You might recall how Answers.com tried to buy Dictionary.com etc. (all part of Lexico).
Well, that deal went nowhere, but Ask.com did buy Lexico for $100M.
You might be wondering what is happening with Answers.com, well, they’re now trading for $25M.
Nice.
I don’t know of too many publicly-traded companies who raise money from VCs, but here’s one: Answers.com. I owned the stock but it was in the toilet for a while so I got out, at a loss.
Incidentally, Redpoint - whose claim to fame is funding Intermix (MySpace) and Right Media - backed Intermix when it too was publicly traded. This is actually something I always refer to: not to take anything away from them, but MySpace was far from the accidental success story. For one, it could leverage eUniverse’s burgeoning traffic. Second, it had a lot of funding… and most importantly, Friendster began to trip up on itself and its board’s ineptitude, largesse and prematurely grandiose vision at a time it should have focused on the product’s nuts and bolts.
The following is a perpetual-work-in-progress. Once you start to compile a list of mergers and acquisitions, you realize why it’s nearly impossible to have a complete list. We are quite confident that the following is a very good, comprehensive list of the largest, more notable deals… but it is not - and no list will be - fully complete because there are too many countries around the world and too many industries to report (it is highly possible that the Wall Street Journal or Financial Post, for example, has such a list… but it would be thick and unwieldy).
We have included:
- many industries
- have not adjusted for inflation
- mergers (be it all cash, cash/stock, or all stock)
- acquisitions (we have excluded partial acquisitions)
- private equity deals.
It is certainly not complete, send me any ones you think I am missing or industries you want us to add next to ash@mojosupreme.com or leave in the comments.
Trivia:
- In 1981, when DuPont acquired Conoco for $7.8B, it was the biggest deal of all time. But adjusted for inflation, that remains a $20B deal by 2008 standards.
- KKR’s private equity deal for KKR remains the biggest buyout when adjusted for inflation, but in actual dollars it has been long surpassed.
Related on HipMojo.com:
Editor’s note: I knew we were speaking too soon. One more deal to add to the list: Time Warner to buy Quigo. Added to the bottom of the list, under ad networks.
According to The Jordan Edmiston Group Inc.’s October 2007 Client Briefing report, the number of deals through the first three quarters of 2007 exceeded full year 2006 figures: 637 transactions with $95B in value thus far. Do the math and that is $150M per deal, quite rich.
As such, publishing our list in November 2007 is a bold and potentially premature thing to do. Regardless, why wait?
What started off as a Top 10 list turned into a Top 27 list: then it got out of hand because we were comparing apples with oranges. We’re at over 30 M&A deals in web-oriented sectors that stood out.
The deals are not listed by size or order of magnitude, just a combination of value, strategic fits and long term potential. Others made the list due to the storylines, frankly, or because they took a while and garnered the media’s attention.
At least one, you’ll see which one, has yet to be finalized, but we expect that it will.
Enjoy, feel free to add, criticize, re-order etc. Surely we’re missing some major ones… some time in December, using emails, comments, suggestions and votes I’ll probably publish a top 10 list of 2007 acquisitions…
ONLINE/OFFLINE PRODUCTIVITY SUITES & COLLABORATION TOOLS
- Yahoo! acquires Zimbra for $350M
Yahoo!’s email service remains the most popular in the world, but when it comes to online meets offline office suites, it was sorely lacking, in particular due to Google’s encroachment onto Microsoft’s terrain against the backdrop of Yahoo!’s dead silence on the front. But, in one move, Yahoo! staked its claim to the party.
- Google acquires Postini for $625M
Google is trying to dethrone Microsoft’s grip on productivity suites while Microsoft is trying to encroach on online advertising. Google has bought Writely, launched a spreadsheet program and while these initiatives and acquisitions have gotten the vocal minority excited, they have failed to win the hearts and minds of corporate IT decision makers.
While we doubt one decision alone will make a change, the acquisition of Postini - makers of corporate email security tools and anti-spam software - could technically make a difference over time. Let’s face it, Gmail is indeed pretty cool, but corporations won’t be caught dead using it. Maybe by meshing Postini with Gmail, offices worldwide will stand up and take notice.
- Facebook acquires Parakey
In 2007, Facebook grew synonymous with hype. Anything the company touched, or sought to touch, quickly turned to gold. Mind you, the company’s torrid growth rate was nothing short of breath taking. But when Facebook announced that it had acq-hired Parakey, a yet-to-launch web operating system developed by Firefox co-founders Blake Ross and Joe Hewitt for an undisclosed price, people noticed because this meant that Facebook had MSFT in its cross hairs. Over time, MSFT made a $240M investment in Facebook, creating an alliance between the two firms, and suggesting that Google, and not Microsoft, was Facebook’s true nemesis.
See HipMojo.com’s post on the deal here.
- Cisco buys Webex for $3.2B
Webex was the first stock I bought, and the reason was simple: companies spend so much money on travel and phone calls are not always easy. Webex was a simple way to bridge the gap between people who needed to at least be on the same page when it came to sales calls and phone meetings etc. Webex who for the large part of the 21st centuy traded slightly above $1B in market cap ended up fetching quite a premium from Webex, selling for a whopping $3.2B.
