In June 2005 Yahoo! acquired upstart Canadian photosharing web site Flickr and the web hasn’t been the same since. Yahoo, on the other hand, didn’t change nearly as much as everyone expected it to. Pre-CEO Jerry Yang told then-Business 2.0 writer Erick Schonfeld six months after the deal “I look at Flickr with envy, it feels like where the Web is going.”

Flickr co-founders Caterina Fake and Stewart Butterfield have now cashed out and officially left the company. Though Yahoo! doesn’t appear to have internalized many of the lessons of Flickr, it’s not too late for the rest of us to look at those same key lessons for inspiration in our work on the web.

Flickr certainly didn’t invent the notion of oAuth-style third-party authentication, and Google certainly weren’t the first ones to adopt it after Flickr was acquired.

You might want to have a look-see at BBAuth, which was released by my team in 2006, about a year after the Flickr acquisition: http://developer.yahoo.com/auth/

Google was literally years behind many others in their adoption of open authentication protocols.

(NB: it’s spelled “protocol.”)

Stewart Butterfield, the cantankerous cofounder of Flickr, has, as we’ve noted, tendered his resignation to Yahoo, as has wife and cofounder Caterina Fake. The two recently celebrated, along with Flickr’s other original employees, a “Vestfest” for their take from the $35 million sale of Flickr to Yahoo three years ago; we’d heard as long ago as October that Butterfield was ready to leave. But we couldn’t have anticipated the manner of Butterfield’s exit.

In a long, rambling email to Yahoo executive Brad Garlinghouse, under whose aegis Flickr fell, Butterfield described the company as a tin-smithing concern, but found that there was no place for him as the company left its metallurgical roots. Better this entertaining nonsense than some tired cliche of “bleeding purple,” I suppose.

I'm also told that this email is classic Butterfield, and that his employees at Flickr would stage dramatic readings of some of his better missives at Flickr's San Francisco headquarters, which will now be run officially by Kakul Srivastava, Flickr's longtime de facto chief.

Hold on just a second before you go rewriting history! I am a huge Flickr fan and user of the service, but please leave the trail-blazing and pioneering label where it is due and that is squarely with Webshots.

As a founder, engineer, and later CEO I can assure you that Webshots was decidedly Web 1.5 and laid the foundation for many of the wonderful things that have come since.

We were enabling the sharing of photos over desktops before digital cameras were even in common use (1995). In 1999 we launched made the critical decision to make photo-sharing public unlike services that came after (Ofoto, Shutterfly, etc.) and in doing so began one of the original pillars of user generated content. There was a point in 2002 when the public Webshots archive would have been 15% of the entire Google image index!

In the social realm, Webshots launched friend connections in the form of “Favorite Members” back in 1999 and with LiveJournal were the antecedants to social networking sites. Webshots photo ecards were a viral and social sharing mechanism that placed Webshots in the top 4 in the ecard vertical for a long period of time.

Webshots was also notably one of the first mainstream services built on a LAMP stack when Sun and Oracle were used by all large properties.

Finally did something most Web2.0 sites don’t do and that was make money ;-)

There’s a lot of photo sharing services on the web, but here’s where Flickr stood. Flickr was the trailblazer, the high-profile media darling and one of the first major Web 2.0 acquisitions. Webshots was much older, had been bought and sold for twice as much money but never embodied the social media ethos the way Flickr did. PhotoBucket is a year older than Flickr, has always been much larger and was acquired by Fox for almost 10X Flickr’s pricetag in the same week that Flickr was pegged to replace the entire Yahoo! Photos property.

We’ve been critical of some of Flickr’s strategies around everything from censorship to data portability, but the big picture is that the service is fantastic. Even though it wasn’t the first and it wasn’t purchased for a particularly large sum (est. $35m) Flickr is still the beacon of innovation in this sector. Here’s why.

