After reading the Top 10 Worst Internet Acquisitions, Part 1 and Part 2, I could not help but come up with this list and offer you the following ten “best” Internet acquisitions of all time.
Criteria:
- My background and experience lies in search, video and online advertising, so naturally there is a skew there.
- Expensive is relative, but not overpaying is a major criteria.
- People matter in all deals, so a good “acq-hire” is sometimes worth more than a deal that is accretive to earnings.
- Take out a competition? Always good!
- Buy low, sell high? We’re impressed.
- Allows parent / acquirer to enter a whole new market with one deal? You have our attention.
- We’re avoiding partial acquisitions, otherwise Google’s 5% investment in AOL for $1B would be high on this list, for defensive purposes.
- Also, we will try to avoid speculation: ie. YouTube/Google is way too young to really be judged.
- To avoid a disclosure-laced post, all disclaimers, FYI, etc. are posted at the end.
- Last but not least: like with all lists, I am sure I am forgetting a big one, so feel free to comment; as with all posts, comments are open but moderated to avoid for spam… I’ll check in later and approve everything that is not spam: good, bad and ugly.
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#11 - Honorary Mention: Yahoo! acquires Yoyodyne in 1998 for $39 Million
This one makes the list because it was a cheap deal securing blue chip clients in an era of insanity. It also paved the way for Yahoo! to become the online media property with the best client list amongst Fortune 500 advertisers and global agencies.
Back in October 1998, Yahoo! was the high flying Internet stock with a share trading above $110. On October 13th, it announced that it was acquiring Yoyodyne, an interactive marketing agency and direct marketing services firm whose clients included America Online, American Express, H&R Block, Microsoft, Netscape, Procter & Gamble, Sony Music, Sprint and Volvo. Yahoo! solidified Seth Godin’s place in Web lore and having paid the acquisition in stock, went on to recoup the investment many times over.
For Yahoo! to secure blue chip clients like that back in 1998 for less than $40M, this one gets a honorable mention.
Additional sources here.
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#10 - aQuantive acquires Razorfish for $160M in June 2004
What makes this even more impressive is that SBI had previously bought Razorfish for a paltry $8.2M in November 2002. In other words, SBI’s return on its Razorfish was a mind-numbing 1,852% in a mere 18 months. But, the last laugh will go to aQuantive, who accelerated its strategy of profiting from the shift of marketing dollars to the Web. Today aQuantive is a $1.5B market cap company and a potential acquisition play by companies ranging from Microsoft to Google who want to ride the wave.
Razorfish might have long lost its dot com boom luster, but it had not lost the marquee client list and online know-how. If I am so bullish on aQuantive, it has as much to do with the Razorfish legacy than Atlas, Avenue A or other units.
Additional sources here.
More on aQuantive: Market to aQuantive: Close but no Cigar | Why aQuantive is the First Stock I Bought Since August
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#9 - Microsoft acquires Hotmail for $400M in 1998
$400M is a lot of money to pay for any company, let alone a free email service firm, especially when Yahoo! had acquired Four11 for $92 million previously. But, Yahoo! was an Internet company, Microsoft was a software company who thanks to their visionary founder missed out on the Web’s first hoorah. So it viewed acquiring Hotmail for $400M as it cost of admission for its late entry online.
While the amount is clearly high, the fact remains that Hotmail - one of the most successful viral plays ever - allowed Microsoft to access a web audience quickly. Every time someone logged off of Hotmail, there they were, on MSN.com. Today MSN.com is a leading Web audience, and a large chunk of that credit goes to Hotmail. For that, Hotmail was a wise acquisition, especially for cash rich MSFT.
Additional sources here.
More on MSFT: Microsoft, O Microsoft, Where Art Thou Microsoft? | Is MSFT Getting Its Mojo Back?