See HipMojo.com’s post on the deal here.
PUBLISHING
- Answers.com acquires Lexico for $100M
Answers.com, whose parent GuruNet Corporation paid $57,000 for the URL moniker, turned around and paid $100M for the parent corporation of Dictionary.com and Thesarus.com, fitting for a company who bills its Answers.com site as the world’s largest Encyclodictionalmanacapedia.
Of course, Answers.com got far more than two sexy URLs, Lexico did decent revenue and earnings, too. But any way you dice it, the deal was rich, translating to:
- 35 times earnings
- 15 times revenues
- $9 per unique
See HipMojo.com’s post on the deal here.
- Discovery Holdings acquires How Stuff Works for $250M
How Stuff Works has been around for what seems to be forever. It raised $50M for expansion this year and many expected the company to be the one signing the checks, but by year’s end, the company’s interest in all things video led to its sale to Discovery Holdings for a whopping $250M.
See HipMojo.com’s post on the deal here and here.
- CBS acquires Wallstrip
On the one hand, as a fellow video producer at WatchMojo.com myself, I was happy to see Howard Lindzon’s Wallstrip exit successfully to CBS: it showed that one can create something of value in video content and, in all honesty, it created a floor price and a comparable… But, by the same token, I think Wallstrip sold too soon and for too little (nothing against CBS).
Ultimately, in the year when marketers spoke loudly against user generated content, it created a first example that professional made video could represent a valuable business if done right. If I dare say so, we’re now going to show just how much a video content creation and syndication business can scale and grow if you stick to your guns… but that’s for a separate post.
- Hearst acquires UGO for $100M
Men don’t read magazines. They’re watching less and less TV. Where are they? Apparently, online and playing video games. If that hypothesis and premise is true, then Hearst made a much needed investment to get into a video game publishing network targeting men, that of UGO. Incidentally, when Viacom and News Corp. vied for IGN Entertainment [disclaimer: my one-time employer after it bought the company where I was a partner], Hearst balked at the price tag, which hit $650M. But two years after that deal, the trend lines were clear: Hearst needed to get serious about reaching men online and the $100M acquisition of UGO was to serve as the spring board. UGO had raised $90M since its inception.
See HipMojo.com’s post on the deal here.
- CBS acquires Max Preps for $43M
High school athletics is a hot sector. High school sports are a key part of local content and local advertising has always been a huge market, and one that is up for grabs, particularly as newspapers see ad dollars flow to the Web. More importantly, high schoolers don’t spend as much time watching TV (not suggesting that all high school sports fans are actually high schoolers, of course). Combine these trends and you see why CBS’ acquisition of Max Preps was a smart one. After the deal, Max Preps was rolled into CBS’ College Sports Television (CSTV) and its network of websites. It’s always very important to hook consumers early on, and there ain’t a better time frankly than before the college years.
- Yahoo! acquires Rivals.com for $100M
$100M for a sports site geared towards college sports seems like a lot, for sure, especially when the previous year, News Corp. bought Scout for $60M and CBS bought Max Preps for $43M.
But when you consider that said company has raised $75M in venture funding and run by CEO Shannon Terry who made the list of SBJ’s Top 20 in Online Sports, you know the deal’s final price will get high.
Ultimately, by making the deal, Yahoo! leveraged its massive audience to become a main player in sports, rivaling FOXSports.com, SI.com and ESPN.com. Mainly, by holding out and seeing CBS and News Corp. buy Max Preps and Scout respectively, Yahoo! not only saw a floor being created for Rivals.com but also had to pay a premium to ensure that the company not fall in another media company’s hands.
See HipMojo.com’s post on the deal here.
- News Corp. acquires Dow Jones for $5B
I know what you’re thinking, did he fire six shots or only five, “Dow Jones is not online. I mean, it’s flagship product, the Wall Street Journal is not even free!”
My friends, Wall Street Journal has the single most successful subscription business and gets 10m unique users per month. For decades, lest centuries, media moguls and tycoons have pushed the mantra of synergies. Rupert Murdoch in one single transaction:
- acquires one of the two assets he’s always fancied (WSJ, other being the Financial Times),
- he gets the best springboard for his new Fox Business Channel,
- acquires 10M uniques on WSJ.com, or 17M in all if you include Marketwatch and Barron’s,
- has the right, but not the obligation, to open up WSJ.com and make it into the most valuable place advertisers can reach the world’s wealthiest and most influential readers.
If you consider all of the variables, that’s one helluva deal.
SOCIAL MEDIA
- American Greetings acquires Webshots for $45M
Forget the fact that Webshots remains a strong brand that just a few years ago was bought by CNET for $70M, but Webshots is actually very complementary with American Greetings’ business. Photosharing has become a huge market, and while in CNET’s hands Webshots needed to be a leader in its space, under a company like American Greetings, it need not be. Moreover, while in the hands of CNET Webshots needed to generate sizable ad revenues (given how many pageviews it generates), in American Greetings’ hands, it need not. In other words, American Greetings is buying a large online property that is very strategic to its core business at a discount. That’s a great deal.
