The acquisition of Instagram by Facebook for a cool $1 billion has hit the headlines across the world recently – but how does the deal shape up when compared with the most expensive website deals of all time? The frank answer is that despite the fuss over Facebook’s flexing of its financial muscles, there is a long way to go for the company to match the really big spenders of the Internet sector.
The Early Years
It comes as no surprise that many of the biggest website acquisitions on record took place in the early years of the e-commerce bubble, before the sector had truly explored how to properly value its assets. Yahoo! was an early player in some of the biggest deals of the late 20th and early 21st centuries, acquiring both Broadcast.com and Geocities in 1999, for $5.7 billion and $3.6 billion respectively. It continued to spend big into the new millenium, splashing out $1.6 billion in 2003 for Overture (formerly known as GoTo). AOL also raised eyebrows with their $4.2 billion acquisition of Netscape in years gone by, while neither Terra Network’s purchase of Lycos for $4.6 billion nor @Home’s investment of a massive $6.7 billion in Excite can be said to have exemplified value for money. Perhaps the biggest howler of the first decade of the commercial Internet came with News Corp’s $580 million gamble on MySpace – a site promptly overtaken by the now ubiquitous Facebook. Microsoft’s $400 million purchase of Hotmail in 1997 seems rather more far-sighted in contrast.
The big spending did not end with the e-commerce bubble, however, and the last decade has seen some truly massive deals. Many of them dwarf the recent Instagram purchase, with the largest of the lot being Google’s acquisition of Motorola Mobility for $12.5 billion. While not strictly a website purchase, there is little doubt that Google’s new presence in the Android market will lead to a serious shake up in the sector – and perhaps in the way consumers think about web presence as a whole. Google has also had a hand in many of the other large deals of the last decade, including its purchase of YouTube for $1.65 billion, of DoubleClick for $3.1 billion, and of 5% of AOL for $1 billion.
Ebay has also featured as a heavy spender, not only picking up Paypal for $1.5 billion in order to integrate its payment methods in 2002, but also spending $1.2 billion on Bill Me Later, $2.4 billion on GSI Commerce, and $2.6 billion on Skype. The last of these has a significant purchase history, as it was picked up by Microsoft for a massive $8.5 billion in 2011. While Amazon could not match the level of these acquisitions, it nevertheless has been active in purchasing a number of well known web service providers (including LoveFilm and Audible.com), and picked up Zappos in 2009 for $1.2 billion.
Acquisitions Behind The Scenes
While website acquisitions make the biggest splash in the headlines, it is perhaps the patented technology behind them which will most indicate which of the big hitters will dominate the next decade of the internet sector. At almost the same time as the much heralded Instagram deal, Microsoft also spent $1 billion – on acquiring 800 patents from AOL, relating to advertising, e-commerce, and internet searchability. It may be that whoever has access to the most cutting edge technology will prove the canniest investor in the long run – and it is a certainty that at least some of the big money website acquisitions of the coming years will fail to produce dividends in the long run.
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