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#8 - Ask Jeeves acquires Interactive Search Holdings for $343M in March 2004
Before the hate mail starts, allow me to explain: when Ask Jeeves paid $343M for ISH, many people viewed it as a return of the good times. But unreasonable those times were not. The deal amalgamated a number of popular sites and search services, including iWon, MyWay (way…), Excite, My Way, My Search, My Web Search and the MaxOnline advertising network, under Ask Jeeves’ networks. CEO Steve Berkowitz added: ”This acquisition will double our market share, enhance our ability to compete in the fast-growing search market, and is expected to increase the financial returns to our shareholders.”
The key was “double.” In October 2003, Ask Jeeves represented the 28th largest network as measured by overall traffic by comScore Media Metrix, while the Excite Network (consisting of Interactive Search’s Excite and iWon properties) held the number nine spot. Interactive Search had approximately 700 million searches in the fourth quarter. This compares to 680 million searches on Ask Jeeves’ proprietary sites during the same period.
The stock market loved the deal, pushing Ask Jeeves stock up. Of note, Ask Jeeves only used $150M of cash, yet a year later, Barry Diller’s InterActive Corp. bought Ask Jeeves for a whopping $1.8 billion. The butler had reason to be excited…
Additional sources here.
More on InterActive Corp: Note to Tenacious D (Barry Diller): Hands off Facebook!
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#7 - eBay acquires Paypal for $1.5B in 2002
There are smart deals and then there are the no-brainers: eBay acquiring Paypal was a no-brainer. When the online auction company swapped 0.39 share of its stock for each outstanding share of PayPal, it effectively bought the leading Internet payment service in an effort to simplify online buying and selling on the largest auction site.
PayPal appeals to consumers by offering the convenience of multiple payment methods through its easy and secure online wallet.
“eBay and PayPal have complementary missions. We both empower people to buy and sell online,” said Meg Whitman, president and CEO of eBay. “Together we can improve the user experience and make online trading more compelling.”
Following the deal, PayPal continued to operate independently but eBay said it will phase out its Billpoint pay system when the PayPal acquisition becomes final.
Billpoint? Never heard of it. That was the problem. About 60 percent of PayPal’s business came from eBay, and on eBay most people used Paypal.
Were it not for Paypal, eBay would today look like a far more mature business than it is. But with eCommerce rising more than ever, Paypal drives eBay’s top line faster than you can check out online.
With nearly 123 million accounts globally, PayPal is the number one online payment service in the world, contributed 24% of Q3 2006 total revenue. During the quarter, PayPal’s total payment volume grew by 37% year-over-year to $9.1 billion.
This deal would place higher; considering how much eCommerce continues to grow, this could easily be Number 1, but $1.5B is a lot of money so right now, it’s #5.
Additional sources here.
More on eBay: Google’s eBay Killer?
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#6 - AOL Time Warner acquires Advertising.com for $435M in June 2004
A funny thing happened in 2004, Time Warner suffered from amnesia. Well, sort of. After the merger between AOL and Time Warner managed to wipe off a massive $80B in market value, you would think that the brass at Time Warner would never want to hear the words “you’ve got Web.” But somehow, that is exactly what happened when AOL.com bought Advertising.com in 2004 for $435M.
Rumors were widely circulating that Advertising.com was contemplating an IPO. Maybe that added some motivation to AOL’s management team, who pulled a deal similar to Yahoo’s acquisition of Overture but in the display realm of advertising: pairing an online publishing company with a marketing services firm. AOL will be able to deploy Advertising.com’s technology across its network and effectively sell inventory on other publishers’ sites.
Said Joe Germscheid, a media buyer with Zentropy Partners: ”I’m excited about it. It’s one of those ‘if you can’t beat ‘em, buy ‘em,’ deals. It will be a great thing for the whole AOL group.”
The deal was accretive from the get-go: Kevin Lee, CEO of search engine optimization firm Did-It.com, said, “The first thing that struck me about the deal is that because Advertising.com has so many advertisers in their system, it’s an easy way for AOL and its parent Time Warner to monetize their content. They can grow Advertising.com that way, by maximizing their inventory.”
