Hacker News Reader

Comment by sandstrom | Hacker News Reader

Had to look it up, for curiosity:

    In April 1999, Yahoo! acquired the company for $5.7 billion 
    (or over $10,000 per user) in stock. [...] The company had 570,000 users.
    -- Wikipedia

These 570k users only listened to audio, seems like the biggest waste ever. Cuban got a bunch of (undeserved?) money and Yahoo lost the same amount. Feels like a pointless transaction.

View on HN

> These 570k users only listened to audio, seems like the biggest waste ever. Cuban got a bunch of (undeserved?) money and Yahoo lost the same amount. Feels like a pointless transaction

These were the heady days before the dot-com bubble burst. In April of '99, Pets.com had just IPO'd (February) and Webvan was a going concern. The 'information highway' replacing traditional radio was believable enough. I don't think at the time anyone knew it was a waste. Hindsight is 20/20.

Offtopic: Only today did I put 2 and 2 together on the inspiration for Silicon Valley's Russ Hanneman "I put radio on the internet" joke...

> Only today did I put 2 and 2 together on the inspiration for Silicon Valley's Russ Hanneman "I put radio on the internet" joke...

http://shop.markcuban.com/three-commas-universal-symbol-for-...

I'm not so sure. Here's my reasoning, but I'm just using logic, I'm really not super in-tune to this stuff.

If the company knew thought its stock was 10x overvalued (Yahoo's stock did drop 90% a year or so later) then they really only sold it for $570 million. That is, if Yahoo knew its stock would be worth 1/10 of its current value in a year, buying a company with $5.7B in stock will add value to Yahoo so long as The acquired company ends up being worth >$570M.

That being said, if they knew their stock was overvalued, it would be best to issue additonal shares, as $1 is worth $1 regardless. Similiar to how undervalued companies should buy back their stock.

I think back in those insane dotcom bubble days valuation and stock prices did not play well together. The acquisition moved forward because it was sound business (Yahoo's planned to become a media corp) and increased shareholder value, as the best way to profit from an overheated market was to hoard investors attention relentlessly.

Yahoo! didn't lose anything, only its investors did (as it paid with stock, not cash)... But then, they would have lost a lot anyways, because the whole market was overvalued.

I certainly see it differently. Investors have bought and sold Yahoo! stock all along. Had they bought it when the deal to buy Broadcast was announced and sold it 5 years later, they would have tripled their money.

Are there Yahoo! investors who have lost money? Sure. That is true for every stock that is traded. Are their investors that made money? Sure, same deal.

If one wanted to evaluate the performance of Yahoo! management in 1999 then one way to approach it would be to answer the question, "Given what Yahoo! knew at the time of the acquisition, what would have been a better use for that stock?" I personally can't imagine what that would have been.

Use it for employee compensation.

If Yahoo had ever known what the fuck it was doing Podcasts would now be known as Ycasts or some such.

It's likely the bigger acquisition was the rights (NBA, NFL, and college) and technology in addition to the users. The bigger question is if that's not a bigger deal in a world where yahoo doesn't destroy startups.

"Do you know what ROI stands for? Radio on the Internet."

Adjusted for inflation that's about $8.25 billion

Reply on news.ycombinator.com