- CBS acquires Last.fm for $280M
Extra! Extra! Read all about it: CBS’ (and traditional media in general) core businesses are shrinking. CBS is the world’s largest TV company in terms of ratings, the largest outdoor company and second largest radio company. But like TV (and print), traditional radio is shrinking, so CBS made the prescient move to buy Last.fm. Similar to Pandora, Last.fm allows users to find new music based on their tastes and the overall community’s listening patterns. Was Last.fm the absolute best and biggest site out there? Probably not, but when you are CBS, you cannot pull a Bertelsmann and invest in a Napster-esque company that has burned more bridges than [won’t go there but insert anything you wish here].
See HipMojo.com’s post on the deal here.
- Cisco acquires Tribe
Cisco is no stranger to acquisitions, of course, but it usually acq-hires teams of engineers or technology. But by buying Tribe, one of the earlier social networking sites, did Cisco signal a shift away from Sun Microsystems’ mantra that “the network is the computer” to social networking is the Web? Perhaps, time will tell.
Ultimately, it’s a tacit admission that the web will become central to, well, everything.
See HipMojo.com’s post on the deal here.
- Nokia acquires Twango for $96.8M
Twango combines online storage with social networking, allowing users to organize and share photos, videos and other personal media.
Twango was founded in 2004 by former Microsoft employees and has around 10 employees. The deal is estimated to be just under $100 million, $96.8 to be precise. That’s right, it weighed in at $10M/employee. Twango is a small step in the seamless transferring of files from handsets to PCs. The fact that Nokia made the acquisition suggests that Finland’s most valuable company should not be seen as a telecommunications hardware company alone.
- News Corp.’s Fox Interactive Media/MySpace acquires Photobucket for $250M
Photobucket’s acquisition by MySpace makes the list mainly because the storyline behind it was pretty soap opera-ish. Photobucket builds business - according to MySpace and FIM executives - a la YouTube by leveraging MySpace’s audience and community, then adds insult to injury by trying to run ads in their slides.
Then Photobucket’s M&A advisors Lehman Bros. whisper their asking price: $300-400M. A lot of people scratch their heads. Of course, fearing a repeat of YouTube, where a company grew thanks to MySpace but sold to someone else, News Corp. blows a gasket and its MySpace site blocks Photobucket.
Suddenly, value of widget-driven businesses and Photobucket in particular plummets. Back channel diplomacy ensues, coup de theatre follows in the shape, form and fashion of a $250M buyout by News Corp.
In fact, the rumor of an impending deal broke out in early May, and the deal was formally announced on May 30th.
See HipMojo.com’s post on the deal here.
- Hi-Media acquires Fotolog for $90M
When European online marketing juggernaut Hi-Media announced its acquisition of Fotolog, eyebrows were raised. On the WTF? side of the argument were those who said: “using Fotolog’s forecasted 2007 revenue of$2.3M, a net-of-transaction fee sale of $90M implies a pretty rich 39 prices-to-earnings ratio. That’s rich. But, the counter-argument was that Hi-Media was acquiring a community of image-crazed users for 1/3 of what News Corp. paid for Photobucket; yes, call it the reverse fool theory. With $15M in financing, a $90M payout was part of the lure, turned out that the institutional shareholders of Fotolog decided to hold on to their stock holdings of Hi-Media. It should be noted, that just before the acquisition, Fotolog had signed a $75M advertising deal with Google, over 36 months, or roughly $2M per month.
See HipMojo.com’s post on the deal here.
- MSNBC.com buys NewsVine
What does this mean for Digg? We don’t know, but last year, the leader in social bookmarking and news, Digg, supposedly asked for $150M from News Corp. Rupert Murdoch balked, launched MySpace News. I’m not sure how well MySpace News is doing, I suspect Digg is doing quite well, but the fact remains, I doubt Digg will get $150M (then again, a sucker is born every second) because Stumble Upon’s $75M price tag and NewsVine’s price tag imply a lower value for Digg.
Of course, this is a post on NewsVine, not Digg. I can’t understand really the logic and prevailing wisdom to sell NewsVine, a company who had raised less than $2M in financing and who was riding high as America is about to enter an election season and NewsVine’s core focus seems to be political… but, I digress. On MSNBC.com’s part, this marked the NBC/MSFT joint venture’s first acquisition, ever.
E-COMMERCE
- Hearst acquires Kaboodle for $40M
Hearst bought a handful of companies this year: UGO for $100M, which was pricey but not very expensive for a company that raised $90M of funding since inception. But given Hearst’s traditional business focus in magazine, the deal for Kaboodle is intriguing because it allows fashion and retail advertisers - two of Hearst’s main clients - to tippy-toe online and connect branding with purchasing. If Hearst can pull this off, the combination can become powerful, and valuable. Will they? Big old media doesn’t have the best track record, admittedly, so time will tell.
See HipMojo.com’s post on the deal here.
- eBay acquires Stubhub for $310M
eBay = auctions, Stubhub = scalping. It didn’t take the MBAs very long to see fits. Speaking of graduate degrees, founders Jeff Fluhr and Eric Baker owned roughly 35% of the company and with $15M in funding over the years, they managed to build a controversial but successful company that did $100M in sales and $10M in EBITDA. The company’s backers included Allen & Co, Blue Water Capital, Pequot Ventures and Staenberg Venture Partners.
