Technology M&A is a dangerous game. History has shown time and time again that companies can dramatically overpay for declining or just worthless assets and be celebrated for it at the time. (Just ask Rupert Murdoch, who paid $580 million for MySpace.)
Instead of lambasting those who got it wrong, we thought we’d celebrate those who got it right and show you the 11 smartest tech acquisitions of the past 5 years.
How do we measure “smartest”? We don’t. This is our own purely subjective assessment.
Who knows if AOL's Huffington Post acquisition is going to work out? That's not the point. The point is that AOL has an ambitious turnaround strategy based on becoming an online content leader, and Huffington Post is the best company in that area. Is it possible that the acquisition won't work out? Sure. Is it certain that if AOL doesn't try Hail-Mary passes like this one it'll crash and burn? Yes.
Plus, Armstrong bought the company at a totally reasonable valuation of 5X 2011E revenues, so even on financial terms the deal made sense.
Display advertising is now growing faster than search advertising, which is maturing, and DoubleClick is one of the technology leaders in that market. The fit is obvious, and display is now generating billion dollar revenues for Google.
9. The Summize acquisition not only gave Twitter a search engine, it put out the fire it was in in 2008
Twitter didn't build Twitter's search engine. A startup called Summize, which Twitter bought in 2008, did. And now search is a huge part of Twitter.
But that's not what made this acquisition great. In 2008 Twitter was down a lot because of a poor architecture and tremendous growth, and it was threatening to kill the company. Summize's cofounder Greg Pass became Twitter's VP of engineering and basically rebuilt the company's engineering architecture from the ground up, which helped Twitter scale much less gracefully, and may even have saved the company.
Many eyebrows were raised when Google bought barely-year-old, no-revenue startup YouTube for a staggering $1.6 billion. Now YouTube is the clear leader in online video by far and is worth many times that amount. It's probably not a huge moneymaker but it is an absolutely amazing asset in video, which is an ever increasing category.
But what people forget is that YouTube is also very much a 'social' site. As Google struggles with social, people should remember that they do own one of the biggest social assets in the world.
PA Semi was a maker of semiconductors which Apple acquired and integrated. Even given Apple's taste for vertical integration that was surprising.
But then the chips based on PA Semi's designs came out as the cores of the iPhone and the iPad, contributing to those devices' performance and battery life.
Perhaps even more important, PA Semi is great insurance for Apple from Intel. As HP and Dell have discovered, Intel makes the best chips but relying too much on them can be costly, and it's not clear Intel can make mobile chips that are as good as its desktop chips. This acquisition removes that headache.
Quidsi runs Diapers.com and Soap.com, for baby products and daily necessities. It turns out that it's a business which is: a) huge and b) very hard to do well.
It's very hard to do well because it involves a bunch of small items that have to be shipped quickly to the consumer, which is a logistical challenge. Because of its focus, Quidsi was actually able to do this better than Amazon. So Amazon bought them after a bit of a price war to get them to the table. Great move.
Siri was an amazing app: you told it what you wanted, and it got it for you. You could find restaurants, make reservations, book flights, etc. For many 'on the go' tasks it was much better than Google's mere web search.
And then Apple swooped in and bought them. When asked at the D Conference whether this meant Apple would compete with Google, Steve Jobs said no no no, Siri isn't a search company, it's an artificial intelligence company. That's rather like saying Google isn't a search company, it's an algorithms company.
Make no mistake, Apple is going to do something with Siri. It won't look like 'search' the way Google defines it. But it will definitely be 'search.'
Love it or hate it, Demand Media has been doing very well of late. And their biggest site by far is eHow, which has zillions of how-to guides on every topic, from the most arcane to the most ridiculous. Demand Media bought it in 2006 for an amount thought to be in the low tens of millions of dollars. Now it's probably worth hundreds of millions of dollars at least.
Call Friendfeed the ultimate talent acquisition. When Friendfeed launched, it had many innovative features and quickly got an avid early adopter userbase, though it failed to crack beyond that.
Facebook first knee-capped Friendfeed by copying its best features into its much more popular product, and then swooped in and bought the company for $50 million in cash and stock. Friendfeed's co-founder and CEO Bret Taylor is now CTO at Facebook and other Friendfeed alums have high positions inside the company.
Friendfeed positioned Facebook as not just a high-growth wunderkind but a savvy player and acquirer. If Google had bought Friendfeed, it would probably have killed it after 6 months and then everybody would have left to do more social startups.
When Amazon bought Zappos, it didn't just get the leader in the hard-to-get-right fashion market (Zappos has long been about a lot more than shoes), it also got a great ambassador for the company in the form of its visionary founder Tony Hsieh.
Hsieh would only sell if Amazon kept Zappos independent, which Amazon has been doing so far. What the acquisition says to entrepreneurs everywhere is that as long as Hsieh, who doesn't need Amazon's money, stays there, being acquired by Amazon means your dream will live on.
1. Android went from a rinky-dink startup to one of the most transformative, disruptive businesses in history
Forgive us for sounding breathless, but it's hard to overstate how powerful Android is. It is helping consumers get smartphones that are really full-featured computers. This in turn is unlocking a market perhaps even bigger than the fixed internet.
Android didn't do that single-handedly, but it plays a big part in spreading the mobile revolution by commoditizing mobile operating systems, something which Apple and Microsoft resist, and, over the long run, commoditizing carriers and device makers.
Android was a tiny startup led by Andy Rubin when Larry Page saw it and bought it. It's highly unlikely Android would have gotten so far without Google's big pockets, industry power, and disinterest in an immediate return on investment. But it's highly unlikely Google would have gotten so far without Android's vision and leader.
It's one of the most successful acquisitions ever.
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