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Key points: Excite's CEO passed on purchasing Google for $750K + 1% of Excite's stock because as a condition of the acquihire deal, Larry Page demanded Excite's

Key points: Excite's CEO passed on purchasing Google for $750K + 1% of Excite's stock because as a condition of the acquihire deal, Larry Page demanded Excite's tech stack be replaced with Google's. While the financial terms of the deal were acceptable to both parties, the deal fell apart due to Larry's request: Excite tested Google's search results against theirs and at the time found no material difference warranting such a drastic change in their business.

gojomo 7y ago
And if you listen beyond the highlighted range of the interview, you hear Excite's CEO Bell speaking of how most of his attention was on the @Home side of the business, managing difficult relationships with his cable-company owners/partners. That reveals, I think, the actual error in Excite's strategy: not realizing that "internet search" was the real prize deserving all the attention. That mis-prioritization is what led to accepting the merger with @Home just a little before these Google discussions. That's also why they mainly evaluated Google on some static set of then-common queries. That's why they were satisfied with their existing search results – which by my recollection, were for a while the clearly "most relevant" of then-extant options. Their tech stack & team had been quite good, and certainly seemed "good enough" as just one small part of the particular larger game they thought they were playing. Had Excite accepted Page's requirement, the tech/team switchover might've been rocky, and I suspect at best Excite would've remained relevant in search for only a little while longer. But the same distractions & headwinds that bankrupted Excite@Home by the end of 2001 likely would've felled the company even with the addition of Google's nascent potential. Google's best talent, including Page & Brin, wouldn't have stayed around for long. (And in the actual history of an independent Google, it still raised tens-of-millions in additional venture investment to give them the time/resources to perfect their model – runway that might not have been available inside Excite.) It was the earlier choice to emphasize the "last mile" cable-internet business and monthly subscription revenues, via the merger with @Home, that sealed Excite's fate. It nudged them away from buying Google, sure, but also put them on a path where even buying Google couldn't have saved them.
- WilliamEdward 7y ago
  You're implying this was a bad decision because they didn't realise the power of internet search. In reality, had they accepted google's terms they probably would have tanked before they could even get it off the ground. In my eyes this was not a mistake on Excite's part and is only being treated that way because Google happened to become successful after the fact.
  - gojomo 7y ago
    As I wrote, I agree that a Google acquisition would not have made a difference for Excite. Excite's key mistake was before any Google negotiations: when Excite demoted search to be just one part of a larger strategy – which apparently involved a lot of distracting politics with cable companies – instead of search being the strategy. (Of course, as a high-flying public company needing to report results in 1999, 2000, etc, that potential cable-subscriber revenue sharing – recurring revenue from millions of subscribing households! – must've been very tempting for Excite. The scale & margins ultimately possible with keyword-based, pay-per-click ads were still speculative in 1999. Google Adwords only launched in late 2000, using CPM-impressions pricing, and only added pay-per-click keyword bidding in 2002.)
- happycube 7y ago
  The other problem of course for @Home was that for the cable companies, bankruptcy was a better outcome since they could buy the equipment cheap. The buyout/merger/etc led to an inaccurate version of their theme jingle in my head too: "I don't wanna grow, I wanna buy a crappy web portal..."
- pmoriarty 7y ago
  "Google's nascent potential. Google's best talent, including Page & Brin, wouldn't have stayed around for long." What made Page & Brin Google's best talent?
  - omarchowdhury 7y ago
    I'd imagine at the time of these deal talks, they were the only talent.
mannykannot 7y ago
To choose to run a comparison test seems objective and rational, but if Excite had its own people perform them, there is quite a risk of 'not invented here' (caveat: I know nothing about how these tests were conducted, beyond what is in the clip.) If your expertise is in search, and someone else has a better idea, you don't look so good. If, in addition, the people tasked with the testing were aware of Larry Page's demand, they would have had even less incentive to show PageRank as superior. There is a long history of companies crushing the innovation they buy, and it is not necessarily a top-down effect. Page had good reason to make this issue a deal-breaker.
russfink 7y ago
750K for a Tech company? Even back then, that is a lowball insult.
- Jamwinner 7y ago
  Not really, there was traffic, but the profit was not so obvious as it is now in hindsight. Engaugement as a metric did not exist, not sure the term clickthrough did either. Investers were, in general, not the same people with the technical understanding to see this future. There are similar areas of business today, transformative, and underfunded because the value is too far in the future for most investors.
hyperpallium 7y ago
The failed acquisitions of the subsequently wildly successful (e.g. Xerox) reminds me of mandatory advertising for a position that is already filled. The founders don't want to sell.
snarf21 7y ago
I never understood why these companies just didn't invest as a hedge. A lot of these startups didn't need outright purchase but wanted working capital. Blockbuster could have bought 10% of Netflix as a hedge and seems like similar things here. You also don't have all the "merge everything together" nonsense that kills deals like this AOL+Time Warner and now Verizon+Yahoo+AOL. You can hedge a call option with a put option once you understand how.
- pmoriarty 7y ago
  Sometimes they do. The most famous example I can think of is Microsoft heavily investing in Apple when Apple was just about at its low-point.
- mswen 7y ago
  I have wondered the same a number of times. Enough that I wrote an article on it. Business Model Fire Insurance:The Phoenix Strategy https://www.linkedin.com/pulse/business-model-fire-insurance-phoenix-strategy-michael-swenson/ https://www.linkedin.com/pulse/business-model-fire-insurance... In short I was making the point that large corporations should deliberately invest in start-ups that directly attack their own current business model. Think of this as a way of stress testing your business model with the benefit that you own a stake if the attacker happens to succeed. Side benefit, those start-ups that fail will have small teams of technically talented people who now know your market, and are now needing an acquire-hire. Pick through and hire the best out of the failed efforts.

