The Ten Best Internet Acquisitions Ever

by: Ashkan Karbasfrooshan

After reading the Ten Worst Internet Acquisitions Ever (my commentary) and Part 2, I could not help but come up with this list and offer you the following ten “best” Internet acquisitions of all time.


- My background and experience lies in search, video and online advertising, so naturally there is a skew there.  Surely there is a skew towards these sectors in this list.
- Expensive is relative, but not overpaying is a major criteria.
- 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 competitor?  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’re avoiding partial acquisitions, otherwise Google’s 5% investment in AOL for $1B would be high on this list, for defensive purposes.
- Also, we will try to avoid speculation: ie. YouTube/Google is way too young to really be judged.
- To avoid a disclosure-laced post, all disclaimers, FYI, etc. are posted at the end.
- Last but not least: like with all lists, I am sure I am forgetting a big one, so feel free to comment


#11 - Honorary Mention: Yahoo! (YHOO) acquires Yoyodyne in 1998 for $39 Million

yoyodyne logoThis one makes the list because it was a cheap deal securing blue chip clients in an era of insanity.  It also paved the way for Yahoo! to become the online media property with the best client list amongst Fortune 500 advertisers and global agencies.

Back in October 1998, Yahoo! was the high flying Internet stock with a share trading above $110.  On October 13th, it announced that it was acquiring Yoyodyne, an interactive marketing agency and direct marketing services firm whose clients included America Online, American Express, H&R Block, Microsoft, Netscape, Procter & Gamble, Sony Music, Sprint and Volvo.  Yahoo! solidified Seth Godin’s place in Web lore and having paid the acquisition in stock, went on to recoup the investment many times over.

For Yahoo! to secure blue chip clients like that back in 1998 for less than $40M, this one gets a honorable mention. 

Additional sources here.


#10 - aQuantive (AQNT) acquires Razorfish for $160M in June 2004

What makes this even more impressive is that SBI had previously bought Razorfish for a paltry $8.2M in November 2002.  In other words, SBI’s return on its Razorfish was a mind-numbing 1,852% in a mere 18 months.  But, the last laugh will go to aQuantive, who accelerated its strategy of profiting from the shift of marketing dollars to the Web.  Today aQuantive is a $1.5B market cap company and a potential acquisition play by companies ranging from Microsoft to Google who want to ride the wave.

Razorfish might have long lost its dot com boom luster, but it had not lost the marquee client list and online know-how.  If I am so bullish on aQuantive, it has as much to do with the Razorfish legacy than Atlas, Avenue A or other units.

Additional sources here.


hotmail logo#9 - Microsoft (NASDAQ:MSFT) acquires Hotmail for $400M in 1998

$400M is a lot of money to pay for any company, let alone a free email service firm, especially when Yahoo! had acquired Four11 for $92 million previously.  But, Yahoo! was an Internet company, Microsoft was a software company who thanks to their visionary founder missed out on the Web’s first hoorah.  So it viewed acquiring Hotmail for $400M as it cost of admission for its late entry online. 

While the amount is clearly high, the fact remains that Hotmail - one of the most successful viral plays ever - allowed Microsoft to access a web audience quickly.  Every time someone logged off of Hotmail, there they were, on  Today is a leading Web audience, and a large chunk of that credit goes to Hotmail.  For that, Hotmail was a wise acquisition, especially for cash rich MSFT.

Additional sources here.


#8 - Ask Jeeves (IACI) acquires Interactive Search Holdings for $343M in March 2004

Before the hate mail starts, allow me to explain: when Ask Jeeves paid $343M for ISH, many people viewed it as a return of the good times.  But unreasonable those times were not.  The deal amalgamated a number of popular sites and search services, including iWon, MyWay (way…), Excite, My Way, My Search, My Web Search and the MaxOnline advertising network, under Ask Jeeves’ networks.  CEO Steve Berkowitz added: ”This acquisition will double our market share, enhance our ability to compete in the fast-growing search market, and is expected to increase the financial returns to our shareholders.” 

The key was “double.”   In October 2003, Ask Jeeves represented the 28th largest network as measured by overall traffic by comScore Media Metrix, while the Excite Network (consisting of Interactive Search’s Excite and iWon properties) held the number nine spot.  Interactive Search had approximately 700 million searches in the fourth quarter. This compares to 680 million searches on Ask Jeeves’ proprietary sites during the same period. 

The stock market loved the deal, pushing Ask Jeeves stock up.  Of note, Ask Jeeves only used $150M of cash, yet a year later, Barry Diller’s InterActive Corp. bought Ask Jeeves for a whopping $1.8 billion.  The butler had reason to be excited…

Additional sources here.


#7 - eBay (NASDAQ:EBAY) acquires Paypal for $1.5B in 2002

There are smart deals and then there are the no-brainers: eBay acquiring Paypal was a no-brainer.  When the online auction company swapped 0.39 share of its stock for each outstanding share of PayPal, it effectively bought the leading Internet payment service in an effort to simplify online buying and selling on the largest auction site.

PayPal appeals to consumers by offering the convenience of multiple payment methods through its easy and secure online wallet.

