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.

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