gojomo 7y ago

And if you listen beyond the highlighted range of the interview, you hear Excite's CEO Bell speaking of how most of his attention was on the @Home side of the business, managing difficult relationships with his cable-company owners/partners. That reveals, I think, the actual error in Excite's strategy: not realizing that "internet search" was the real prize deserving all the attention. That mis-prioritization is what led to accepting the merger with @Home just a little before these Google discussions. That's also why they mainly evaluated Google on some static set of then-common queries. That's why they were satisfied with their existing search results – which by my recollection, were for a while the clearly "most relevant" of then-extant options. Their tech stack & team had been quite good, and certainly seemed "good enough" as just one small part of the particular larger game they thought they were playing. Had Excite accepted Page's requirement, the tech/team switchover might've been rocky, and I suspect at best Excite would've remained relevant in search for only a little while longer. But the same distractions & headwinds that bankrupted Excite@Home by the end of 2001 likely would've felled the company even with the addition of Google's nascent potential. Google's best talent, including Page & Brin, wouldn't have stayed around for long. (And in the actual history of an independent Google, it still raised tens-of-millions in additional venture investment to give them the time/resources to perfect their model – runway that might not have been available inside Excite.) It was the earlier choice to emphasize the "last mile" cable-internet business and monthly subscription revenues, via the merger with @Home, that sealed Excite's fate. It nudged them away from buying Google, sure, but also put them on a path where even buying Google couldn't have saved them.

WilliamEdward 7y ago
You're implying this was a bad decision because they didn't realise the power of internet search. In reality, had they accepted google's terms they probably would have tanked before they could even get it off the ground. In my eyes this was not a mistake on Excite's part and is only being treated that way because Google happened to become successful after the fact.
- gojomo 7y ago
  As I wrote, I agree that a Google acquisition would not have made a difference for Excite. Excite's key mistake was before any Google negotiations: when Excite demoted search to be just one part of a larger strategy – which apparently involved a lot of distracting politics with cable companies – instead of search being the strategy. (Of course, as a high-flying public company needing to report results in 1999, 2000, etc, that potential cable-subscriber revenue sharing – recurring revenue from millions of subscribing households! – must've been very tempting for Excite. The scale & margins ultimately possible with keyword-based, pay-per-click ads were still speculative in 1999. Google Adwords only launched in late 2000, using CPM-impressions pricing, and only added pay-per-click keyword bidding in 2002.)
happycube 7y ago
The other problem of course for @Home was that for the cable companies, bankruptcy was a better outcome since they could buy the equipment cheap. The buyout/merger/etc led to an inaccurate version of their theme jingle in my head too: "I don't wanna grow, I wanna buy a crappy web portal..."
pmoriarty 7y ago
"Google's nascent potential. Google's best talent, including Page & Brin, wouldn't have stayed around for long." What made Page & Brin Google's best talent?
- omarchowdhury 7y ago
  I'd imagine at the time of these deal talks, they were the only talent.

mannykannot 7y ago

To choose to run a comparison test seems objective and rational, but if Excite had its own people perform them, there is quite a risk of 'not invented here' (caveat: I know nothing about how these tests were conducted, beyond what is in the clip.) If your expertise is in search, and someone else has a better idea, you don't look so good. If, in addition, the people tasked with the testing were aware of Larry Page's demand, they would have had even less incentive to show PageRank as superior. There is a long history of companies crushing the innovation they buy, and it is not necessarily a top-down effect. Page had good reason to make this issue a deal-breaker.

russfink 7y ago

750K for a Tech company? Even back then, that is a lowball insult.

Jamwinner 7y ago
Not really, there was traffic, but the profit was not so obvious as it is now in hindsight. Engaugement as a metric did not exist, not sure the term clickthrough did either. Investers were, in general, not the same people with the technical understanding to see this future. There are similar areas of business today, transformative, and underfunded because the value is too far in the future for most investors.

hyperpallium 7y ago

The failed acquisitions of the subsequently wildly successful (e.g. Xerox) reminds me of mandatory advertising for a position that is already filled. The founders don't want to sell.

snarf21 7y ago

I never understood why these companies just didn't invest as a hedge. A lot of these startups didn't need outright purchase but wanted working capital. Blockbuster could have bought 10% of Netflix as a hedge and seems like similar things here. You also don't have all the "merge everything together" nonsense that kills deals like this AOL+Time Warner and now Verizon+Yahoo+AOL. You can hedge a call option with a put option once you understand how.

pmoriarty 7y ago
Sometimes they do. The most famous example I can think of is Microsoft heavily investing in Apple when Apple was just about at its low-point.
mswen 7y ago
I have wondered the same a number of times. Enough that I wrote an article on it. Business Model Fire Insurance:The Phoenix Strategy https://www.linkedin.com/pulse/business-model-fire-insurance-phoenix-strategy-michael-swenson/ https://www.linkedin.com/pulse/business-model-fire-insurance... In short I was making the point that large corporations should deliberately invest in start-ups that directly attack their own current business model. Think of this as a way of stress testing your business model with the benefit that you own a stake if the attacker happens to succeed. Side benefit, those start-ups that fail will have small teams of technically talented people who now know your market, and are now needing an acquire-hire. Pick through and hire the best out of the failed efforts.