10 Tech Deals that Defined the Decade – Part 2

In the previous entry, we looked at the deals 6 through 10 and found ourselves seeing the rise of China and the mainstreaming of blogs in that batch of deals. It is now time to look at what the top 5 most defining tech deals of this decade were.

5. MySpace acquired by News Corp

In the age before the rise of Facebook, MySpace was the new behemoth in the social network space. Earlier players (sixdegrees.com, friendster) had appeared and faded but MySpace seemed to be on a never-ending growth trend. When NewsCorp offered US$580 million for the company in 2005, it looked like an outrageous amount of money and a few people claimed that the founders could have received more money if they had held out.

It is possible that MySpace could have grown into something even bigger but, under NewsCorp’s umbrella, the company seems to have had a hard time keeping up with the competition. The rise and multi-billion dollar valuation of Facebook seems to illustrate what could have been, had MySpace remained independent but, on the other hand, the fall of friendster might also have served as a potential scenario.

Either way, the deal established the concept of social network sites as here to stay.

4. YouTube acquired by Google

It was a deal that brought back many fond memories of the bygone dotcom era: a small company with no revenue and no business plan in place getting acquired for US1.65 billion. Google’s acquisition of YouTube in 2006, the largest in its history, ended up being an outlier in terms of outsized deals in the Web 2.0 space.

But it did establish consumer-created content, and online videos as two important trend in the internet space. In one felt swoop, the deal put on a spark to the online video space and, while the company has had to contend with issues around illegal videos being posted to its site, forced video content producers to start thinking about online distribution strategies.

That deal can be seen as the grandfather of Hulu, iTunes and Amazon’s video offering, as well as Netflix on demand.

3. Apple and AT&T partnership

Sometimes, a partnership is more important than an acquisition. In the case of this deal, having AT&T, one of the most traditional telco vendors, agree to major concessions in order to get its hand on a coveted new phone was revolutionary: in a world where carriers traditionally decided what software was running on the phone and what sites could be accessed with it, AT&T let Apple make all the design decisions, open up the deck to external developers, under some levels of control, and provide access to any site on the internet.

From the moment the iPhone was announced, it looked like a winner. It helped move more people to GSM-based networks, allowing for more interesting phones to enter the market. The 2007 partnership heralded a new age of competition and innovation in the mobile space, delivering, for the first time, on some of the promises that had been made around that concept for well over a decade. It also forced carrier to rethink their own business models as the heavy loads of traffic generated by the 3rd and 4th generation of the device defied the predicted usage patterns and forced mobile providers to upgrade their network.

2. Time-Warner acquired by AOL

Whether a deal is good depends on the side of the table one sits on. The January 2000 acquisition of Time-Warner by AOL was great for AOL shareholders and turned disastrous for Time-Warner’s. Playing on the fear instilled in media companies by the success of dotcoms left and right, AOL managed to engineer a deal where most of the shares of a merger would go to its shareholders.

Ultimately, the deal became a disaster for all parties involved as the attempt at finding synergies between the two companies found themselves bumping against the cold reality of political warfare and corporate protectionism. With units fighting against each other for most of the decade, the only way to reclaim the piece was to spin-off AOL, 9 years later, for less than 1 percent of the combined value of the two companies in 2000.

If there is a bigger example of destruction of financial value by a deal, I’m not aware of it. Ultimately, the importance of this deal is two-fold: first, it was the last big deal of the dotcom era and can serve as the marker for the end of that era (some might quibble that the stock market didn’t fall apart until about 6 months later but that’s just a detail). The deal also showed that expertise in online and not online are not necessarily compatible. Both require different business models and experts who understand the particulars of each market.

1. Google acquires Applied Semantics

The number one tech deal of the decade is probably going to be a contentious choice as it is also one of the smallest deal on a financial basis. Google acquired Applied Semantics in 2003 for a bit over US$100 million, most of it in stock. What did Applied Semantics do? Well, to put it quite simply, it did contextual text-based advertising. The company’s work serves as the base for Google’s AdSense program, which delivers roughly half of Google’s ad revenue. I would argue that, without this acquisition, Google’s advertising reach would not have extended as far as it did and that this acquisition serves as one of the largest drivers of revenue to the company and its key differentiator against other online ad offerings.

Because AdSense has been such a substantial engine of revenue Growth for Google; because it was developed by an outside company most people haven’t heard off; because Google is now one of the most important players in the tech space, dictating and directing trends in our industry;  I would say that this is the single most important tech deal of the decade.

About the Author

Tristan Louis

Writing and working on the internet since 1993, I've launched six companies, of which two went public and three were sold. This is my personal site and all opinions here are mine.

  • http://polymash.com/ JB

    Nice write up!

    Timely also, with the recent MSNBC TV special entitled “Inside the mind of Google”, which would support your view on the importance of “AdSense” and the Applied Semantics acquisition as your no.1 choice.

    You should do a TNL Predicts piece on “10 Tech Deals that will define the NEXT decade” :)

  • http://polymash.com/ JB

    PS, “Inside the mind of Google” http://www.cnbc.com/id/34039290

  • http://searchengineland.com Danny Sullivan

    Google AdSense wasn’t developed by Applied Semantics. Google had its own contextual ad product that rolled out before Applied Semantics was purchased, in February 2003. In April of 2003, it bought Applied Semantics. Applied Semantics had a program called AdSense that was later merged into Google’s system, and Google adopted the AdSense name for its own contextual product.

    Actually, AdSense isn’t the name of contextual ads. Those are AdSense For Content (versus AdSense For Domains & AdSense For Search). AdSense is the general name used to mean any program that publishers can sign-up for, to carry ads (while AdWords is the common name that advertisers use to place ads through Google to show up targeted to search, contextually or in other ways).

    In short, getting Applied Semantics helped Google with contextual ads, but Google was already delivering these before the purchase. It certainly didn’t rip out its own systems the day after the purchase happened, either.

  • http://www.tnl.net/blog/ Tristan Louis

    Danny,

    Fully agree that Google was delivering contextual ads but, at the time, it was only on their site. The technology from Applied Semantics allowed them to expand their inventory beyond their own properties (in what is known as Adsense for Content today). Google’s own press release about the acquisition highlighted

    Applied Semantics’ products are based on its patented CIRCA technology, which understands, organizes, and extracts knowledge from websites and information repositories in a way that mimics human thought and enables more effective information retrieval. A key application of the CIRCA technology is Applied Semantics’ AdSense product that enables web publishers to understand the key themes on web pages to deliver highly relevant and targeted advertisements.

    Considering what they were saying at the time and what AdSense came to become, it seems pretty clear that Google did rip out their existing technology and replaced it with what they got in this acquisition.

  • http://www.tnl.net/blog/ Tristan Louis

    JB,

    Thanks for the suggestion on future post. The challenge on doing the deals that define the next decade is that many of the companies involved in those deals may not exist yet.

  • Tony Touch

    I am waiting for the top 10 tech busts (deals) of the last decade

  • http://www.tnl.net/blog/ Tristan Louis

    Tony,

    Maybe you should look at deal #2 on this list. Pretty big bust, as far as I see it :)

  • http://www.paulcampy.com Paul Campy

    Nice roundup and I agree, #1 is the significant ‘sleeper’ in the list.