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Tuesday, February 08, 2005

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Dave McClure

"hard" doesn't mean "not doable".

and furthermore, your "zero billion dollar" market metaphor is exactly what i'm talking about.

Yahoo, Google, Microsoft/MSN (not to mention Amazon, eBay, AOL, & IAC) are all in the same game -- namely, monetize every possible stinkin' thing you can get in front of your X-00 million users without pissing them off. and that doesn't mean you have to charge for it (although that's even better), you just have to show you can increase the level of paid advertising you're already serving to your existing audience.

this is why Gmail is free -- it's just another platform for serving up AdWords. if they can get X billion impressions from the Google userbase, they'll cover the costs of giving away free email & disk space.

which is why all of these companies should be following a model of buying new technologies when they're small(er) and therefore less expensive, and then integrating them quickly and rolling them out to their userbase.

eBay overpaid for PayPal (@ $1.5B) not because they weren't worth it -- we were a steal at anything south of $5B -- but because Meg waited so damn long to buy it. She could have had it for a hell of a lot less at any of the 3 or more previous times they tried to do the deal. Unfortunately for her, it took half the entire audience at eBay Live 2002 wearing PayPal t-shirts & boycotting eBay payments before she came kicking & screaming to the table. she made the right decision, but from the perspective of her customers & shareholders, she was pretty damn slow on the trigger.

Google appears to have the right strategy of buying companies early in the tens of millions of dollars stage, if the technology is interesting. however, they haven't done such a great job of scaling it / rolling it out to their users (yet). Blogger should probably have been further along by now.

Yahoo has historically done lots of acquisitions, but they've tended to wait a while and acquire later after the technology has "proven itself" by showing it can acquire users (aka eGroups). however, they should be doing a better job of figuring out good technology and monetizing it themselves, rather than waiting so long.

Microsoft also only been selectively acquisitive and usually later-stage-oriented.

hard? sure. risky? definitely. but still eminently worth doing.

major portals need to think of themselves as VCs, not acquirers. invest ahead of the adoption curve, don't acquire after it. otherwise, they should be returning the cash hoards they've got to their investors as dividends.

Sean Murphy

The companies you list are all in "zero billion dollar" markets. It's hard for a company like Yahoo at a multi-billion run rate to get the acquisition integration right and foster the entrepreneurial team to a billion dollar market. Microsoft has had an even harder time with this due to their culture. It's also hard for a large company to execute multiple acquisitions in the same year: if they are done serially the price for each succeeding one goes up (partially due to the earlier purchases, but primarily due to increased competition/bidding as the other major players put in bids just to put the price up). The follow-on phenomenon is that companies get created so the "left out majors" have something to acquire in a year to two; it's also complicated by the interaction with traditional media companies who need to incorporate the new affordances that web technologies enable. Something very similar has happened in the networking space, where for a time Cisco could buy products "below market" and the traditional telcos resisted VoIP and related technologies because they were destructive of their current business models (think craigslist and classifed ads). No longer. I am not arguing that there won't be consolidation in the space, just that it would be extremely difficult for one company to execute a cluster of acquisitions and "buy the market."

Nick Bradbury

Nice to see that FeedDemon made the list, Dave :) FWIW, I'd add PubSub to the list.

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