Flickr proved that experimental, bleeding edge web 2.0 features didn’t have to be limited to early adopters. When Flickr brought geo-tagging, the addition of location data to photo metadata, onto the site – more than 1 million photos were geotagged in the first 24 hours. Now that location aware services are heating up, who’s in one of the best positions to serve media up in that environment? Flickr is.

Flickr’s APIs have been wildly successful. Mashup and API directory site ProgrammableWeb lists more mashups using Flickr APIs than any other API on the web, short of Google Maps. More than Amazon, more than eBay, more than YouTube.

Flickr’s FlickrAuth user authentication API was a key model for the standards based oAuth protocal – now employed by Google’s OpenSocial and hopefully soon by countless other applications.

Flickr broke new ground in numerous ways and proved that technical experimentation didn’t have to remain in the early adopter niche.

Butterfield wrote a great letter of resignation, which was leaked to the bottom feeders at Valleywag but is a great little read none the less. All parties say it’s hardly out of character and indeed, in my own passing interactions with the man, he was never a fakely-nice typical business type worried about what might come around someday from being nasty to any little blogging piss-ant that got in his way.

Flickr came from Vancouver, British Columbia – in Canada. They must be the national web 2.0 pride and joy of that freakishly wonderful country.

The next time someone gives you a hard time for being a freak at work, just cluck at them knowingly and think about Flickr.

One of the most important elements of Flickr’s early success was its incredible engagement with its users. Flickr management spent what might have seemed like a totally unreasonable amount of time welcoming new users to the site, participating actively and promptly in forums and highlighting the best photos uploaded.

That kind of engagement can turn passing early adopters into ongoing community stakeholders and advocates. It’s something that any startup could benefit from emulating and a role we’re seeing formalized in an increasing number of companies hiring community liaisons.

Oauth was an attempt to copy flickr auth, kellan who is at flickr spent a lot of time on the oauth spec to make it so. That was the intention. It was also the intention to avoid the numerous mistakes made in BBAuth, which was an example of yahoo not being able to learn from flickr.

Lessons? Flickr was a failure.

They sold for too low, and never made the impact on Yahoo! that people predicted.

And Yahoo! never had the impact on Flickr that people predicted. Yahoo didn’t ruin the service, but they didn’t make it the #1 service in its category either.

It would be fantastic to see Fake and Butterfield start something new but they’re certainly due all the relaxation time they want, too. Once you’ve got a few million dollars in the bank, though, starting more internet businesses may be a sign of limited imagination more than anything else. For the rest of us still plugging away, Flickr offers some great inspiration.

We’re sure there are readers here who have been much more engaged in the Flickr community than we have. What kinds of business lessons have you learned from the company?

Other people have raised other issues that they think are key to learn from the situation as well. Flickr power user and exec at rival startup Zooomr Thomas Hawk offered some obviously heart-felt feelings about what the Flickr story said about acquisition and innovation.

“[They] developed an amazing product. Cashed out (smart). [They] could have had incredible impact on the future of social search and innovation at Yahoo but were thwarted by a band of disorganized bumbling executive idiots who wouldn’t recognize talent if it hit them in the face. Most important opportunities to innovate came under Terry Semel’s watch who was more concerned with being the highest paid CEO in America than either innovation or shareholder value.” (In response to Hawk’s comment, Robert Scoble humorously replied that Yahoo! “reminds me of Podtech. Had lots of superstars under their roof and then couldn’t listen to them to make things happen.”)

Dave Winer told us that the move makes him concerned about all the data that users have entrusted to Yahoo! “Whatever emerges from this, the new company should immediately embark on a program to make users’ data portable,” Winer said. “Users have been an abstract thing to Silicon Valley, it would be great if now that the superstars are leaving Yahoo, the industry could turn to the users for inspiration, and start to trust them with their own work.”

Flickr’s handling of user data was generally accepted as a fairly good work in progress. Now that the original minds behind the company have left the building, it would be great for the new leaders there to cement user trust in regards to their data by instituting some formal, easy-to-use measures for users to make sure their photos are safe and secure.