Today, Advertising.com generates the lion’s share of AOL.com’s revenues, and we know how well things are finally going at Time Warner’s Internet division. For example, in Q3 2006, revenue at Advertising.com, a division of AOL that operates as a display ad network selling ads on a large number Web sites, grew 90 percent. Admittedly, this one could easily be higher but the ones that did place higher had more upside to the parent than this one did (in other words, a few alternatives to Advertising.com could have had roughly the same impact; yes, I know, that’s worthy of discussion).
Additional sources here.
More on AOL Time Warner: TWX, MSFT, YHOO Menage a Trois? Don’t Count On It
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#5 - Yahoo! acquires Inktomi for $235M in December, 2002
Two days before Christmas 2002, Yahoo! gave itself a long overdue gift: its own search technology. After being known for search (well, directory really) and giving that lead up to Altavista first and then to Google next, Yahoo! decided to stop using Google’s search results and acquired Inktomi in order to develop its own search algorithm. Frankly, the deal was well overdue, and considering that the high flying Inktomi was once worth billions, the $235 million price tag was reasonable in giving Yahoo! the first building block to enter the lucrative search industry - the proper way…
Inktomi was one of the first search darlings, launching in 1996 and specializing in algorithmic Web search technology. But like everyone else, Inktomi - who never had a consumer site - lost key accounts to Google. Ultimately, it viewed a sale to Yahoo! as the best route.
Inktomi gave Yahoo! its pay-for-inclusion technology, a rapidly growing space in the search market that allowed Google to scale in revenue.
Additional sources here.
More on Yahoo!: Take Yahoo! Private, Triple Your Money in 4 Years
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#4 - Yahoo! acquires Overture for $1.63B in July, 2003
If Google is the King of Search today, it is not because Google built a better search engine, it is because Yahoo! - the leading media property on the Web - decided to power its search function using Google. In effect, the rising tide helped Google add to its work-of-mouth success and become the biggest and baddest (bad is good) search engine out there. By the time people wised up to how good Google’s financials were, it was bad news for Yahoo! (bad is bad, here).
Yahoo said the deal will allow it to expand its pay-for-performance search business and to expand contextual advertising throughout its network.
Coming on the heels of the Inktomi deal, this deal allowed Yahoo! to take on Google head on, said Chief Executive Officer Terry Semel: “the deal gives Yahoo a greater ability to market itself to small and medium-size advertisers, Yahoo now owns all the crucial elements of an end-to-end search offering. Consumers will benefit from more relevant messages, and marketers from more effective results.”
The love fest continued: Forrester Research analyst Charlene Li said the Overture deal is significant in that Yahoo has essentially filled out its portfolio for marketers, specifically around branding and the paid search market.
Incidentally, while the deal surprised some, “it was really a question of who was going to buy Overture–Yahoo or MSN,” according to Li as Overture’s distributors generated almost all of its revenue: Yahoo and Microsoft’s MSN Web portal together accounted for 54 percent of its sales in 2002.
The next year, Yahoo! doubled profits, with the source being largely from paid search.
Additional sources here.
More on Yahoo!: Should Terry Semel Go?
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#3 - Google acquires Sprinks in October 2003
Before Google went public and everyone knew how profitable they were, Google pulled off one of the least covered, yet most impacted deals in the history of the Web. Google acquired publishing company Primedia’s paid listings unit, Sprinks, which was a part of the About network. It also signed Primedia and About to a four-year search and contextual advertising agreement. Financial terms were not disclosed and Primedia executives declined to comment much on the deal. But to insiders in the search and online publishing industry, it was clear that Google’s ambitions were far-flung.
The deal called for Google to become the exclusive provider of contextually targeted and search advertising across the 450 About.com Guide Sites and the Web sites for most of Primedia’s Consumer Media and Magazines Group. The group includes many of the magazine publisher’s 250 magazines, which include Motor Trend, Automobile, New York, Fly Fisherman and Creating Keepsakes.