SEARCH, NAVIGATION & DIRECTORIES
- R.H. Donnelly acquires Business.com for $345M
When word got out that Business.com might be selling for over $300M, the natural reaction was to think “the bubble is back”. After all, just a few years ago, founders Sky Dayton and Jake Winebaum acquired the URL for $7.5M from Marc Ostrovsky. At the time, even I thought “will they ever generate $7.5M in revenues off the site, over the course of its lifetime”? Of course, when Dayton and Winebaum bought the URL, Google had yet to create the keyword ecosystem that today underwrites much of online advertising. While critics maintained that by 2007, Business.com was little more than a directory of resold Google text ads, R.H. Donnelly saw salvation for their shrinking print directories and agreed to acquire the firm for $345M.
See HipMojo.com’s posts on the deal before it happened here and afterwards here.
- eBay acquires Stumble Upon for $75M
Stumble Upon’s 2.3 million users and 5 million daily recommendations caught the attention of AOL, Google and eBay, and ultimately, after valuations ranged from $40-75M for a few months, eBay walked away the winner. When the rumor popped up and few understood the logic, though technically, like eBay’s Skype acquisition, the prevailing wisdom of the leading auction community to acquire a leader in “stumbling navigation” makes sense. Of course, that’s what was said about Skype too, and this year eBay wrote down a chunk of that acquisition, even though the fit was even stronger there. Stumble Upon raised less than $2M, which means that founders Garrett Camp, Geoff Smith, Justin LaFrance and Eric Boyd walked away with a nice payday each. Lesson for entrepreneurs: success did not come over night, the site was founded in 2000!
See HipMojo.com’s post on the deal here and here.
- Microsoft acquires Medstory
For all of the talk about vertical search engines being the next great thing, very few case studies proved to be profitable exits. Then came along Medstory and the battle for health information, which led Microsoft to acquire vertical search player Medstory as Google, Yahoo! and Microsoft all vied for search market share and to become the gateway to users’ health information online.
COMMUNICATIONS, WIRELESS VOICE SERVICES
- Google acquires Grand Central for $45M
Let’s face it, financially, Google remains a on-trick pony with 99.9% of its revenues coming from paid search ads and the two related products: Ad Sense and Ad Words. But Google’s product assortment has grown very attractive, from GMail, to Maps, Google Earth, YouTube and soon Doubleclick, Google is certainly laying down the foundation to become a diversified new media and technology company. In that vein, the acquisition of Grand Central to arm users with one number on any platform is consistent with Google’s global and multi-platform ambitions. In fact, at $45M, the deal was cheap and provided good value to Mountain View.
- Microsoft acquires TellMe for $800M
TellMe is “a leading provider of voice services for everyday life, including nationwide directory assistance, enterprise customer service and voice-enabled mobile search.” If the price tag weren’t so darn high, it would surely be higher on this list. Regardless, this catapults MSFT into voice services and voice-enabled mobile search, which a few short years from now will actually help it quite a bit against the #1 and #2 in search, Google and Yahoo!, respectively. While $800M is a large price, if it can execute on that alone, the deal can be a enormous coup for Redmond.
MOBILE AD NETWORKS
- AOL acquires Third Screen Media
Indeed, to quote the Wall Street Journal’s Kara Swisher, new CEO Randy Falco has been busy torching AOL’s Dulles, Virginia’s HQ, but while he’s been doing that, he’s also been making some bets on the next growth area: wireless. In 2007, AOL bought Third Screen Media, a mobile advertising network and ad-serving management platform provider. Will this be a repeat of Advertising.com’s $435M which today drives most of AOL’s top line? Who knows. I doubt it, wireless is way too embryonic, today. But one day, when cars fly and everyone has a pony, wireless entertainment and mobile advertising shall inherit the earth. Time will tell if Randy Falco will be ruling the fiefdom when that happens.
- Nokia acquires Enpocket
In the emerging mobile content and advertising market, Nokia hopes to expand its footprint beyond hardware. To achieve its goal the handset manufacturer agreed to acquire Enpocket to build its advertising platform.
Though Nokia has a content and advertising presence in Europe, its wanted to expand there and elsewhere, including the U.S., through internal development and acquisition. The Enpocket acquisition follows Nokia’s buy of social media sharing service Twango, as well as internal moves toward content publishing.
Enpocket has customers in the US, Asia, and Europe, including Vodafone, Telefonica, British Telecom, and Sprint. It delivers advertising across a variety of mobile formats, including SMS, MMS, mobile Internet, and video. Its customers include both carriers and the companies with which they do business, most notably Pepsico.
In some ways, this deal was in the same vein as Microsoft’s acquisition of European mobile ad firm ScreenTonic with the intention of integrating its capabilities into adCenter: “We want to deliver a platform that helps advertisers buy across all digital mediums,” said Joe Doran, GM of Microsoft’s digital advertising solutions. “As we build out the breadth of our platform, we are continuing to invest against that vision.”
