5 social media deals that make Waze and Tumblr seem like steals

Tech companies' spending billions of dollars on up-and-coming social sites is nothing new, but a few past deals might surprise you.

Google buys Waze. Yahoo buys Tumblr. Facebook buys Instagram.

Three recent social-media deals highlight a strange phenomenon: The US$1 billion app that makes no money. It seems ridiculous at face value--how can cat GIFs and photo filters be worth that much?--but I took a look at tech's recent history to put these deals into context. Some of these gems might surprise you.

1999: Yahoo buys GeoCities for $3.6 billion

Yeah, you read that right. $3.6 billion. Tumblr seems like a steal in comparison. At the time, GeoCities was the number three most-visited website on the Internet, just behind AOL and Yahoo. In fact, Yahoo acquired GeoCities because of its popularity as a personal publishing platform, back when personal websites (or blogs, as we now call them) were your Internet calling card. After the dot-com bubble burst and free (or cheap) Web hosting became de rigueur, GeoCities quickly slid downhill. Yahoo at last ended the site's suffering in 2009.

Yahoo spent a ton of money in 1999, as the company also acquired streaming-media site Broadcast.com for $5.7 billion. It's being decidedly more conservative under Marissa Mayer's leadership.

2006: eBay buys Skype for $2.5 billion

Meg Whitman, eBay's then-CEO, dreamed that the auction site's buyers and sellers would turn away from email and instead chat over Skype. That never happened. The company took a lot of heat for allowing Skype to languish, but the video-calling platform managed to fare just fine. Microsoft snagged Skype for $8.5 billion in 2011, and today it's still one of the most popular services around.

2006: Google buys YouTube for $1.6 billion

In retrospect, the most surprising aspect of the Google-YouTube deal is how little Google paid for the online video company compared with other big acquisitions of the same period (see: eBay-Skype). At the time, YouTube's $1.6 billion price tag seemed steep. The site was far from a money-making enterprise, and critics doubted its long-term potential.

But Google stayed the course. Instead of folding YouTube into Google, the search behemoth let the fledgling online video site retain its quirky community and grow into the top online video platform. The popularity of online video shows no signs of diminishing: According to comScore, 182 million Americans watched some 41 billion videos online last month. YouTube ranks toward the top of the Internet's most-visited sites. Now that $1.6 billion seems almost like a bargain.

2008: AOL buys Bebo for $850 million

AOL's $850 million acquisition of social network Bebo in 2008 seemed like pocket change for the media company, which in 2000 had spent $164 billion to acquire Time Warner. But the Bebo deal turned out to be a disaster. (The Time Warner deal was also a catastrophe.)

Bebo, once an incredibly popular site that competed with MySpace, proved that not every early social network could scale for the long haul. Bebo couldn't begin to compare to Facebook or Twitter as the years passed. In 2010, AOL dumped the site in a $10 million sale. Bebo filed for bankruptcy last month.

The deal that never was: Yahoo's $1 billion bid for Facebook

In 2006, Facebook hadn't yet cracked 10 million users. It had just opened the doors to regular folks after building networks of college students. And it was fending off Microsoft and Viacom, each of which wanted to buy the site for some $750 million.

Yahoo, desperate to gain access to the community of 18- to 24-year-olds flocking to Facebook at the time, reportedly made two overtures for the social network in 2006. But the social networks that sold out early (MySpace, Bebo) struggled to grow within corporate conglomerates. CEO Mark Zuckerberg decided to go it alone.

Now Facebook is one of the top tech companies in the world, competing with Yahoo to acquire other startups (see: Tumblr). Though each of the major players, including Facebook, Google, Microsoft, and Yahoo, began as a specialised service--social network, search engine, software provider, and Web portal--they are gradually overlapping with forays into maps, photo-sharing, and more.

That's where the $1 billion app comes into play. Sharing platforms, location-based data collections, and search tools are key to growing a well-rounded tech company (and getting those sweet, sweet ad dollars). If an app such as Waze or Instagram can deliver tens of millions of users along with their tech innovations, however small they might be, suddenly $1 billion becomes the market price--if for no other reason than Facebook, Google, and Yahoo don't want each other to have that app. Whether Waze or any of the other $1 billion apps proves to be a YouTube-type bargain or a Bebo-type bust remains to be seen.

Join the newsletter!

Or

Sign up to gain exclusive access to email subscriptions, event invitations, competitions, giveaways, and much more.

Membership is free, and your security and privacy remain protected. View our privacy policy before signing up.

Error: Please check your email address.
Show Comments

Latest Videos

More Videos

Modernization on marketing to promote products and business is really a big leap especially the age of social media. Thanks for sharing s...

Brayden Manchee

How National Tiles used digital personalisation to deliver 15 per cent of revenue online

Read more

Great write-up. I wrote an article about ASMR as well and the top ASMRtists:https://medium.com/illumina...

Dexx Mason

ASMR: Flash in the marketing pan, or something more?

Read more

Nice to be visiting your blog once more, it has been months for me. best mp3 converter

Yolanda R. Skillman

Melbourne Fashion Week: Using digital and insight to drive engagement and attendance

Read more

Typically I visit your web journals and get refreshed through the data you incorporate yet the present blog would be the most obvious bes...

Yolanda R. Skillman

What automated design is going to do to 3D printing and product customisation

Read more

I am overpowered by your post with such a decent theme. best mp3 converter

Yolanda R. Skillman

Report: Accountability key to marketing's influence in business

Read more

Blog Posts

Why direct response advertising is winning this year

In response to the COVID-19 crisis, brands around the globe are going into hibernation and waiting out the ongoing storm. CMOs have dramatically slashed their budgets across every single form of media, digital included.

Sabri Suby

Founder, King Kong

Taking back control of your tech

To win in customer experience, brands need to take back control of their technology.

Michael Titshall

VP, managing director, R/GA Australia

Brands with internal customer insights capability will survive and even thrive

According to The Australian Bureau of Statistics, two-thirds of Australian businesses across all sectors have reported taking a hit to revenue or cash flow due to COVID-19. About one in 10 said they have paused trading altogether. In 70 per cent of cases, this was due to COVID-19.

Pip Stocks

CEO of BrandHook and founder of Hearsay

Sign in