Top 10 Worst Internet Business Deals
10.
News Corporation buys MySpace for $548 Million
In the early days of social networking one
of the major players was MySpace, which was
launched in 2003 by Chris DeWolfe and John
Carmack.
In 2005 MySpace was getting 20 million unique
visits a month, and that’s when News Corporation
(which also owns FoxNews and 20th Century
Fox), purchased the website for $580 million.
After purchasing it they were getting 70 million
visitors a month, but it was unclear if MySpace
ever made News Corp. any money.
The division of News Corp. which MySpace was
a part of only turned a profit once, and that
was thanks to Google Advertising.
In the end, News Corp. ended up selling MySpace
to Specific Media and Justin Timberlake for
$35 million in June 2011.
9.
Excite@Home Buys Blue Mountain for $780 Million
One of the first features that drew a lot
of people to the Internet was email.
The idea of instantly sending someone a letter
was an incredibly appealing idea, which is
why sending greeting cards over the Internet
seemed like the next logical step.
One of the first companies to do eCards was
Blue Mountain.
It was bought in December 1999 by Excite@Home
for $780 million, which was considered an
odd move.
While Blue Mountain did have some premium
cards that people could buy, most of the cards
were free.
Most of their revenue came from advertising
and they were getting nine million unique
visitors a month, which isn’t a lot for
a company valued at $780 million.
Even if every visitor was somehow worth $1
million (which of course they weren’t),
it would still take seven years to recoup
the money.
Two years later, Excite@Home was in serious
trouble and they sold off Blue Mountain to
American Greetings in September 2001 for $35
million, only about 4% of their original purchase
price.
8.
Yahoo!
Buys GeoCities for $2.9 Billion
During the 1990s, one of the exciting things
about the Internet was that anyone could build
their own personal page.
One of the most popular platforms to post
a free web page was Geocities, which launched
in 1994.
In 1999 Yahoo bought Geocities for $2.9 billion.
When it was purchased, GeoCities was the third
most visited webhost and had 1.1 million users.
It may have seemed like a smart investment,
but then along came social networking sites
like MySpace and Facebook.
They were much easier for posting information,
and GeoCities quickly lost traction.
In April 2009, Yahoo decided to stop supporting
GeoCities and it would no longer offer free
websites, with the exception of Japan where
it’s still in operation.
7.
AOL Buys Netscape for $4.2 Billion
Launched in 1994, Netscape was one of the
first widely available web browsers.
In fact, Microsoft created Internet Explorer
to compete with Netscape.
At one point during the mid-90s, Netscape
had 90% of the market share.
In 1999, America Online purchased the browser
for $4.2 billion, making it the default browser
for AOL users.
However, as part of AOL, Netscape was essentially
driven into the ground.
By 2007, the once mighty Netscape had lost
to Microsoft and a new competitor, Mozilla’s
Firefox.
Netscape accounted for less than 1% of the
web browser market, and AOL stopped supporting
Netscape in December 2007.
6.
Yahoo!
Buys Broadcast for $5.7 Billion
One of the most lucrative ventures on the
Internet is streaming videos.
Netflix and YouTube have proved how profitable
this can be, but one of the early pioneers
was Broadcast.com, created by Mark Cuban and
his partner Todd Wagner.
Started in 1995 as an Internet radio company,
it was one of the leading media websites by
1999.
Yahoo, which was looking to expand their brand,
bought Broadcast.com for $5.7 billion in 1999.
In theory it might have been a good idea,
but in 1999 the technology for fast streaming
video simply wasn’t there.
For live events the streaming was choppy,
while their library of movies was limited
and they took a long time to load.
Broadcast.com never turned a profit before
it was sold to Yahoo, and even after Yahoo
bought it Broadcast never took off.
In 2005 YouTube launched and became the dominant
video streaming platform, and Broadcast.com
no longer exists.
5.
Microsoft Buys aQuantive for $6.3 Billion
Looking to make money for their online services,
Microsoft purchased aQuantive for a staggering
$6.3 billion in May 2007.
aQuantive was an online advertising company,
and with the purchase Microsoft was hoping
to compete with Google and thought that they
would be “[the] industry leading, Internet-wide
advertising platform.”
