Anyone miss the blackened fingers from reading your daily newspaper to get your news in the morning?
Any urbanites out there reminiscing about folding the paper into columns so you could read the newspaper while strap hanging on a roller-coaster-like subway ride?
When did we stop getting our daily dose of news from tree pulp?
Excite was launched in 1995, think of it as another Yahoo. A person could get news, weather, a search engine, email address, instant messaging, stock quotes and a customizable user homepage. Excite was the 4th most visited website in the world. Excite even negotiated a deal with AOL, where AOL agreed to make Excite its exclusive search and directory service. DOJ Antitrust Unit is still preparing the briefs on that one. If you remember AOL and how big it was at the time, this deal was a massive win for Excite. In ’99 Excite was acquired by @Home network. This merger of two internet tech companies was one of the biggest for its time and was supposed to change the game. After the merger Excite was so enormous it was even sponsoring an Indy car driver. As the adage goes…Win on Sunday, Sell on Monday!
The merger ended up being a disaster. Online advertising plummeted while Cable network and internet revenue stream went up. As an aside, Comcast and Cox Cable came out of the Excite and @Home Merger. Less than 2 years after the merger, Excite@home had to file for bankruptcy and ended up selling its high- speed fiber network to AT&T.
This is where the story as current day relevance. According to legend, before the Excite and @Home merger, two graduate students named Sergey Brin and Larry Page decided that their little side hustle known as Google was taking up too much of their study time. They went to Excite and offered to sell it Google for a million bucks or so. Excite declined the offer. Oops.
Vinold Khosla, a venture capitalist for Excite, then negotiated for Brin and Page to sell Google to Excite for $750,000 and Excite CEO George Bell still rejected the offer. Apparently, Page and Brin’s stipulation to replace Excite’s search technology with Google was a deal-breaker. Double Oops. Today Google is valued with 9 zeros and is one of the titans of the tech industry. Excite is surprisingly still around but is not overly exciting.
Strategy Session. From a sheer business perspective, if you are offered the ability to buy a potential rival company for pennies on the dollar you do it just for the simple fact to eliminate any future competition. Read Titan, the biography of John D. Rockefeller by Ron Chernow. This model worked well for him as he took Standard Oil to being the biggest company in the world.
The fact that Google got offered to Excite again for an even smaller amount and it still declined is just up there in the all-time blunder category. Honorable mentions also go to Tom Brady for losing in the Super Bowl to Eli Manning…twice. One may posit, Page and Brin put a stipulation on the offer that made it harder to accept, but that is flawed reasoning. Bell, in rejecting the offer because Google insisted Excite use its search engine, fell victim to the sunk cost fallacy way of thinking. Sunk cost fallacy is when an individual or company continue a behavior or endeavor because of previously invested resources. Bell thought their search engine had them in the top websites in the world why should they change for some hotshots academic intelligentsia.
Well, that sort of thinking keeps you from being innovative and not making changes and staying on top of your industry. The lesson to be gleaned from Excite’s storied journey through mergers and acquisitions in the world of search is that before the dot com bubble burst, no one had any idea of what was going on. Google went around and showed off a clearly superior search engine to several potential buyers and were turned down, mostly because the idea of page rank was too revolutionary. Excite, Yahoo, and Lycos ( bought for $12 billion in 2000, sold for $95 million in 2004, then sold again for $30 milion in 2010!) were all portals, whose sole goal was to keep people within their domains. How monetization would occur was still unclear in the search world, George Bell was correct in declaring that Google was too good. His business was keeping users in Excite’s portal, and Google would have ruined that. Unfortunately for Bell, Excite’s comparatively weak search engine likely frustrated users into seeking out a stronger one, and Google lay there waiting. Google soon rolled out ad-sense, and they started printing money.