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How Yahoo! Screwed Up Flickr

NEW YORK (TheStreet) -- It was 2005 and the world, Silicon Valley in particular, was between Web 1.0 and Web 2.0, two very different periods. Web 1.0 held the rise and fall of companies like AOL (AOL), Yahoo! (YHOO - Get Report), Netscape, and others. Web 2.0 has seen the emergence of companies like Facebook (FB), Instagram, Twitter (TWTR), LinkedIn (LNKD) and a host of others. Flickr, the photo-sharing Web site and app, was exploding in growth, but the company needed cash. It faced two decisions -- either take venture capital money, or sell out and hope for the best.

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What happened in the following years led to Flickr's downfall, and led to the rising of Instagram and a subsequent $1 billion acquisition of Instagram by Facebook that some have said should have been Flickr's to lose.

"We were a six-person company, based in Vancouver, and it was a fairly difficult thing to keep the lights on," said Caterina Fake, co-founder of Flickr and Findery and Chairman of Etsy, a Brooklyn-based online marketplace, akin to eBay (EBAY). "We were perpetually running down to the border to pick up our Dell servers, to rush to the colocation center to plug them in, to install the software and get them up and running because the thing [Flickr] was almost collapsing."

In 2005, the Internet was a very different place for start ups, especially ones that were seeing rapid growth. There was nothing like Amazon's (AMZN) Web Services (AWS), which most startups depend on now. AWS allows businesses to "[b]uild architectures from day one that will scale up automatically with your business." Companies that have used AWS for their services include the aforementioned Instagram, Animoto, Pinterest and countless others.

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