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.
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.
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.
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.)
Have you heard of Google, and how as a late entrant to web search, it's grown to be the 4th-most-valuable public company in the world, largely based on superior technology?
But seriously, while I can't be sure Page & Brin were necessarily the absolute best of all Google's talent, they seem pretty smart & effective.
They did a lot of the original work, and hired & managed the original team – which at the time of these Excite negotiations, was probably just a dozen or so people. (That is, smaller than the ~100 person Excite search team whose results they at least matched, drawing the acquisition interest for their impressive performance & scaling potential.) Page & Brin both remained deeply involved in Google's successful product efforts for another decade, and Page is still CEO of the successor parent company Alphabet.
Neither Google, nor Excite in the hypothetical alt-timeline where Excite bought Google, would have wanted to lose Page, Brin, or other top talent by the end of 2001 – when Excite@Home hit the rocks in our timeline.
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.
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.
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.
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.
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.
I always find stories like this fascinating. It always reminds me of how fragile our futures are. If Google was acquired the internet will be a VERY different place today. I find it humourous because this kinda brings to mind Skynet from the Terminator. In the movies, they spend a lot of time sending killing machines to the past to take out people who would invent the future and it causes a great deal of chaos, while all they might need to do is add a clause in a merger or acquisition that botches a deal that prevents Skynet from existing and the mission is accomplished. LOL
Are you sure? If Google didn't remain Google within Excite, perhaps they wouldn't have been as successful, and would've still been replaced by the next Google-like company.
Perhaps, like judgement day, Google was inevitable.
Some of google's success was due to simple business decisions. An acquirer would reverse these, and google wouldn't win.
These were: uncluttered search-only, instead of a portal filled with junk; no paid-placement; it was also faster due to clever backend, so an acquirer could save money on the backend, bringing it down to adequate speed.
Some argue that The Algorithm (pagerank) wasn't important for google's success at all, except as marketing to geeks, because search results were comparable to alternatives.
Today, apart from consumer habit, google's biggest advantage is speed, possible by massive capital investment in datacenters.
But also today, google is hamstrung by money (Wall St), making them vulnerable, as previous search was.
OTOH the problem/need was there, maybe eventually there would have been another google targetting search-only.
I was an early user of Google too, and I don't remember the search results being any better than AltaVista (the dominant search engine at the time) or any of its other competitors.
Google was just fast and ad-free, unlike AltaVista, which was ad-infested and slow. That was the attraction for myself and the other people I knew who used it.
Perhaps we used to search for different things. AltaVista allowed far more control over operators and filters, but invariably I would have to dig much deeper in ther results to find what I was looking for. On google it would be there on the first page.
In The Sarah Connor Chronicles, one Terminator accidentally time traveled decades too far into the past, its arrival tweaking the timeline such that the person it was supposed to assassinate wouldn't be at the venue he was supposed to be. The terminator became a businessman and built a construction company, just to build the building where the assassination was to take place. According to records found, it was loved by its workers, since it cared more about getting the job done than about profits, and would regularly work alongside them.
So yeah, the idea doesn't need a lot of tweaking for a lawyer terminator to exist. They already do whatever they need to for their goal, they aren't just killing machines.
Realistically, killer machines wouldn't abide by the Geneva Convention and could just make up a poison gas or supervirus and wipe out all humanity without making humanoid robots in the first place.
People forget that had Google been acquired it's not like we would still have the same site today.
The main reason it was successful back in the day was because it was fast, clean and had no ads. Any company that acquired them would sort those out pretty quick.
"Fast, clean and no ads" was a big deal for me. Internet was very slow when I starting using it. When I discovered Google, it was a breath of fresh air to my life. For a change I was using a search engine that loaded fast.
I've come around to the idea that the old 'directory style' search engines is a feature that I'd quite like to see again. If a search engine is only available as a search listing then you're entirely at the mercy of the algorithm. With a human-curated directory of links there's some checking going on, and it's much harder for someone to game their way to the top of the listings.
With a pure search system, you can endlessly tweak your results to precisely what you need in any obscure topic space using search terms.
With a human curated directory, you will instead find that whatever terms you add, you always get dumped back into the same box of hand built pages of results. Once you’ve mined those out, this will get really frustrating.
A blend of the two approaches would be useful. Expose the internal topic classifications and let searchers manipulate them to narrow or widen the search space.
I remember I and many others starting to use them for exactly that. Look at this comparison (not that early is starts at 2004 while google iirc started to see usage at 2001)
Right, but the received wisdom was that the ‘winner’ of the internet race to be the number 1 portal would look more like Yahoo, Excite or AOL. A big front page with lots of content and big juicy adds. If Google had been acquired, they would simply have become the tiny little search box on the Excite front page. That could have left space for another company to develop competing search tech and beat them with a minimalist approach. Or for another heavy duty portal page site to develop competing tech. Maybe it was only Google’s radically minimalist focus that allowed their superior search tech to really stand out.
Don’t forget that Pagerank, the ‘results must have all terms’ feature and the very large index made for significantly better results that the competition had.
