The Rise and Fall of Public Internet Advertising Companies
With the excitement, disappointment and frustration surrounding the news of Yahoo teaming up with Google, and telling Microsoft to pound salt. A couple months ago, Yahoo was sitting in the dumps around $18 a share, then jumping to nearly $30 per share with the news of a possible Microsoft merger. Off the news of the merger going away, Yahoo stock has taken yet another beating, and back down to $22 a share. On the topic of the future of advertising and the BIG 3, I thought it would only be fitting to do a quick spotlight on two other internet companies and their rapidly declining stock prices, which also base their businesses around internet advertising.
HandHeld Entertainment
I’ve talked about Handheld Entertainment (ZVUE) several times in the past, mainly because I have worked in the humor and entertainment niche area for years… and this company came along and purchased a ton of high traffic entertainment sites, for what many saw as “inflated premium prices“. Handheld Entertainment went on to buy the extremely popular and controversial site, EbaumsWorld.com. At the time of the purchase, ZVUE stock was hovering around $1.78 per share. The terms of the deal were that Handheld Entertainment (ZVUE) will pay $17.5 million, including $15.0 million in cash and $5.0 million in common stock for the site. Today ZVUE is sitting at a low 27 per share.
The Business Model of Acquire, Acquire, Acquire… Isn’t Working for ZVUE
HandHeld Entertainment Stock - 52 Wk. Range: 0.20-3.73
ThinkPartnership, Inc (KowaBunga!)
The next stock I’d like to point out is, ThinkPartnership, Inc (THK). Like Handheld Entertainment, ThinkPartnership (now known as Kowabunga!), went on a bit of a buying spree of their own… picking up affiliate network PrimaryAds, creating ValidClick and now the core of their business KowaBunga! To make a long story short, before there were a million affiliate networks out there, the two main platforms were to go with DirectTrack or KowaBunga. In many cases, Kowabunga was the cheaper and better solution for smaller companies to run their own affiliate programs, and later through ther MyAP network… but ThinkPartnership would later increase Kowabunga prices through the roof… leaving many current users to shy away from using the network. So in short, that brings us to where we are today… the one year chart below shows the story, THK stock is now sitting at a low of .55 a share.
Where would KowaBunga be today if ThinkPartnership didn’t get in the way?
ThinkPartnership, Inc Stock - 52 Wk. Range: 0.45-3.43
So what is the end story and why are these companies failing? With both of the examples above, the core strategy of the parent company was to acquire other properties. Even when trying to look at a success story like InterActiveCorp (IAC) and their formerly popular Ask.com & AskJeeves.com… Barry Diller now plans to break apart the company intro five separate companies. Once again, we are seeing the same potential fall of Yahoo’s main business model (advertising) falling into the hands of Google.
How much further can these company’s stocks fall and what’s the future of advertising online?
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"With great power comes great responsibility".... my Uncle Ben told me that. Haha, just kidding! I'm Zac Johnson and I've been making money online for over 10 years now. In short, I started making money online while I was in high school... but my passion for marketing and making money goes back way earlier than that. I created ZacJohnson.com to help motivate you to start making money online, and live the life the you always dreamed of.
At least I only own (still!) one of these…
Are they still wanting to buy sites? I’d love to sell mine for an inflated premium
The acquire, acquire, acquire, strategy seems to only work for… Google.
Irrespective of the size, I think that the effectiveness of online advertising will come under greater scrutiny in the future. Being a new medium, it has taken a lot of advertising revenue, but quite whether online advertising has generated incremental sales over and above regular advertising is yet to be conclusively studied. If it has and there is some data on it, I would appreciate it being shared here.
The internet user public is somewhat different from other hoi polloi! I have serious doubts that they read leave alone get influenced by online advertising.
I’m my opinion not always a merge is the best option for companies.
sometimes buying a company doesn’t change anything.
the BEST merge of all was when Adobe bought Macromedia and became the master of entertainment software development.
Merges can be good or bad. It always depends on the strategy behind the merger and how the companies execute them.
The industry is full success and failure stories of mergers.
Yahoo and Microsoft would have been a interesting merger.
Good post. I wonder where this whole thing will take us affiliate marketers…
Pretty interesting post, I didn’t know ebaumsworld got sold and for that much. I wonder how much ebaums makes in ad revenue, probably over 3k a day would be my guess.
I know. It really sold for a whole lot of money. Its amazing what some sites are worth or sale for.
Good post, I know a lot about this Yahoo-Microsoft merge failure. Yahoo really never told MSFT to shove it, Microsoft was the dominant player at all times. It was really just Jerry Yang making poor decisions as a selfish CEO. He screwed over YHOO shareholders, and should be embarrassed in my opinion.
It wouldn’t be the first time that CEO’s were looking after their interests above those of the shareholdes.
Yes, buying a startup is the fastest way to innovate.
Interesting….
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Well, the internet is going to be officially owned by Google… and yes, the mergers only seem to work in Googles favor… I better get on this AM before we’re all screwed.
Jay
Very true…….Jay…
Since we have to pay to list our sites on Google(ppc), they might as well charge us for any searches done .
and that I won’t be surprised.
Charge people for searches? That would make people stop using the internet.
Great point … we will have to see how this all falls into place!
Darin
I tried to give a link to an article on today’s New York Times on this very subject, but my comment is not getting published for some reason. I draw your attention to the article called”MySpace Might Have Friends, but It Wants Ad Money”
A new approach has to be taken with internet advertising. One that is more meaningful to the merchants and consumers. It seems when the larger companies take over the focus on the customer -which is really the affiliate in a network (IMHO) is lost. It isn’t about technology or being all things to all people and grabbing up everything. It is about serving your customers better.
Talking about Yahoo, Microsoft, and Google is like talking about endless story. Everything is really unpredictable and the situation is so easily change. Let’s just wait and see what will happen to those giant companies.
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I had no idea ask was hurting so bad. I knew I had no heard about the company in a while.
Great post…quite an informative content.
The funny thing is, even if #2-4 competitors got together, I think they’d still have problems competing with Google.