Sprinks’ main strength - and opportunity - was its superior ability to serve relevant ads on content pages. This is something Google provided via its AdSense program, and rival Overture, now owned by Yahoo, also offered.
Google acquired Sprinks and essentially shut it down. It was one of the boldest moves from the folks at Mountain View. Just before going public and filing to go public, mind you.
It acquired great technology, inventory and took out a competition. Brilliant.
Additional sources here and here.
More on Google: Will Google be Worth More than MSFT by 2010? | Will Google be the World’s First Trillion Dollar Company?
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#2 - New York Times acquires About.com for $410M in February, 2005
Most newspapers are stuck in a rut these days. Their print divisions are losing subscribers, advertisers are bailing, but if everything goes according to plan, that won’t be the case with the New York Times. This is not to say that the Times does not have problems, it does, like all newspaper companies. But its future it far brighter than its brethren.
Along with their flagship newspaper, the Times owns the Boston Globe, the International Herald Tribune, 16 regional newspapers, 8 television stations and 2 NYC radio stations. It also publishes nearly 40 unique news related websites.
About.com, which had been bought by Primedia in late 2000 for $690M. Primedia decided to adopt the backwards strategy of ”buy high, sell low” and put the popular “Human Web” network for sale in 2004. As a side note, between the Sprinks sale for “sums undisclosed” and this one, Primedia might have been old media’s answer to, well, CMGI.
What makes the NYT’s acquisition so smart is that online empires Google, Yahoo, Ask Jeeves and AOL were all interested. In any one of their hands, it would have made the new garde stronger and further weakened newspapers.
Instead, it is the silver lining in the NYT’s company: for example, in the 2005’s Third Quarter, earnings fell by half at the New York Times Co., held back by surging paper prices and tepid ad growth. But the company’s top line benefited considerably from the addition of About.com, which saw ad sales rise 67% in the quarter.
For what newspapers should be doing, click here.
Additional info here and here.
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#1 - News Corporation acquires MySpace-parent Intermix for $580M in May 2005
I tried long and hard to find a better deal; I hope this does not come across as bandwagon jumping, kool aid drinking but numbers speak volume, and $900M is a big number to overlook.
Forget that RBC’s Jordan Rohan said that MySpace could be worth $15 billion by 2010. That’s analyst self promotion. Forget that Rupert Murdoch said he pegged MySpace’s value at $6 billion. That’s the talk of a shrewd businessman (if anything, such talk suggests that FIM is worth more separate than combined, for our previous analysis, click here).
Let me say clearly: MySpace’s acquisition of News Corp. is the best Internet acquisition ever because thanks to it, Google paid News Corp. $900M in a search deal. Sure, that money also includes other Fox Interactive Media assets such as IGN.com (the other $500M+ acquisition News Corp. made in 2005), AmericanIdol.com, RottenTomatoes, GameSpy.com, FOX.com, FoxSports.com etc., but no way would Google have paid so much were MySpace not on the table.
One of the most recent Web acquisitions, in May 2005 News Corporation acquired MySpace’s parent Intermix for $580 million. At the time, like many deals, people were suspicious of the parent company, crown jewel and acquisition price. But MySpace went on to triple in size, News Corp. hired a Traffic Cop to clean up the site of sexual predators.
Recently, News Corp. sold off all of Intermix’s non-MySpace assets back to Intermix Chairman Richard Rosenblatt, to the ire of Intermix founder Brad Greenspan. Architect Ross Levinsohn resigned and like he has many times before, Rupert Murdoch re-engineered his global, diversified media company into an online machine, striking a mammoth $900M ad deal with Google.
Lastly, for what it’s worth, in 3 or 5 years (when the social networking craze calms down), if I were to duplicate this list, there is a 50-50% chance that IGN - and not MySpace - makes this list.
More on News Corp./FIM: Murdoch, UBS Suggest FIM worth more separate than combined | Did Google overpay for FIM’s search business? | What Would Wikipedia Social Media Site be Worth as a For-Profit?
