TekLink

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Teklink-Boom & Bust-by Heather (PC Voice)

You know when you look at some of the aquisitions going on today with Internet-based companies. You might be inclined to think that the 1990s dot-com boom era is making a return.

Think about it, eBay bought Skype for $2.6billion. News Corporation, Rupert Murdoch’s company bought MySpace for $580million, and now the word is Yahoo are in talks to buy Facebook for a figure getting close to $1billion.

Now back in the 1990s, it seemed venture capital firms were begging to throw millions of dollars into investments with online-based companies that have next to no track record or decent business plan and we all know what happened then. Something stinky hit the fan.

This time round though, things look a little different. The companies that seem to be being bought, at the least have track records of attracting millions of visitors to their site on a daily basis. For instance, take a look at YouTube. They are quoted as receiving 100 million video downloads a day, with over 70 million viewers a month. It’s pretty much a given that the Google Video venture was a flop, hence their reason for buying YouTube. This has resulted in Google increasing its amount of video streams by at least a factor of 10.

So it seems this time round, internet companies like YouTube are being bought, not just for what they might promise, but also to allow companies access to online communities that are growing faster than ever before.

Most of the companies being bought, also have decent business models and are making money on the Internet by online advertising. And for me this appears to be the key in this round of purchases. It’s all about advertising. Advertising equals big bucks. Look at the figures. I heard Google sold about $10billion worth of advertising last year and returned a profit of over $2billion. Now that’s not to be sniffed at.

I was reading through some BBC technology news where they reported that Google’s YouTube deal is based on the idea that Google will make money from the site’s Content by sharing advertising revenues with commercial video makers such as music companies and amateurs that put their home movies up online. This basically sums up my thoughts exactly.

One of the Internet purchases that has puzzled me though is eBay buying Skype. Skype is a great service, free telephone calls and all, but how can eBay make money out of it? Are they going to stick small banner ads for online auctions on the Skype application? Surely they can’t be thinking about adding quick five second audio advertisements at the start and end of each call.

If you want to buy something from eBay, it would be nice to be able to talk to the seller and asked questions about the product before making a purchase but is it really going to work? The seller would have to be online at the same time as you are making your bid, if not, you would after leave a voicemail and wait for a reply, which is more or less exactly the same process you go through when you email the seller with your question. I guess with this deal will just have to wait and see what happens

A big difference this time round with these Internet company purchases, is that the companies actually making the purchases are Internet or media companies themselves and have substantial cash and revenues. Take Google for instance, who is reported to be sat on almost $10billion in cash. These guys are looking at long-term investments, and not just a quick book.

This doesn’t mean these Internet purchases are all good deals though. Time and time again, we get reports that companies have overpaid in their attempt to gain new customers. The Internet is an unpredictable place, and no doubt some sites will lose their attractiveness to viewers, resulting in costly mistakes.

I have to say though, I am hoping most of these acquisitions work out for the best, and help the Internet emerge from its teenage years, turning it into a young adult that all companies will be happy to do business in.

PS. If Google, Yahoo or Rupert Murdoch (i’m not fussy which), have lots of money to throw around, I’m sure I could dream up some barmy Internet community site and let you throw some money my way. Hah, I can dream.

Cheers,
Pete,

www.TekLink.co.uk

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