D’oh! The Biggest Internet Mistakes Ever

Making money on the Internet is easy isn’t it? You slap up a website; do a bit of search engine optimisation and watch the money come rolling in while you’re laying on a beach earning 20%. If two guys can set up eBay and become billionaires inside 2 years the Internet has to be the most open marketplace in the world, rife for any fourteen year old with an Internet connection to make enough money for concerns such as ‘education’ and ‘getting a job’ to be completely unnecessary.

It’s not always this simple though. Over the years obscene amounts of money have been frittered away on bad Internet investments and worse still; hundreds of billions of dollars have been missed by passing on what seemed at the time to be a risky venture, but with the benefit of hindsight was a licence to print money if only they’d taken the risk.

So, in no particular order (and by which I mean watch out for the last one, it’s a classic) I present to you the biggest Internet mistakes of all time.

AOL merges with Time Warner

Representing the very epitome of the .com boom and subsequent crash US giant Time Warner merged with AOL in January 2000, who were then valued at $160 billion. Last year Google paid $1 billion for a 5% stake in AOL, placing its full worth now at just $20 billion. With a loss of $140 billion that’s some impressive business. AOL Time Warner renamed their brand ‘Time Warner’ in 2003 in an effort to distance the company from the disaster that was AOL.

Warner Brothers was founded in 1918 and is responsible for some of the greatest movies of all time including the Batman and Superman franchises, Time Magazine was founded in 1923 and is an iconic publication known the world over and AOL was founded in 1983 and has managed to annoy millions of Internet Users with its shoddy customer service, limited technology and irritating adverts. Yet AOL was the bigger company??? Shows you just how crazy the .com bubble was, and it was never going to last.

Google passes on buying MySpace

Even the mighty Google makes mistakes, and this one could prove to be a Pavarotti sized mistake for Google’s profits. According to Rupert Murdoch Google could have bought MySpace in 2005 for as little as $290 million but decided to pass on the deal. 3 months later Murdoch’s News Corp bought the social network site for $580 million, double what Google could have paid.

Why could this prove such a blunder for Google? As of 2006 MySpace made up a whopping 8% of Google’s search traffic, which is where Google makes the bulk of its revenue, and that’s quite some bulk! In 2006 Google made over $10 Billion. Should MySpace decide to use another search provider the potential revenue loss for Google would be huge – far more than the $290 million they could have acquired MySpace for.

In fact, Google makes more money from MySpace in just 4 months than they could have bought the whole company for. Surely buying MySpace and guaranteeing that revenue would have made sound financial sense?

Guess not.

Terra Networks buys Lycos

It always amazes me why anyone uses search engines like Lycos or Ask. I mean seriously, what’s the point? Terra Networks thought there was a point, as in May 2000 they bought Lycos for $12.5 billion. How much??? $12.5 billion!!!! That’s obscene; surely they’d have been better off setting fire to the money and throwing it out of a plane? Sure enough just 4 years later they sold Lycos for the princely sum of $95 million – a loss of just $11.55 billion.

I do hope someone lost their job over that.

Yahoo passes on buying Google

This has to be the biggest mistake ever made in the long and glorious history of monumental mistakes, a mistake so huge in scope it makes Lincoln’s decision to attend the theatre in a big hat a positively inspired idea. In 2001 Yahoo’s CEO Terry Semel met with Larry Page and Sergey Brin of Google with a view to acquiring the company. Google valued themselves at $1 billion dollars but insisted they weren’t for sale. Within one week Google’s price had soared to $3 billion. Terry Semel stated that no one really knew the value of Google and there was no way he was going to pay that sort of money for a company with no tangible profits.

Yahoo could have acquired Google for as little as $5 billion, but that would have exhausted all of their assets and would have represented more of a merger than a takeover. It would have been one of those ‘betting the house on it’ kind of deals, but as Google is now valued by the stock market at well over $100 billion it’s the sort of missed opportunity that could have shaped history, and would have spelt the end for the competitors of the proposed Yahoo-Google super company.

Worst. Mistake. Ever.

In doing this research the pattern emerging became clear; while today we balk at the money spent by companies like Google in the $1.65 billion deal for YouTube and eBay’s $2.6 billion acquisition of Skype, these deals pale in comparison to the sums thrown around at height of the .com boom. A $160 billion valuation of AOL and a $12.5 billion purchase of Lycos highlight the instability of the marketplace at the turn of the millennium. Today companies are a lot more careful with their money and more conservative in their valuations.

It makes the $580 million Rupert Murdoch paid for MySpace seem a bargain doesn’t it? Considerably better than the £790 Million (roughly $1.5 Billion) Malcolm Glazier paid for Man UTD, and they couldn’t even get into the champions league final.

Come on Liverpool!

On a personal note I should also mention that Yahoo’s refusal to open up their contextual advertising network to publisher applications is a monumental mistake, as is their insistence on publishers with a US Tax ID – because as we all know, only the Americans use the Internet. This blind ignorance from Yahoo allows Google’s market share and overall dominance of the contextual advertising arena to grow.

That’s it Yahoo; keep those mistakes coming!

Darren
SEO Programmer