- Nokia acquires Navteq for $8.1 Billion
Nokia is the world’s largest manufacturer of cell phones. Nokia owns this market, basically, and any acquisition it makes is bound to have ripple effects. NAVTEQ is a leading provider of comprehensive digital map information for automotive navigation systems, mobile navigation devices, Internet-based mapping applications, and government and business solutions. NAVTEQ also owns Traffic.com, a web and interactive service that provides traffic information and content to consumers. The Chicago-based company was founded in 1985, generated 2006 revenues of $582 million and has approximately 3,000 employees located in 168 offices in 30 countries. Incidentally, “Internet and wireless” make up only 5% of Navteq’s revenues, compared with 25% from mobile devices and a whopping 62% from in-dash navigation systems.
Translation? Lots of upside in Web and mobile revenues and the creation of a very powerful wireless and local ad network, perhaps?
AD NETWORKS
- AOL acquires Tacoda for $275M
One of the bigger and hyped phenomenon (fairly or unfairly) of web advertising remains is behavioral targeting (BT). Rightfully, to better optimize inventory and users, and to make the promise of web advertising a reality, BT has a role to play. But AOL’s acquisition of BT also demonstrated BT’s inherent limitations: few sites want to partner with BT firms, they want to own the data and underlying IP. Will it be an Advertising.com type of payoff? Time will tell, but Tacoda within AOL is worth far more than outside, in that sense, this deal made sense…
See HipMojo.com’s post on the deal here.
- Google acquires Feedburner for $100M
Google paid $100M for a company with $10M in revenue. Regardless of the financial merits of the deal, the fact is that had Google sought to emulate Feedburner (even had Feedburner not existed), the media companies that partner with Feedburner would not have allowed Google to access such private and valuable data. In other words, Google bought something that was worth many times more to Mountain View as in a year where it had become more and more enemy than friend.
See HipMojo.com’s post on the deal here, Google Buys Feedburner and Encroaches on Organic Ad Results.
- Yahoo! acquires Blue Lithium for $300M
Blue Lithium’s focus on introducing large, sexy brands to the virtues of advertising networks is legendary. Before more and more larg, Fortune 500-type marketers embraced running online ads - let alone using ad networks - Blue Lithium stood out of the clutter with a product and service that appealed to both sides of the online advertising ecosystem. Once upon a time, Blue Lithium’s management even talked of its advantages and strengths over online ad champion Google, but then lo and behold, Yahoo! acquires Blue Lithium for $300M to maximize the monetization of its ad inventory and to bolster its online advertising network both outside Yahoo!’s burgeoning media properties.
Given that the next wave of growth in online advertising will be display / banner ads (after video) and that will come from Fortune 500 marketers, this is a move that can pay off considerable dividends to Yahoo!
See HipMojo.com’s post on the deal here and here.
- Google acquires Doubleclick for $3.1B
Technically, this deal has yet to go through. But we added it onto this list because it shows that Google is completing its arsenal of web tools. Starting off with search, then video (YouTube), then email/newsletter (Feedburner) and now display/banners (Doubleclick), Google has the potential to circle the loop of online advertising.
We’ve covered this deal ad nauseum, so we’ll simply link back and leave you with this quote from one of our posts:
“When a lot of people said Google just hit a home run in online advertising by buying DCLK, they were wrong because saying DCLK is an online advertising play is akin to saying MSFT is strong with ad agencies because ad agencies use powerpoint in their client pitches. DCLK sold all of its media assets to L90/MaxOnline when ad rates were low and no one really paid CPM rates, and got into software only”
But, that notwithstanding, Google buying Doubleclick is a key deal because it bolsters Google’s online advertising software suite, which in itself helps it attack MSFT on many more fronts.
See HipMojo.com’s post on the deal here:
- Google Buys Doubleclick for $3.1 Billion; Blocks MSFT Acquisition
- Questions in Wake of DCLK/GOOG Deal; MSFT/YHOO Repercussions?
- Two Variables in DCLK/GOOG Deal: Dart for Publishers/Advertisers; All Cash Deal
- Why GOOG’s DCLK Makes Little Sense (To Me)
- DCLK Winners: Hellman & Friedman; Losers? DCLK’s Shareholders?
- aQuantive Under Spotlight
- Yahoo! acquires Right Media for $750M
Technically, Yahoo! paid $45M for 20% of Right Media first, then less than a year later, it paid $680M for the 80% it did not own. Right Media was unique in that it worked with other ad networks to allow publishers to create an auction process for a publisher’s long tail inventory. On a property like Yahoo! alone, with billions upon billions of remnant, unsold ad inventory, such a platform can be worth billions each year.
And, as Yahoo! develops its network online (away from Yahoo!-owned sites), Yahoo! liked what it saw enough to justify pushing up the price of the asset four times in less than a year.
See HipMojo.com’s post on the deal here.
- WPP acquires 24/7 Realmedia for $649M
WPP is one of the largest agencies in the world, a marketing behemoth with huge ambitions in digital advertising. It got one step closer to that when it bought 24/7 Realmedia, getting an advertising network, an email newsletter business, search marketing tools and much more. With its extensive advertiser relationships, WPP is sure to get enough bang out of its $649M bucks.
See HipMojo.com’s post on the deal here.
