based software services, CEO Marissa Mayer seems to be "going native" in New York and trying to build a media empire. She has been raiding the rest of the Times' building for talent like David Pogue, and is now reportedly after former CBS anchor Katie Couric for a Web-based interview show.

For an old tech reporter like me, it's very exciting. But as a reporter who has studied business models for all his adult life, it's the dumbest thing I've ever heard.

The reason? Content doesn't scale like software. Nothing scales like software when it goes online.

I know it's fun to play dress-up for a Hollywood premiere. I know it's great to be interviewed for the TV. I certainly love my own job in journalism and wouldn't do anything else.

But the numbers don't add up the way they do in technology. Last year's total box office receipts came to $10.82 billion, according to Box Office Mojo . The final figures for 2013 will show little growth.

Contrast that with Google's $60 billion in 2012 revenue. Software scales best.

TV audiences continue to disintegrate -- the World Series had less than half the viewer ratings for 2013 than it had in 1991. And while the big joke of 1996 was the Web sells everything at a loss but makes it up on volume, that's now the hard truth of the newspaper business.

In contrast, online goes from strength to strength. The Internet Advertising Bureau estimates the industry's total ad revenue for the first half of 2013 alone was over $20 billion , and that search engine ads represented $8.7 billion of that.

It's a lesson that's deeply imprinted in Yahoo!'s own history.

Back in the 1990s Yahoo! was king. It did search, in scale, before anyone else. Had it just stuck to its knitting it would be Google by now. But it didn't. It listened to New York, which told it to become a portal, to buy into broadcasting and custom content and all sorts of other things.

And now Mayer is listening to New York again? Don't listen to New York about technology. Listen to Silicon Valley, to people who know and understand technology.

Yahoo! is rich today only because Mayer opened Alibaba's cave. Alibaba, a Chinese site that started as a small business-to-business company but grew into China's version of Amazon.com , eBay and a commercial bank under Chairman Jack Ma, took $1 billion from Yahoo! in 2005.