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November 21, 2005

Bipolarization of Internet Acquisitions in 2005

In the context of recent discussions of Yahoo’s biz dev folks stating that the company is directly competing with VCs for deals, Paul Kedrosky says of Google,

“It's just that rather than buying some of the equity of early-stage, pre-revenue companies, in typical venture fashion, Google's always buys all the equity. It is a de facto and targeted form of financing for many companies, albeit narrowly available, but let's still call it what it is: venture capital.”

Yes, it appears that a trend has emerged this past year, not just with the Yahoo/Google, but with companies in this industry as a whole – the bipolarization of internet acquisitions. We’ve seen it happen over the past twelve months, so this statement is not a revelation by any means. But to crystallize it, I put together a chart below counting the number of acquisitions in various price ranges by AOL, eBay, IAC, Google, News Corp, Viacom, and Yahoo this year.

If one assumes that nearly all of the “undisclosed” prices are also under $50M, we can clearly see this bipolarization emerging. The internet acquisitions have been either small “venture acquisitions” (to Kedrosky’s point) –or– pricy purchases of companies with demonstrable viable business models (Shopping.com, ASK) or expansive reach (MySpace, Skype). As such, there has been a dearth of everything in between. There just aren’t that many companies in the $50M to $500M range being acquired by the big guys – they’re either gobbling them up early or waiting (perhaps to a fault) until these startups are too valuable to pass up.

(I’ll post some of backup data in the comments below.)

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