- Microsoft acquires aQuantive for $6 Billion
Microsoft generates very little from advertising. In the future, all advertising will be planned, bought and managed on digital platforms. And digital advertising will be larger than all offline advertising. Furthermore, targeted/tracked (web) advertising will command a considerable premium to non-targeted and untracked advertising. As such, for MSFT to win aQuantive - the crown jewel in the sector - it had to pay a commanding premium.
Like it or not, the market determines how much an asset is worth, which in turn is a function of demand and supply. aQuantive had a range of suitors, and the company that wanted it most ended up paying for it. MSFT’s acquisition of aQuantive can be a game-changer for MSFT if it does not botch it up.
See HipMojo.com’s post on the deal here.
- Time Warner acquires Quigo for $340M
Quigo, which signed a deal with Time Warner’s magazine division, Time Inc, and has more than 500 publisher relationships, is an Internet ad-targeting company that lets advertisers buy sponsored listings, much like Google’s AdSense, based on keywords or subjects.
AOL in September restructured its advertising business, consolidating ad network Advertising.com; Tacoda, which targets users based on their habits; wireless ad network Third Screen Media; video ads company Lightningcast; and ADTECH, a global ad-serving company, into one division.
What did you think of the list? Corrections, suggestions, comments etc., add to comments or email me at ash@mojosupreme.com.
The $100M price tag that Answers.com paid for Lexico - owner of Dictionary.com and Thesarus.com - translates to:
- 35 times earnings
- 15 times revenues
- $9 per unique
Not too shabby. Read our previous post on the logic of the deal.
Answers.com, a company with a market cap of $100M and an enterprise value of $93M, today bought Lexico, the parent of Dictionary.com for $100M.
Where did Answers.com get this cash? I’ll investigate, but fow now, is this an oddball move or does it make sense?
When I saw the news and began to write this post, I was flabbergasted and thought it was an oddball move. But when you think in the context of a game of chess, tragically it all makes sense.
Answers.com is one of those companies that has a unique product. It has the potential to be a leading reference website online, but its a rich price based on earnings alone. In fact, Answers.com also announced that its revenue would be weaker than expected, so the stock is down $1.50.
I own shares in the company and right now, and initially I was going to get out of the stock because this seemed reckless. But as I thought of the rationale, at least one reason hit me (perhaps I am reading too much into this and giving the company too much credit).
A cynic would wonder:
Why on earth would Answers.com make this acquisition? It already trumped Dictionary.com’s much valued real estate on the upper right section of Google’s results page. It’s one thing if someone bought Answers.com to inherit that real estate (though there’s no guarantee that Google would not bounce it), but why would anyone by Dictionary.com?
Then it hit me. By buying Dictionary.com, Answers.com does two things:
- It consolidates the dictionary / reference market. Dictionary.com probably gets a lot, and I mean a lot of organic traffic from results pages regarding standard definitions and even generic one word queries, which could be in the billions per month.
- More importantly, Answers.com needed an antidote to Google’s moodswings. In other words, to the best of my knowledge, there is nothing in writing securing Answers.com’s slot in Google’s result page. Any given day, Google could bump off Answers.com for someone else (after all, Google itself bumped off Dictionary.com for Answers.com).
But by buying Dictionary.com, Answers.com ends up winnin regardless of whether Google uses it or Dictionary.com. Of course, Google could also replace Answers.com with its own product, but then that would only make Answers.com more attractive as a target M&A, in my humble opinion.
In fact, one of the main dark clouds hanging over Answers.com is the argument that no company would want to buy it because they would risk Google bumping them off, something that would cause a massive loss of traffic. So this is not only a hedge, but ultimately, it strengthens the company quite a bit…
Disclaimer: long Answers.com
Not long ago - May 20th 2007 to be precise - I enumerated a bunch of stocks that were in play, some of them have now risen in value, a few quite a bit.
Of note, amongst those I own:
- Answers.com - up from $11 to $17
- Infospace - up from $18 to $24
- Roo - up from $2 to $2.65
Of the ones I don’t own:
- Marchex - up from $13 to $15
The last one shows how backwards sometimes the market can get, in light of my earlier post on MCHX’s dubious click quality issue at its GoClick unit.
Lots of M&A activity, and rumors.
The search industry has been putting too much of a premium on paid results at the detriment of organic results.
Well, not so fast. The quintet of mass search - Google, Yahoo!, MSN, Ask.com and AOL - have focused on both organic and paid, but the laggards have not, and the market caps - and market shares - of these is a reflection. This quintet also battles for mass search supremacy, leaving a great opening for niche players.
You would think that players #6 and down would compete in this space, but these smaller players have adopted a me-too strategy of trying to be masters of monetization, and effectively hurt their organic results.
As developer of the domain-specific vertical search engine MetaMojo.com (along with a video meta search engine), that makes me very happy as it creates a demand for any way that these smaller search players can improve their organic results, assuming they actually have something in place to begin with.
MARKET SHARES
The leading five companies account for 99% of the cumulative market share, and the laggards get less than 1%. Should they even bother? Well, yes, because search remains a lucrative business.
But the problem with the laggards is that they put an emphasis on paid results at the detriment of organic results. Some, in fact, do not even have an organic search strategy.
MARKET CAPS
Google is the 600 pound gorilla, naturally, with a market cap of $150B, revenues of $10B with profits of $3.2B in 2006.
