Back in November 2006, I published the Top 10 Greatest Internet Digital Media M&A Deals of All Time. It included eBay’s $1.5 billion acquisition of PayPal, Yahoo’s $1.6 billion acquisition of Overture, and Microsoft’s $400 million purchase of Hotmail back in 1998. It also included News Corp’s $580 million acquisition of MySpace. Don’t laugh. The list was published a month after the big $900 million deal with Google, which I thought Google had drastically overpaid for at the time. Of course, times they change, as does the list, so I decided to update the list – and yes, I went through all 255 pages on the Acquisitions section of CrunchBase.
Below is my updated list of the Top 10 Greatest Digital Media M&A Deals, in reverse order. Give me your top ten in comments.
- Lists are subjective, this one isn’t any different.
- Suffice to say these are U.S. deals.
- This is not a “tech list”, 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. As Fred Wilson mentioned when I first published the initial list, “Seven of the eleven deals were done in the “Internet doldrums” of 2001-2004. It will always be true that the best time to buy is when nobody else is buying.”
- 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 are excluding acquisitions by private equity firms, otherwise Hellman & Friedman’s acquisition of Doubleclick for $1.1 billion before selling it to Google for $3.1 billion would rank near the top.
- As with the original list, we’re avoiding partial acquisitions. That is why Google’s 5% investment in AOL for $1B would didn’t make the initial list (it was a very smart defensive move) and why Silver Lake and Andreessen Horowitz’s 70% acquisition of Skype didn’t make the cut on this updated list (that could have been #1, seeing how they flipped it to Microsoft for $8 billion within 2 years). Microsoft’s 1.6% stake in Facebook also seems like a bargain now.
- They have to matter in 2011: for example, while AOL’s acquisition of ICQ to defend AIM and bolster its instant messaging platform was wise, today AIM holds a 1% market share, so the deal doesn’t really resonate anymore.
- Last but not least: like with all lists, I am sure I am forgetting a big one, so chime away.
10. Microsoft acquires Hotmail for $400 million in 1998
The previous year Yahoo! had acquired Four11 for $92 million, by countering with a $400 million acquisition for Hotmail, Microsoft bought its way into the first truly viral application: email. Not only did Hotmail users lead one another to sign up, but as users signed out of their email, they were redirected to MSN.com.
Ironically, this deal has made both “Greatest” and “Worst” lists. But even as of today, Hotmail is the largest web-based email service and remains larger than AOL, Yahoo and darling Gmail. (How many accounts are active is a fair follow-up question).
More on this deal here.
9. AOL Time Warner acquires Advertising.com for $435 million in June 2004
Despite wiping out nearly $100 billion in market value by way of the disastrous AOL and Time Warner merger, AOL convinced the board to acquire Advertising.com in 2004 for $435 million. Without a doubt Advertising.com isn’t driving AOL’s revenues the way it once did, but were it not for this deal, AOL would be in much worse shape than it is today.
More on the deal here.
8. Amazon Acquires Zappos for approximately $928 million in July 2009
Were it not for the RIP Good Times presentation that Sequoia gave its portfolio company CEOs in late 2008, it’s entirely possible that Zappos would still be independent. But the fact remains, Jeff Bezos met his match in Zappos’ CEO Tony Hsieh on the customer satisfaction front. By scooping up Zappos, Amazon basically acquired the lone threat in the e-commerce landscape.
7. CBS Acquires CNET for $1.8 billion in May 2008
Yes, CBS paid a lot, but at 4x revenues in early 2008, it didn’t have much choice; CNET represented the only property/company that could give CBS overnight scale: becoming a Top 10 property. And sure, had CBS waited a few months, it could have paid half. But that’s hindsight, and this is M&A. I laid out the logic of this deal a couple of months before it closed. Also (disclosure), my company could have been part of this entity as we had strategic conversations with both CBS and CNET before they hooked up.
6. Google Acquires Doubleclick for $3.1 billion in April 2007
Yes, $3.1 billion is a very expensive price tag—especially considering private equity firm Hellman & Friedman paid $1.1 billion earlier—but Doubleclick has helped Google become a display banner juggernaut. It was money well-spent.
5. Google Acquires Applied Semantics for $102 million in April 2003
In my original list, I had chosen Google’s acquisition of Sprinks in October 2003 because overnight this deal gave Google a lot of real estate on third-party websites to serve its text link ads on. However, it was the Applied Semantics deal that gave Google the technology to scan web pages and serve contextual ads, thus giving birth to AdSense.
4. Yahoo! acquires Overture for $1.63 billion in July 2003
After Yahoo! acquired Inktomi for $235 million in December 2002, CEO Terry Semel pulled the trigger on Overture (formerly GoTo.com). The deal not only gave Yahoo! an inroad into the rapidly growing paid search business but served as its lifeline to stay in the black.
More on the deal here.
3. eBay acquires Paypal for $1.5 billion in 2002
eBay dropped its Billpoint product and agreed to acquire Paypal for $1.5 billion. Considering that about 60% of PayPal’s business came from eBay, you have to wonder why eBay didn’t apply some pressure to bring down the price, but the fact remains: PayPal drove eBay’s revenues and is now clearly the most exciting part of the business. The deal also gave rise to a whole generation of Internet entrepreneurs and investors who went onto found or invest in companies such as Facebook, LinkedIn, and Yelp.
More on the deal here.
2. Google Acquires Android for $50 million in August 2005
Google’s own M&A team credits Android as their best deal ever: David Lawee, told attendees at the Stanford Accel Symposium that the acquisition was quite simply Google’s “best deal ever.” Android only cost Google around $50 million, and considering that Android founder Andy Rubin, who previously started mobile-device maker Danger Inc., stuck around to take on RIM and Apple, it clearly deserves a top spot.
1. Google Acquires YouTube for $1.65 billion in October 2006
David Lawee might be reading this and scratching his head: what can possibly convince someone to pick YouTube ahead of the deal that Google’s own M&A team picked as the “best deal ever”?
Google bought YouTube for $1.65 billion in stock and within the first few days saw its market valuation rise by well over $2 billion. By doing so, it inadvertently blocked its only true threat as a search engine by scooping up what was to become the No. 2 search engine in the world. It can be argued that every 1% search market share is worth $1 billion.
If that wasn’t enough as a defensive move, YouTube gave Google an entry into display advertising (this was six months before the Doubleclick acquisition) and billions of additional pageviews to serve Google search ads on as overlay on the videos. Today, Google is the undisputed king of both search and video, and thanks to Android, it can claim to lead in mobile as well.
But this misses the point, were it not Android, it could be argued that Google would have found something else (internal or via acquisition) to do what Android does. Google made Android into what it is today. However, YouTube was a force to be reckoned with and at the time of the acquisition the most explosive startup ever. Sequoia had only poured $11.5 million of venture funding into the company. YouTube had the runway—forget what Mark Cuban says, he did after all sell Broadcast.com for $5.7 billion to Yahoo—to become a threat the way Facebook has become a threat. By buying YouTube, Google scorched the earth in online video.
It’s YouTube’s world, we just stream it.
Hope you enjoyed this week’s article. Suggest topic ideas for upcoming weeks.
Image credit: Shutterstock/ Ilona Baha