“eBay and PayPal have complementary missions. We both empower people to buy and sell online,” said Meg Whitman, president and CEO of eBay. “Together we can improve the user experience and make online trading more compelling.”

Following the deal, PayPal continued to operate independently but eBay said it will phase out its Billpoint pay system when the PayPal acquisition becomes final. 

Billpoint?  Never heard of it.  That was the problem.  About 60 percent of PayPal’s business came from eBay, and on eBay most people used Paypal.

Were it not for Paypal, eBay would today look like a far more mature business than it is.  But with eCommerce rising more than ever, Paypal drives eBay’s top line faster than you can check out online.

With nearly 123 million accounts globally, PayPal is the number one online payment service in the world, contributed 24% of Q3 2006 total revenue.  During the quarter, PayPal’s total payment volume grew by 37% year-over-year to $9.1 billion.

This deal would place higher; considering how much eCommerce continues to grow, this could easily be Number 1, but $1.5B is a lot of money so right now, it’s #5. 

Additional sources here.


#6 - AOL Time Warner (NYSE:TWX) acquires for $435M in June 2004 logoA funny thing happened in 2004, Time Warner suffered from amnesia.  Well, sort of.  After the merger between AOL and Time Warner managed to wipe off a massive $80B in market value, you would think that the brass at Time Warner would never want to hear the words “you’ve got Web.”  But somehow, that is exactly what happened when bought in 2004 for $435M.

Rumors were widely circulating that was contemplating an IPO.  Maybe that added some motivation to AOL’s management team, who pulled a deal similar to Yahoo’s acquisition of Overture but in the display realm of advertising: pairing an online publishing company with a marketing services firm.  AOL will be able to deploy’s technology across its network and effectively sell inventory on other publishers’ sites.

Said Joe Germscheid, a media buyer with Zentropy Partners: ”I’m excited about it. It’s one of those ‘if you can’t beat ‘em, buy ‘em,’ deals. It will be a great thing for the whole AOL group.”

The deal was accretive from the get-go: Kevin Lee, CEO of search engine optimization firm, said, “The first thing that struck me about the deal is that because has so many advertisers in their system, it’s an easy way for AOL and its parent Time Warner to monetize their content. They can grow that way, by maximizing their inventory.”

Today, generates the lion’s share of’s revenues, and we know how well things are finally going at Time Warner’s Internet division.  For example, in Q3 2006, revenue at, a division of AOL that operates as a display ad network selling ads on a large number Web sites, grew 90 percent.  Admittedly, this one could easily be higher but the ones that did place higher had more upside to the parent than this one did (in other words, a few alternatives to could have had roughly the same impact; yes, I know, that’s worthy of discussion).

Additional sources here.


#5 - Yahoo! (YHOO) acquires Inktomi for $235M in December, 2002

Two days before Christmas 2002, Yahoo! gave itself a long overdue gift: its own search technology.  After being known for search (well, directory really) and giving that lead up to Altavista first and then to Google next, Yahoo! decided to stop using Google’s search results and acquired Inktomi in order to develop its own search algorithm.  Frankly, the deal was well overdue, and considering that the high flying Inktomi was once worth billions, the $235 million price tag was reasonable in giving Yahoo! the first building block to enter the lucrative search industry - the proper way…

Inktomi was one of the first search darlings, launching in 1996 and specializing in algorithmic Web search technology.  But like everyone else, Inktomi - who never had a consumer site - lost key accounts to Google.  Ultimately, it viewed a sale to Yahoo! as the best route. 

Inktomi gave Yahoo! its pay-for-inclusion technology, a rapidly growing space in the search market that allowed Google to scale in revenue. 

Additional sources here.


#4 - Yahoo! (YHOO) acquires Overture for $1.63B in July, 2003

If Google is the King of Search today, it is not because Google built a better search engine, it is because Yahoo! - the leading media property on the Web - decided to power its search function using Google.  In effect, the rising tide helped Google add to its work-of-mouth success and become the biggest and baddest (bad is good) search engine out there.  By the time people wised up to how good Google’s financials were, it was bad news for Yahoo! (bad is bad, here).

Yahoo said the deal will allow it to expand its pay-for-performance search business and to expand contextual advertising throughout its network.

Coming on the heels of the Inktomi deal, this deal allowed Yahoo! to take on Google head on, said Chief Executive Officer Terry Semel: “the deal gives Yahoo a greater ability to market itself to small and medium-size advertisers, Yahoo now owns all the crucial elements of an end-to-end search offering.  Consumers will benefit from more relevant messages, and marketers from more effective results.”

The love fest continued: Forrester Research analyst Charlene Li said the Overture deal is significant in that Yahoo has essentially filled out its portfolio for marketers, specifically around branding and the paid search market.

Incidentally, while the deal surprised some, “it was really a question of who was going to buy Overture–Yahoo or MSN,” according to Li as Overture’s distributors generated almost all of its revenue: Yahoo and Microsoft’s MSN Web portal together accounted for 54 percent of its sales in 2002.