Then enter Yahoo! who let Google become what it is today by using it on its portal. Yahoo! is worth as a total business $38B. It’s the #2 in search.
Microsoft commands a market cap of $300B nearly, but I’d estimate that MSN.com (with the portal and search business) is worth $29B. See that analysis here, in “Should MSFT Spin Off MSN.com/Live into Yahoo!?”.
Ask.com is the #4 player, and sold to IAC a few years ago for $1.8B. Today it’s search business within IAC is worth more. I’ll look at a valuation of how much soon.
AOL.com is #5, and is a part of Time Warner, the largest media company in the world with a market cap north of $70B.
Let’s examine the smaller players now (not in order of value):
- Answers.com is one of my favorite players in the space, it is not a cheap company by any stretch of the imagination, and it is very vulnerable to Google one day waking up and removing their link off their results page. But once you grapple with that risk factor, you realize Answers.com is a unique company that is smart enough not to even consider itself a competitor in search. I own shares in the company, who have gone up and down since its IPO a couple of years after dropping the software subcription model for a free, ad-supported strategy. The company boasts a market cap of $122M and while it is rich in any traditional method, for what you get, it’s an intriguing place to plunk down your money.
- MIVA is one company that does not have an organic strategy at all. It has a number of paid products and last year launched an interesting contextual product, but the problem is that in an era where Google, Yahoo! and MSN can outbid you for distribution and have FAR more advertisers, I cannot see MIVA getting any traction.
Its market cap? $181M.
I own shares in MIVA as well, but mainly / solely because I view it as a cheap M&A target with a solid European presence, which I like. But ask me what I think of its stand-alone prospects, and the honest answer is: not much. I don’t own many shares so it’s not a large holding.
- Mamma.com (disclaimer: I worked for Mamma in 2000) is a drama story that has had enough storylines to merit a movie made about it. I have bought, sold, bought and sold stocks in this company over the years. I could have made a lot more, but the volatility was too much to handle so I always got out upon making a decent return. I don’t own any shares and frankly view this one more as a desktop search (after it bought Copernic) and as it stands, I view desktop search as very competitive. Mamma.com is worth some $60M on Nasdaq. Can it be an acquisition? Sure, who is not. But I see better fits than Mamma.com, who’s search technology is a meta search and a video meta search that is powered by Pixsy.
- InfoSpace is also a company I own stock in (see a trend).
It’s a drama in itself. Just yesterday, the company closed with a market cap of $640M and an enterprise value of $200M. Today the stock is up 20% (more on this below) and the company is right now worth $817M with an enterprise value around $266M.
In fact, INSP’s slike this morning is what drove me to write this post.
The stock spike was odd because yesterday was payout date for the special, one-time dividend of $6.30. INSP had over $400M of cash up to recently, and at the behest of institutional shareholder Sandell Asset Management, it recently paid out $300M in dividends.
I bought INSP way back when people got excited about search and Google was not an option (not yet public). I think Infospace is a company that will one day offer shareholders a nice payout in a sale. It’s bound to happen, but please note, I am biased in saying this since I own shares.
Today I got to work and saw INSP up $3.40. Why, I asked? According to some rumors:
Spanish newspaper reported that Spanish cell phone and Internet content company LaNetro Zed SA is working out a deal to buy the company for 800 million euros, or about $1.08 billion.
More rumors of a sale, problem is:
So InfoSpace has two businesses — online and mobile — and both of them have issues. The online business, made up of the metasearch and private-label services, is the company’s cash cow, generating more than 60% of its gross profit last year. One of the biggest difficulties facing that business is that the search service ain’t that great.
“The problem with that product is that it offers an inferior search experience,” says Mark May, an analyst with Needham. “Rather than always delivering you the most relevant results, it delivers you the most relevant advertisements, which aren’t always the same thing. From a consumer perspective, they don’t compare favorably to the bigger names like Google.”
The mobile business’s problems are more extreme. In late September InfoSpace disclosed that Cingular, its largest ringtone customer, wouldn’t renew its contract. (Carriers have moved to sign deals directly with major record labels, cutting out InfoSpace as the middleman.) Three weeks later the company decided to exit the mobile content business, which contributed the bulk of the division’s revenue.
InfoSpace, of course, got into search when it merged with Go2Net back in the day. Go2Net ran Metacrawler and Dogpile, and in many ways, InfoSpace never did much with the products. If I am wrong, please advise.
InfoSpace has essentially dropped the ball in organic search (or never dipped their toes), and the market reflects badly on them.
- Marchex is another player fully involved in paid search, I like that they focus on verticals. For full disclosure: I am unhappy (as a client) with Marchex’s unit at Goclick. Here’s the entire story.
That issue notwithstanding, I think Marchex is well positioned in the entire parked domain name business, which I do not particularly like, but many in the mainstream media and venture capital community do. Marchex weighs in at $650M in market cap. Marchex was actually founded by Go2Net founder Russ Horowitz.
- Looksmart is a company I made a nice return on as well and got out, at the right time, since the stock has stalled since. Looksmart totally repositioned a couple of years ago and dove into the vertical search business. I think it has a strong monetization rate, but Looksmart, too, is a bit all over the place. However, of all of these companies, it might be the best positioned in terms of organic results. For a while, it did not have an algorithm in place and relied on its directory, that changed with the purchase of WiseNut.
