Monday, November 20, 2006

Top 10 Worst Internet Acquisitions Ever

As the market for acquiring fledgling Internet companies heats up, it's worth taking a look at all those acquisitions that didn't quite work out. For every Internet acquisition that's successful there seems to be dozens that die on the vine.

So what makes for a really bad Internet acquisition? First, it has to be expensive. No one's going to rake a company over the coals over a few blown $50 million acquisitions. That might sound like a lot of money to you and me, but that's a rounding error to Google.

Second, for an acquisition to be lousy it has to contribute little or no long term growth to the acquiring company. An acquisition that doesn't fit with a company's long term strategy and that is quickly forgotten - that's a bad buy.

So, here is my highly subjective list of the 10 worst Internet acquisitions of all time:

10. Hotmail - acquired by Microsoft in 1998 for about $400 million. Hotmail was a second-tier free email service when Microsoft bought it and the acquisition did little to improve Microsoft's internet portal ambitions.

9. Skype - acquired by eBay in September 2005 for $2.6 billion. While it's early to call this one an absolute dud, eBay does not seem to have a plan - or at least a plan that would justify the acquisition price - for how to integrate Skype's calling service with the core auction business.

8. MySimon - acquired by CNET in 1999 for $700. The price comparison site mySimon was supposed to launch CNET into lots of non-tech verticals - not a bad idea at the time. Unfortunately CNET had no idea how to effectively integrate mySimon and it's now withering away, surpassed by newer, shinier price comparison engines.

7. BlueMountain.com - acquired by Excite@Home in 1999. $780 million for an online greeting card site. 'Nuff said.

6. Lycos - acquired by Terra Networks for $4.6 billion in 2000. Yeah, I never heard of Terra either. The warning bells should have gone off when the deal was originally announced in May 2000 at a value of $12.5 billion, only to fall by more than 50% by the time it closed in October of that year because each company's stock price was plummeting.

5. Netscape - acquired by AOL in 1998 for $4.2 billion. To be fair, this was a mercy acquisition. By the time AOL bought the company, Netscape had been humbled by Microsoft's free Internet Explorer browser. AOL clearly had no plans for Netscape and as a result the once pioneering company is now an afterthought.

4. GeoCities - acquired by Yahoo! in 1999 for $3.56 billion. When was the last time you visited a site with a geocities.com domain? I can't remember either. Shortly after the acquisition, innovation on GeoCities appears to have ground to a halt. GeoCities could have been mySpace, but the entire social networking revolution passed them right by.

3. Excite - acquired by @Home in 1999 for $6.7 billion. Remember Excite.com? Remember how it was the #2 or 3 portal for awhile? Well, a whole year and a half after the cable company @Home acquired Excite (for $394 per user!) in January 1999, the combined entity filed for bankruptcy never to be heard from again. Classically disastrous.

2. AOL - merged with TimeWarner in 2000. This one is obvious. While Time Warner finally seems to be turning things around at AOL six years after the fact, this merger was doomed from the start. Shortly after the merger AOL's business started falling apart fast, with TimeWarner holding the bag. There was never a coherent integration plan and all that talk of synergy is - thankfully - dead and gone.

1. Broadcast.com - acquired by Yahoo! in 1999 for $5 billion. Yahoo! paid a mind-boggling $710 per user back in the hey day of the bubble. But why does this rank higher than the AOL boondoggle? Two words: Mark Cuban. Yahoo's ludicrous overpayment for Broadcast.com gave Cuban the money to go out and buy the Dallas Mavericks basketball team and permanently implant himself on the American psyche. Unforgivable.

So did I miss any duds?

Next up: the 10 best Internet acquisitions. That'll be a littler harder.

348 comments:

1 – 200 of 348   Newer›   Newest»
Anonymous said...

What about VRSN buying Network Solutions?

Anonymous said...

BIG miss on Alta VIsta by CMGI-$5B

Anonymous said...

Missed Dud: NetIQ's acquisition of Webtrends (NetIQ acquired by Attachmate June 2006) for almost a billion dollars in stock...then turns around and sells it for 99 million...loser

Hockeydino said...

Those were great acquistions if you were on the recieving end! Holy Cow...envy! Whatever happened to Fogdog?

James please contact me offline
hockeydino @ google's mail.

thanks

Dino

Anonymous said...

Every CMGI acquisition was a dud

TJP said...

eBay is still planning a Skype integration with its eBay marketplace. and you're right, it's way too early to decide whether it's a dud or not.

Anonymous said...

I believe GoTo (pre-Overture days) bought Cadabra (comparison shopping) and AuctionRover (who knows) for a combined $600MM back in the day. I don't think either contributed a dime of revenue.

Anonymous said...

GREAT ARTICLE
-------------

and the funniest part is how Mark Cuban, the founder of Broadcast.com, parades around like he is really talented in business.

Anonymous said...