That never came to fruition, and Microsoft
never made money for their online services.
In fact, they lost $10.4 billion over five
years.
In 2012, Microsoft valued aQuantive at $100
million, meaning the company had lost $6.2
billion in value in five years.
4.
Excite Buys @Home for $6.7 Billion
Before the dawn of Google there were a number
of search engines fighting for users, and
one of the front-runners was Excite.
Wanting to expand their business they acquired
@Home, a high speed Internet provider, for
$6.7 billion in 1999.
It was a horrible move from the very start.
In 2000 the company lost $7.4 billion.
They were forced to file for bankruptcy in
October 2001.
By February 2002 the company was finished
and @Home’s network access was sold to A&T
for $307 million.
Excite was bought by Ask Jeeves for only $10
million.
3.
Terra Networks Buys Lycos for $12.5 Billion
Four years after launching in 1996 Lycos was
the third most visited website in the United
States, attracting 33 million unique visitors
a month.
During their ascension, the Internet search
portal bought a number of other websites,
including Tripod, Angelfire and Hotbot.
In May 2000, Spanish telecommunications company
Terra Networks bought the portal for $12.5
billion in stock.
By 2004, Terra Networks was ready to sell
Lycos and Daum Communications Corp., which
is based out of South Korea, purchased it
for $95 million.
That turned out to be a poor investment for
them as well, because in 2010 they sold Lycos
to the Indian based Ybrant Digital for $36
million.
2.
Worldcom Buys MCI Communications for $37 Billion
Worldcom was launched in 1983 as a long distance
phone company.
In 1997, Worldcom bought MCI Communications,
which was one of the first long distance companies
in the United States to compete against AT&T.
Worldcom valued MCI at $37 billion, and the
newly combined MCI Worldcom was the second
largest long distance provider and one of
the big players in the emerging business of
providing Internet service.
At the time of the merger, Worldcom was competing
against two other offers to buy MCI and probably
overpaid.
However, that wasn’t the biggest the problem
with the deal.
The main problem was Bernard Ebbers, who was
chief executive officer of Worldcom — he
committed fraud that was valued at about $11
billion.
In July 2002 the company filed for bankruptcy,
one of the largest filings of its kind in
American history.
Ebbers was arrested and given 25 years in
prison.
MCI was able to climb out of the ashes, but
a lot of damage had been done.
They were bought for $8.44 billion by Verizon
in 2004, and while that’s a lot it’s much
less than the offers that competed with Worldcom
in 1997.
1.
AOL Buys Time Warner For $162 Billion
In 1990 Time Inc., which had over 90 magazines
including Sports Illustrated, People, Entertainment
Weekly and Time, merged with Warner Communications.
Warner had subsidiaries like Warner Brothers,
HBO and Hanna-Barbera.
In 1996, Time Warner merged with Turner Broadcasting
System, which included TV networks like CNN,
TNT, TBS and the Cartoon Network.
Altogether they formed a media giant, but
as the Internet gained popularity they were
having trouble establishing an online presence.
Meanwhile, America Online was thriving on
the Internet.
It launched in 1985, and 14 years later AOL
was one of the biggest Internet suppliers
in the world.
In January 2000, the two decided to join forces
when AOL purchased Time Warner for $162 billion.
Many people in the business world thought
the merger was brilliant; it was old media
coming together with new media.
Time Warner would get better online access,
and AOL would have access to more content
and television networks.
The merger valued the new AOL Time Warner
at $350 billion, making it the biggest business
deal in American history.
It also holds the title for the worst merger
of all time.
There were problems from the very start, and
AOL failed to progress with the times.
They were still a dial-up Internet service
when the industry was moving towards broadband.
By 2009, 10 years after the merger, AOL and
Time Warner split.
At that point AOL was only worth $2.5 billion,
which was about 10% of their worth at the
time of the merger, while Time-Warner was
worth about $36 billion.