A little side story: before Powerset and others became “Google’s latest threat,” ’twas Wisenut and Teoma. Teoma was bought by Ask Jeeves, who itself got bought out by InterActive Corp. for a whopping $1.8B.
Looksmart is worth some $77M but it boasts a lot of cash on its books, about $37M, so its enterprise value is in fact a modest $40M.
Of course, this does not mean you should dive in and buy the stock, it is extremely hard to compete in this space, even though it is indeed very lucrative when you’re a market leader.
Connecting the dots…
It is interesting to note than even the #5 player Ask Jeeves (at the time, it has since moved up to #4) realized that remaining a stand alone search company was simply too hard, so it sold to Barry Diller’s IAC.
This makes me wonder why INSP, MAMA, LOOK, MIVA, ANSW even bother… but that is just the point: search compaies remains a very likely M&A target. But as the article in Smart Money suggests, some of these companies drop the ball in search result quality, so it might not be foolish for them to try to improve that component of their business before selling out.
Disclosure: at the time of writing I own shares in INSP, MIVA, ANSW, YHOO and would like to resolve my little issue with Marchex ASAP!
I guess it’s time to roll out the stock market cliches.
Back in 2000, I used to work at Mamma.com, the so-called “Mother of All Search Engines.” I worked there before the search engine industry took off, before the stock price tripled in price in one day, before Mark Cuban bought and sold his shares in the company.
Late last year, I bought a few thousands shares in the company. In January, for some odd reason, volume spiked and I sat on a nice, juicy return. I did not sell. My rationale was the company had some $25M of cash on its books, and the market cap being at $30M, it was a safe investment. Larger companies and old media firms were also looking to invest in search.
Mamma.com lost some money in the ensuing quarters and I regretted not selling th stock. Well, regret is a big word, for in the stock market, what goes up must come down (eventually, usually) and vice-versa (eventually, usually).
Indeed, I knew that there would be something in the horizon that would eventually cause the stock to pop again. Today Mamma.com announced that it had launched a video search engine using Pixsy’s media database. The stock soared 45%.
For the record, I have no idea what made the stock pop in January. But, I learned from history.
What’s that saying? Oh yes: Buy the Rumor, Sell the News.
I sold all of my shares today and made a nice profit. Don’t get me wrong, I like the company (I’m a loyal guy, usually). If the stock continues to do well, I’ll be happy as a former staffer. If the company’s stock tumbles, I’ll be glad that I cashed out.
The company’s market cap is $50 million. Sure, that’s a tiny amount compared to market leaders Google who are worth $150 billion, but, there is a reason why the former is worth $50 million and the latter $150 billion. As a side note, when I joined Mamma.com, we then had 4-5 million uniques, Google had nowhere near that.
When I bought the stock late last year, I used to think that some companies would eventually want to buy out Mamma.com, but as a meta-search engine, I am not sure many would. After all, a meta search engine lacks its own index, it parses and returns results from other, underlying search engines. It’s got its place online, but as an M&A target, I’d rather buy an index and crawler.
But increasingly, I do not think many companies will look to buy into the search market.
Why?
With Google, MSN and Yahoo! now all having a proprietary search index and paid listings databases, I believe these companies will basically pay for market share.
Case in point: News Corp. could have bought Mamma.com, Answers.com, Looksmart.com and pushed them much like InterActive Corp. bought Ask Jeeves and invested in it. Of course, that was after Barry Diller put a contract out for the butler.
But instead, News Corp. gladly accepted a $900M payment from Google to use it instead. Today I noticed the “Powered by Google” logo on MySpace.com for the first time. I think Google overpaid, but it was a defensive move against MSFT and Yahoo!.
I also bought Looksmart for that same very reason: potential target in an M&A. Of course, I liked Looksmart mainly because it was repositioning itself as a player in the rapidly growing vertical markets, which I myself have directly invested in (more on that in the disclosure). But seeing Looksmart double in price over the past few months, I decided to join my sale order for Mamma with one for Looksmart.
After all, you can’t be greedy. Looksmart is worth $110 million. It’s doing well. But at a $110 million, it was time to sell.
What’s that other saying? Oh yes, bulls make money, bears make money, but hogs get slaughtered.
Disclosure: As mentioned, I used to work for Mamma.com. At the time of writing, I just sold my positions in Looksmart and Mamma.com.
Of all of the companies mentioned: I own Answers and Yahoo! To see why I like Answers, read this.
Also, as the founder of Mojo Supreme, our company runs a vertical search network called MetaMojo.com. Like Mamma.com, we are about to launch a video search shortly; though I doubt it merits a 45% spike in our “stock price.” Well, maybe it does…
UPDATE: When the dust settled, Mamma rose 80% in one day (thank God for those small floats, valuing the company at $60M. It does make you wonder if the launch of a video search relying on another company’s database on a site with some 5M uniques - I estimate - is worthy of all of this excitement?). I will say this: it’s a great time to be in this business, and I can’t wait for when we launch our search engine shortly.
PLAY