YES, I WISH TOO THAT SOMEONE WOULD TELL MARK CUBAN HE IS A DUMB GUY

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Anonymous said...

You can bet the News Corp / MySpace and News Corp / IGN acquisitions will rank up there soon. Everyone seems to be leaving that ship before it tanks - including the guy that originally made the deals, Ross Levinsohn.

Oh yea so is Google / YouTube is going to rank up there too... Lots of hype. Lots of "network effects". But cash.

One of the best acquisitions: Yahoo / Overture.

James Nicholson said...

Thanks for all the responses. Good catch on the AltaVista acquisition by CMGI. That definitely went nowhere.

Any more suggestions on good acquisitions? Sad to say I'm having a hard time coming up with 10 that really worked.

James

Anonymous said...

James

a great list

for your "good" list, don't forget Yoyodyne. Yahoo only paid about $39 million, and they get enough revenue and talent to pay for it many times over. And they got Seth!

Anonymous said...

AOL as #2 worst acquisition? How quickly people forget.... AOL was the buyer of Time Warner, not the other way around. And, frankly, buying Time Warner wasn't a terrible thing for AOL shareholders. Steve Case used his company's vastly inflated stock to buy a business which actually was generating positive cashflow. Yes, the market cap of the combined company has fallen sharply since the merger, but AOL has held up better through the bust than most internet companies. TWX's shareholders were the ones who were hurt: they were paid in AOL stock.

Anonymous said...

There's just too many candidates for 10 worst. Recall Ask Jeeves paying 500m for Net Effect? Can't recall that one. My point exactly.

Anonymous said...

You missed Disney buying go.com

Anonymous said...

You missed Disney buying go.com

Anonymous said...

depending on your point of view the EarthLink/MindSpring "merger" was a huge bust. The number two and three ISPs merge and manage to languish along for all these years. The customer base has not grown in any significant numbers, millions of dollars acquired in the merger was pissed away on projects that failed. They wanted to be a high speed comany (DSL/Cable) - failed, then came Blackberrys, oh that was the money maker. Next up wireless and voip. Failures.

Jon Zencovich said...

Great list! Well written and well researched :)

I just have one disagreement: Hotmail. Sure, there was potential for better, but hotmail gave Microsoft a lot of business, Ads revenue if nothing else. Although I'm a gmail user (left hotmail 3+ yrs ago), most of my friends are still hardcore hotmail users. It's tanking, but I don't think it qualifies as a bad acquisition.

@ Anonymous who talks about YouTube being on the list

Nope. Google paid $1.65 Billion, but is going to reap all that money REAL quick: Ads. YouTube is among the top 10 sites (3-5?) with most traffic on the internet. Do you have ANY Idea how much revenue that will rack in? Google doesn't even have to touch anything on YouTube! It ain't broke, so Google has no reason to TOUCH IT. Google is gonna leave the successful YouTube alone for the most part, and get lots of cash anyways.

YouTube would qualify as one of the top 10 Internet Acquisitions in my opinion.

James, wonderful list. Good Job :)

--Jon Z | http://www.jzencovich.com

Anonymous said...

Great list, got me thinking...

Here are the 10 best:

http://www.watchmojo.com/web/blog/?p=919

Cheers

Ash

Anonymous said...

DISNEY bought GO and then lost 1 BILLION and was sued by GOTO.com (which became Overture and now Yahoo Search Marketing)

Compaq bought AltaVista and who's used that search engine since?

Anonymous said...

Actually, Disney bought out Starwave and created Go.com (or attempted to do so, rather lamely). It was a disaster, something that set the company back 5 years or more and drained it of both resources and talent. But the Starwave acquisiton itself wasn't stupid, per se.

Here's a great, recent boner, however: NBC Uni purchasing iVillage for $650 million! Every media org on the planet had looked at that moribund property and concluded it wasn't worth anything close to the assumed asking price ($500 mil.). Then Wright and Comstock, desparate to make a name for NBC in the digital M&A space, pony up a huge sum for a property that now requires enormous overhaul. Next week they will come out and announce the new iVillage, w/ heaving PR and marketing; too bad that 700 NBC Uni employees are having to pay w/ their jobs to make that possible. I'd rate the NBC-iVillage deal as one of the bottom ten, ever....

Anonymous said...

Best acquisition ever: SAIC buys Network Solutions in 1995 for about $3 million. Domain registrations immediately take off. Five years later, they flip it to VeriSign for $21 billion!

Anonymous said...

What about AOL buying Winamp? How does that rate?

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Jay said...

I wish if i can share my tarot reading on Should Microsoft acquire Yahoo"?

Here is link:
http://readingtarotcard.blogspot.com/2007/05/should-microsoft-acquire-yahoo-tarot.html

annerose said...
This comment has been removed by a blog administrator.
Seo Link Master said...
This comment has been removed by a blog administrator.
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