The next year, Yahoo! doubled profits, with the source being largely from paid search.

Additional sources here.


#3 - Google (NASDAQ:GOOG) acquires Sprinks in October 2003 logoBefore Google went public and everyone knew how profitable they were, Google pulled off one of the least covered, yet most impacted deals in the history of the Web.  Google acquired publishing company Primedia’s paid listings unit, Sprinks, which was a part of the About network.  It also signed Primedia and About to a four-year search and contextual advertising agreement.  Financial terms were not disclosed and Primedia executives declined to comment much on the deal.  But to insiders in the search and online publishing industry, it was clear that Google’s ambitions were far-flung. 

The deal called for Google to become the exclusive provider of contextually targeted and search advertising across the 450 Guide Sites and the Web sites for most of Primedia’s Consumer Media and Magazines Group. The group includes many of the magazine publisher’s 250 magazines, which include Motor Trend, Automobile, New York, Fly Fisherman and Creating Keepsakes.

Sprinks’ main strength - and opportunity - was its superior ability to serve relevant ads on content pages. This is something Google provided via its AdSense program, and rival Overture, now owned by Yahoo, also offered.

Google acquired Sprinks and essentially shut it down.  It was one of the boldest moves from the folks at Mountain View.  Just before going public and filing to go public, mind you.

It acquired great technology, inventory and took out a competition.  Brilliant. 

Additional sources here and here.


#2 - New York Times (NYSE:NYT) acquires for $410M in February, 2005

Most newspapers are stuck in a rut these days.  Their print divisions are losing subscribers, advertisers are bailing, but if everything goes according to plan, that won’t be the case with the New York Times.  This is not to say that the Times does not have problems, it does, like all newspaper companies.  But its future it far brighter than its brethren.

Along with their flagship newspaper, the Times owns the Boston Globe, the International Herald Tribune, 16 regional newspapers, 8 television stations and 2 NYC radio stations.  It also publishes nearly 40 unique news related websites., which had been bought by Primedia in late 2000 for $690M.  Primedia decided to adopt the backwards strategy of ”buy high, sell low” and put the popular “Human Web” network for sale in 2004.  As a side note, between the Sprinks sale for “sums undisclosed” and this one, Primedia might have been old media’s answer to, well, CMGI.

What makes the NYT’s acquisition so smart is that online empires Google, Yahoo, Ask Jeeves and AOL were all interested.  In any one of their hands, it would have made the new garde stronger and further weakened newspapers.

Instead, it is the silver lining in the NYT’s company: for example, in the 2005’s Third Quarter, earnings fell by half at the New York Times Co., held back by surging paper prices and tepid ad growth.   But the company’s top line benefited considerably from the addition of, which saw ad sales rise 67% in the quarter.

For what newspapers should be doing, click here.

Additional info here and here.


#1 - News Corporation (NASDAQ:NWS) acquires MySpace-parent Intermix for $580M in May 2005

I tried long and hard to find a better deal; I hope this does not come across as bandwagon jumping, kool aid drinking but numbers speak volume, and $900M is a big number to overlook. 

Forget that RBC’s Jordan Rohan said that MySpace could be worth $15 billion by 2010.  That’s analyst self promotion.  Forget that Rupert Murdoch said he pegged MySpace’s value at $6 billion.  That’s the talk of a shrewd businessman (if anything, such talk suggests that FIM is worth more separate than combined, for our previous analysis, click here). 

Let me say clearly: News Corp.'s acquisition of MySpace is the best Internet acquisition ever because thanks to it, Google paid News Corp. $900M in a search deal.  Sure, that money also includes other Fox Interactive Media assets such as (the other $500M+ acquisition News Corp. made in 2005),, RottenTomatoes,,, etc., but no way would Google have paid so much were MySpace not on the table.

One of the most recent Web acquisitions, in May 2005 News Corporation acquired MySpace’s parent Intermix for $580 million.  At the time, like many deals, people were suspicious of the parent company, crown jewel and acquisition price.  But MySpace went on to triple in size, News Corp. hired a Traffic Cop to clean up the site of sexual predators. 

Recently, News Corp. sold off all of Intermix’s non-MySpace assets back to Intermix Chairman Richard Rosenblatt, to the ire of Intermix founder Brad Greenspan.  Architect Ross Levinsohn resigned and like he has many times before, Rupert Murdoch re-engineered his global, diversified media company into an online machine, striking a mammoth $900M ad deal with Google.

Lastly, for what it’s worth, in 3 or 5 years (when the social networking craze calms down), if I were to duplicate this list, there is a 50-50% chance that IGN - and not MySpace - makes this list.



I own aQuantive and Yahoo! at the time of writing. 

And, technically, despite them losing Round 1, there is an ongoing litigation to mention: News Corp. was my former employer from Sept. 2005-Dec. 2005 after they bought their other half a billion dollar baby, IGN, for whom I worked for from June-Dec. 2005 after they bought my then employer… and when they are not busy throwing goodbye parties for Ross Levinsohn and Mark Jung, they are suing me and our company (even though we don’t compete and I am not violating my non-competition agreement - and they know it).