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Disclosure:
Own aQuantive, Yahoo! at the time of writing.
- Last but not least: like with all lists, I am sure I am forgetting a big one, so feel free to comment; as with all posts, comments are open but moderated to avoid for spam… I’ll check in later and approve everything that is not spam: good, bad and ugly.
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WatchMojo NewsletterMINNEAPOLIS, Nov. 24 /PRNewswire/ — Panasonic, the market and technology leader in Plasma TV, is giving shoppers at the country’s largest shopping mall this holiday weekend a crystal clear view of what will be atop many holiday gift lists this season — big screen Panasonic Plasma HDTVs.
Panasonic’s Plasma Tour will stop at the Mall of America beginning Black Friday to give consumers a look at the 103″ world’s largest Plasma HDTV. The 103″ Plasma will highlight a display of Panasonic’s entire range of best-selling Plasma HDTVs (from 37″ - 65″) that have been significantly more accessible this holiday season.
“What better place to show people the undeniable power and beauty of a Panasonic Plasma TV than at the country’s biggest mall on the biggest shopping weekend of the year?” said Andrew Nelkin, Panasonic’s Display Group Vice President. “Black Friday signals the start of the most important selling season on our calendar. It is a time when people are inundated with information from a wide range of sources on what is best to buy. We feel that consumers can make the most educated purchasing decisions by actually seeing first hand how a Panasonic Plasma delivers the best high definition viewing experience for sports, movies and video games and talking to one of our flat panel HDTV experts face-to-face.”
According to the Consumer Electronics Association(1), sales of flat-panel TVs are expected to top $7.3 billion this year, up 85 percent from a year ago.
Half of consumers surveyed said their next TV set will be a flat panel. A recent Opinion Research Corporation study(2) of more than 1,000 adults found that nearly 75% of respondents feel buying a Plasma HDTV is more affordable/feasible than one year ago.
About Panasonic
Based in Secaucus, N.J., Panasonic Consumer Electronics Company is a Division of Panasonic Corporation of North America, the principal North American subsidiary of Matsushita Electric Industrial Co. Ltd. (NYSE: MC - News) and the hub of Panasonic’s U.S. marketing, sales, service and R&D operations. Information about Panasonic products is available at http://www.panasonic.com.
A Belgian court said on Friday it would wait until after the new year to decide whether to cancel an injunction forbidding Web search leader Google Inc. from reproducing extracts from Belgian press reports.
Google, which faces a parallel case in a U.S. court filed by Agence France-Presse, argued on Friday that the injunction, granted by Brussels’s Tribunal des Referes, should be cancelled.
“It will be after the Christmas holidays,” the judge told lawyers after a three-hour hearing during which Google lawyers argued that the Belgian Google News service did not infringe on copyright laws.
Lawyers for Copiepresse, an organisation which manages copyrights for French and German language newspapers and which brought the case, said that Google had no right to make any copy of content without prior consent.
Read more.
This is a good point:
Mainstream newspapers are up against dwindling circulation and shrinking advertising revenues, but college papers have become hot commodities.
Spurred by research indicating that about 76 percent of the 6 million full-time US undergraduates read their campus papers at least occasionally, big corporations and advertisers are latching on to student-run publications.
One of the most notable examples of the trend occurred in late summer, when a subsidiary of MTV, one of the country’s best-known youth brands and part of the Viacom entertainment empire, bought College Publisher, a company that runs websites for about 450 college papers.
But it’s interesting to note that readership of newspapers then falls off after graduation. You enter the workforce and are bound to access the info on a computer or wireless device, and not papers. I know what you are thinking: young professionals (who just graduated and commute to work via public transportation, for example) might be prone to read dailies on the bus, subway etc.
Right?
Not so. A few years ago, a major media company launched free, lifestyle dailies and gave them away on buses, subways. Soon thereafter, it went online-only.
Read more.
PLAY
