Photo: CBS 60 Minutes
What makes technology so treacherous a business is that everything changes very rapidly, markets are often winner take all, and the future is especially hard to predict. So plenty of companies do deals and acquisitions that, in retrospect, are monumentally stupid.Here are some of them.
Cost: $530 million.
When News Corp bought MySpace for $580 million, that looked like an extremely savvy play by the old media company. But due to mismanagement and Facebook, MySpace stopped growing and then kept faltering. News Corp would be lucky to get $50 million for MySpace now.
Cost: $840 million.
AOL makes more than one appearance on this list. While News Corp's acquisition of MySpace was a good bet that went wrong, there's no serious explanation for AOL's acquisition of Bebo or how much it spent.
AOL bought Bebo for $850 million and then sold it for $10 million.
Cost: $1 billion--and counting.
The story is worn by now: Dodgeball was a popular check-in app before check-ins were popular. Google bought it. Google shut it down. Foursquare's founder Dennis Crowley left Google to start Foursquare, which is basically Dodgeball 2.0. Foursquare is reportedly raising money at a $500 million valuation. So Google is probably going to have to spend twice that to get Foursquare back into its fold. Even though all of this would probably already be theirs if they'd only given Crowley free rein.
Cost: $2 billion--and counting.
Remember Jaiku? What people don't remember about this microblogging service is that it was actually growing much faster than Twitter for a while. To compete with Twitter, Google bought Jaiku. And then shut it down.
Of course there's no way to know if Jaiku would have been as successful as Twitter, but only hindsight makes that seem inevitable. With Twitter being down through most of 2008, if there had been a good alternative around maybe people would have switched en masse. Twitter is worth around $4 billion these days. With a 50% probablity that Jaiku could have beaten Twitter, that looks like a $2 billion mistake for Google.
Cost: $5.4 billion
Remember Lycos? (We're in Europe, we do.) Lycos was huge in its day, about as huge as Yahoo. It sold at the top of the bubble to the Spanish telecom conglomerate for $5.4 billion. Telefonica sold it a few years later for a handful of million.
Cost: $5.7 billion
There's no doubt Mark Cuban is a great entrepreneur who wasn't 'just lucky.' We should all wish to be equally 'just lucky.' But there's also no doubt that any value Yahoo hoped to gain by buying Broadcast.com was eliminated. Broadcast.com was the YouTube of its day: the biggest internet video site. The only problem? Back then, connections were much too slow for people to watch video online.
Cost: Many, many billions.
Most people think the iPod sprung fully-formed from the mind of Steve Jobs but that's just not true. The original idea for a cool, small form-factor MP3 player connected to an MP3 store belongs to Tony Fadell, then an independent consultent, who first pitched the idea to RealNetworks, who turned him down flat. Fadell then went to Apple, and the rest is history.
Cost: $50 billion--and counting.
After Google bought YouTube, Yahoo felt it had to make a big '2.0' acquisition. Yahoo CEO Terry Semel and Facebook CEO Mark Zuckerberg shook hands on $1 billion. It's not clear who got cold feet (one version says Yahoo's stock tanked the next day and Semel thought he couldn't afford it anymore; another says Zuckerberg raised his price at the last minute) but this one could have been pulled off with some more persuasion. Today Facebook is one of the biggest companies on Earth.
Of course, it's not sure that Facebook would have grown that big under Yahoo, but it's still a huge blunder.
Cost: $170 billion.
Google tried to sell itself to Yahoo many times. For $3 billion at one point. But for a handful of millions at the start. Why didn't Yahoo do it? Because until Google became huge, everyone thought search didn't matter. Whoops.
Today Google's market cap is around $170 billion.
Cost: $198 billion
It was probably the most value-destroying merger in history. At peak, AOL had a market cap of $240 billion. Today Time Warner's market cap is around $40 billion and AOL's... $2 billion. The rest of that money? Poof!
Cost: $220 billion
This is one of the all-time great business stories. When IBM decided to start making personal computers, they were sure the value was in hardware, not software. Microsoft thought hardware would get commoditized, not software. So when IBM asked Microsoft to make an OS for them, Microsoft asked to keep the rights to the OS and be able to licence it to other makers. IBM said sure. And they handed them the most valuable technology franchise in history: desktop operating systems. Today Microsoft is a $220 billion market cap company. Ouch.