The challenges of acquiring social media businesses

By September 19, 2008Consumer Internet, Exits

Acquiring social media companies is a tricky business as shown by yesterday’s rumour that Ebay is putting StumbleUpon up for sale – over the last twelve months traffic has declinced by 70% as measured by unique visitors and 19% as measured by page views, and it is likely they will get less than the $75m they paid for it in May last year.

The problem is that acquirors haven’t quite figured out how to manage these companies post acquisition.  As far as I can tell one of the biggest challenges is balancing off the fear that if a service is integrated into the acquirers offering it will lose it’s magic (particularly if the founder is still around) with the feeling that if it is left unintegrated there will be few synergies and it might slowly whither on the vine as the best people drift off to work for new startups.

I think this is largely a product of youth.  In sectors like software and semis that have been around much longer experienced acquirers like Broadcom, Cisco, and IBM have acquisition processes that are both well honed and highly effective.

There is some evidence that digital media acquirers are starting to get better at this – the recent relaunch of Jaiku is encouraging from the Google perspective and elements of the Bebo acquisition by AOL bode well.