Eric's contribution to Google was paranoia and urgency from his bitter experiences losing twice to Microsoft. He knew Microsoft would come after them. So, they to widen the gap so far that when the "sleeping giant" woke up, it wouldn't be able to overtake and crush em.
- what if Excite bought Google and killed it. And kept buying all competitors before they become a threat .... like Google does these days.
- following from there: which companies have been bought and killed off so that the future we could have had was sacrificed on the altar of existing companies defending their own turf.
- following even more: Which innovation are we not seeing because the huge business model desert created by the dominant advertising model (which now turned into surveillance model).
Likely they would have seen differences if they had compared on long tail queries instead of common queries. With the growth in search usage at the time the diversity of searches was only going up.
"they tested was “Internet.” According to Hassan, Excite’s first results were Chinese web pages where the English word “Internet” stood out among a jumble of Chinese characters. Then the team typed “Internet” into BackRub. The first two results delivered pages that told you how to use browsers. It was exactly the kind of helpful result that would most likely satisfy someone who made the query. Bell was visibly upset. The Stanford product was too good. If Excite were to host a search engine that instantly gave people information they sought, he explained, the users would leave the site instantly. Since his ad revenue came from people staying on the site—“stickiness” was the most desired metric in websites at the time—using BackRub’s technology would be counterproductive."
A lot of people want to judge investors who passed on Google. They shouldn't. In VC you hit or miss, you win some you lose some. People judge investors who passed saying it was a "poor" decision. That's only because you have hindsight and hindsight is 20/20.
I am sure there were many other search plays at the time and picking from one was just like picking a crab from a barrel.
I doubt investors, who do this everyday and win some and lose some, worry all the time about why they passed on Google.
I’m not sure what you’re saying - that we shouldn’t assess people whose job it is to pick investments with how well they pick investments? Isn’t it supposed to be their skill to be able to pick things without hindsight? Otherwise what are they doing and why don’t they just gamble the money in a casino instead?
Investors don't work with perfect information. They work with imperfect information. This means that it is impossible to predict with certainty what will happen.
So it's important to remember that an investor who passes on a product that goes on to become very successful may have actually made the best possible decision given the information that she had.
It's exactly this. You have to judge a decision based on the merits of the decision, not on the outcome. A great example is poker. I should call an all-in on a hand I will win 95% of the time. I will still lose one in twenty times. That does not mean it was a bad decision.
A good decision is not based on how good the outcome is, it's based on how good the reasoning is. At the time, acquiring google would have probably failed their business and we wouldn't have the google we have today, so he actually made a great decision based on the information he had.
Some people are a bit better at it, however it's still mainly a gamble. There are so many factors behind it. For instance,what Uber Eats or Deliveroo do today, we used to have about 15 years ago in Lithuania.You could call any taxi driver and say: 'I need a little service'.The driver then asked for specifics, how many bottles of alcohol,what type,etc.go buy it from the shop and deliver to your home.Everybody just assumed it and none had an idea how such a thing would grow into multibillion dollar industry.
You should but you should look at how well they did over time and a large number of investments, not just individual decisions.
A good investor will take losses and missed opportunities and re-evaluate their decision making process, but they have to be careful not to over correct or the could make another mistake in the opposite direction.
I agree with the general sentiment of your post, and luck is definitely a factor. But investors ultimately care about ROI, and if you didn't invest in Google before the dot com bust then there's a very good chance your entire fund failed.
> I doubt investors, who do this everyday and win some and lose some, worry all the time about why they passed on Google.
A very famous investor once said to me "you either invested in Google or you lost money."
> But investors ultimately care about ROI, and if you didn't invest in Google before the dot com bust then there's a very good chance your entire fund failed.
Google is up 4000% since its 2004 IPO and 1000% from local bottom during the housing bubble crash. Didn't even need to be a VC to get access to VC level gains buying GOOG.
I believe it is Steve jurveston who made the claim that on average, post ipo gains are roughly equal to pre ipo. I Don’t know how one calculates that but it’s an interesting thought.
> I Don’t know how one calculates that but it’s an interesting thought.
You could get a good estimate of this just checking Crunchbase. Assuming the company is doing well, none of the weird stuff like ratcheting kicks in. So just look at how much money went in and what valuation, apply dilutions for later rounds, and calculate what percentage you own by the time you get to an IPO.
This method still isn't perfect (employee option pools being adjusted will not show up, as well as other possibilities), but it'll definitely give you a rough estimate.
That's a good question. I remember using Yahoo and AltaVista a lot in high school. In college I'm 100% sure I used Google all the time which dates back around 2002/3. Switched to Gmail in 2005.
It must have been before that. I was on AmigaOS, during the 90's, and there was a (commercial) web browser named "Voyager", which came with Google as homepage/search pre-installed.
Around 2000. Initially via the Dogpile meta search engine, but after a while it became apparent that all the best results were coming in via Google anyway, so went right to the source.
I was quite young at the time with very limited access to the internet.Google was the first search engine I used and it was just starting.A couple of months later I 'discovered' Yahoo.Went on their site and I was like wtf..I think I visited Yahoo less than 10 times since then..
