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Why the Economics of The Aardvark Acquisition Make Sense

8 points by alexandros 17y ago

bravura 17y ago
“It’s interesting that the founders left Google, spent 2.5 years building something, then get acquired by their former company for $50 million. What is going wrong at Google that is costing them this kind of ‘innovation premium’?” - David Lifson, Google Acquires Aardvark For $50 million Perhaps it's simply because Google doesn't give $50 million dollar bonuses, and never will?
- sogrady 17y ago
  Ha! They say that you have to leave your job to be compensated fairly, but that's the most extreme example I can think of ;)
johnrob 17y ago
If the founding team wants a fair price, they need the option to sell to a non-Google company. I don't think Google would be happy selling its internal projects to Microsoft.
- sogrady 17y ago
  Precisely, which is the risk Google assumes. That said, at scale, the premium paid to buy them on an open market likely compares favorably to the expense of internally managing dozens if not hundreds of smaller projects.
ntoshev 17y ago
Nice promise in the title, but the article doesn't really try to estimate anything. Almost no content.
- sogrady 17y ago
  Disclosure: I wrote it. That said, looking at the economics doesn't require, in my view, actual numbers. Because mostly when we look at the economics of private companies we don't have the actual numbers, or the ones that we have are very imperfect. In this case, to estimate would have been nothing but pure speculation. With so many variables unknown, it didn't seem to make sense. That said, if you or anyone else has those numbers and can build a model, I'd love to see it.
wedesoft 17y ago
The article seems to assume that the company is worth it. According to TechCrunch they have more than 90000 users and process 3000 queries per day. Their FAQ says that they have 20 employees. I can see that there is some value in knowing where and when people are asking a question related to a product. And I guess this kind of service could help Google to expand in the third world where most people only use mobiles to access the internet But $50 million still is a lot of money for 20 employees, 90000 users, and about a Gigabyte of data.
- sogrady 17y ago
  Surely the value of the data can't be measured by its size, can it? The content must have some reading on its value, no? The $140 million Picasso canvas that woman tore a couple of weeks back is worth more than a 60 inch square of cloth and paint, right? To be honest, I have no idea whether the data itself is worth it. But I'm betting Google does, and that very specific answers to very specific questions have substantial value for them, both from an algorithmic input perspective as well as on a pure content basis. $50M worth? Probably not. But throw in the people, the user community (and remember, that 90K figure was as of October of last year), and the mechanism of getting people to answer other people's questions and I can see the math working. My concern wouldn't be the price. I'd be more worried that Google will mismanage its acquired asset, as they have with other acquisitions.
  - wedesoft 17y ago
    The fact that somebody paid $140 million for a Picasso makes it expensive but not necessarily valuable ;) Nokia's CES2010 keynote video is quite interesting if you think about mobiles. Apparently they have implemented mobile applications for local businesses in India for ordering and advertising products. I still think the acquisition is about Google on mobiles.
    - sogrady 17y ago
      If someone's going to pay that, I'd say that's a fair proxy of its value. But point taken on the mobile front; I think there's definitely a case to be made there. Will try and track down the Nokia keynote.

8 points by alexandros 17y ago

“It’s interesting that the founders left Google, spent 2.5 years building something, then get acquired by their former company for $50 million. What is going wrong at Google that is costing them this kind of ‘innovation premium’?” - David Lifson, Google Acquires Aardvark For $50 million Perhaps it's simply because Google doesn't give $50 million dollar bonuses, and never will?

sogrady 17y ago
Ha! They say that you have to leave your job to be compensated fairly, but that's the most extreme example I can think of ;)

johnrob 17y ago

If the founding team wants a fair price, they need the option to sell to a non-Google company. I don't think Google would be happy selling its internal projects to Microsoft.

sogrady 17y ago
Precisely, which is the risk Google assumes. That said, at scale, the premium paid to buy them on an open market likely compares favorably to the expense of internally managing dozens if not hundreds of smaller projects.

ntoshev 17y ago

Nice promise in the title, but the article doesn't really try to estimate anything. Almost no content.

sogrady 17y ago
Disclosure: I wrote it. That said, looking at the economics doesn't require, in my view, actual numbers. Because mostly when we look at the economics of private companies we don't have the actual numbers, or the ones that we have are very imperfect. In this case, to estimate would have been nothing but pure speculation. With so many variables unknown, it didn't seem to make sense. That said, if you or anyone else has those numbers and can build a model, I'd love to see it.

wedesoft 17y ago

The article seems to assume that the company is worth it. According to TechCrunch they have more than 90000 users and process 3000 queries per day. Their FAQ says that they have 20 employees. I can see that there is some value in knowing where and when people are asking a question related to a product. And I guess this kind of service could help Google to expand in the third world where most people only use mobiles to access the internet But $50 million still is a lot of money for 20 employees, 90000 users, and about a Gigabyte of data.

sogrady 17y ago
Surely the value of the data can't be measured by its size, can it? The content must have some reading on its value, no? The $140 million Picasso canvas that woman tore a couple of weeks back is worth more than a 60 inch square of cloth and paint, right? To be honest, I have no idea whether the data itself is worth it. But I'm betting Google does, and that very specific answers to very specific questions have substantial value for them, both from an algorithmic input perspective as well as on a pure content basis. $50M worth? Probably not. But throw in the people, the user community (and remember, that 90K figure was as of October of last year), and the mechanism of getting people to answer other people's questions and I can see the math working. My concern wouldn't be the price. I'd be more worried that Google will mismanage its acquired asset, as they have with other acquisitions.
- wedesoft 17y ago
  The fact that somebody paid $140 million for a Picasso makes it expensive but not necessarily valuable ;) Nokia's CES2010 keynote video is quite interesting if you think about mobiles. Apparently they have implemented mobile applications for local businesses in India for ordering and advertising products. I still think the acquisition is about Google on mobiles.
  - sogrady 17y ago
    If someone's going to pay that, I'd say that's a fair proxy of its value. But point taken on the mobile front; I think there's definitely a case to be made there. Will try and track down the Nokia keynote.