Every company has a story. Learn the playbooks that built the world’s greatest companies — and how you can apply them as a founder, operator, or investor.

Episode 33: Overture (with the Internet History Podcast!)

Episode 33: Overture (with the Internet History Podcast!)

Mon, 13 Mar 2017 16:33

Episode 33: Overture (with the Internet History Podcast!)
Ben & David dive deep into the early days of internet search, with the help of the best in the internet history business: Brian McCullough from the Internet History Podcast! We are huge fans of IHP at Acquired, so this was a real treat to collaborate with Brian and the great work he does over there. In this episode we cover the story of how a small incubator in Southern California spawned perhaps the greatest tech business model of all-time, Yahoo!’s fumbling of that golden opportunity, and Google’s recovery of that fumble to cross into the end zone of tech history behind the biggest moat ever constructed on the internet.
Topics covered include:
  • Overture’s origins as part of the Idealab incubator run by famed early internet entrepreneur Bill Gross
  • Invention of the paid search business model… initially by returning ADS ONLY in response to search queries
  • The eventual marrying of Overture’s paid search (ads) with organic search results via syndication on other properties like Yahoo!
  • Revenue from Overture’s ad partnership saving Yahoo!’s business after the internet bubble burst
  • Yahoo!’s eventual acquisition of Overture for $1.4B in 2003
  • But… the really interesting story here: Overture’s 'inspiration' of Google’s business model and the creation of "the greatest advertising machine in the history of the world"
  • The original (pre-Overture) Google business model: selling a box!
  • Google’s differentiation vs Overture: focusing on the long tail, ad quality scores, and an advertiser-friendly auction structure
  • Google’s first major search syndication victory over Overture: AOL
  • Yahoo!’s failed attempt to buy Google for $3B in 2002, leading it to settle for acquiring Overture instead the following year
  • Project Panama” at Yahoo!, and its impact on the tech and internet history
  • Overture's (and later Yahoo!’s) lawsuit against Google for stealing the paid search business model— "the O.G. version of Snapchat and Instagram”
  • Paul Graham’s take on "What Happened to Yahoo?”
  • Perhaps the most important technology to come out of this whole episode: Hadoop
  • The power of incentive alignment in marketplaces— and creating the widest and deepest moats on the internet
The Carve Out:

Listen to Episode

Copyright © Copyright 2022 ACQ, LLC

Read Episode Transcript

Brian, have you ever had to cancel an episode, like mid episode because something was going wrong and it was just unrecoverable? Yes. Actually, the one that was the worst that I still released was ironically enough, the guy that invented the MP3. Welcome back to episode 33 of Acquired, the show about technology acquisitions and IPOs. I'm Ben Gilbert. David Rosenpull. And we are your hosts. Today, we've got a great guest with us. Brian McCullough from the Internet History Podcast. We are huge, huge fans of Brian's podcast here on Acquired, so super, super pumped to have him joining us today. We're doing a double episode, so you'll be able to hear a version of this episode on Brian's podcast as well. And today, we will be talking about the Valley Shaping acquisition that happened in 2003 of Yahoo acquiring Overture. Our presenting sponsor for this episode is not a sponsor, but another podcast that we love and want to recommend called the Founders podcast. We have seen dozens of tweets that say something like, my favorite podcast is Acquired and Founders, so we knew there's a natural fit. We know the host of Founders. Well, David Senra, hi, David. Hey, Ben. Hey, David. Thank you for joining us. Thank you for having me. I like how they group us together and then they say it's like the best curriculum for Founders and Executives. Errili, as we use your show for research a lot, I listened to your episode of the story of Aqueo Marina before we did our Sony episodes, this incredible primer. You know, he's actually a good example of why people listen to Founders until acquired, because all of his great-sendishmenters and investors, they had deep historical knowledge about the work that came before them. So like the founder of Sony, who did he influence? Steve Jobs talked about him over and over again if you do the research to him. But I think this is one of the reasons why people love both of our shows, and there's such good compliments. On acquired, we focus on company histories. You tell the histories of the individual people. You're the people version of acquired and where the company version of Founders. Listeners, the other fun thing to note is David will hit a topic from a bunch of different angles. So I just listened to an episode on Edwin Land from a biography that David did. David, it was the third, fourth time you've done Polaroid. I've read five biographies of Edwin Land, and I think I've made eight episodes of them, but in my opinion, the greatest entrepreneur to ever do it, my favorite entrepreneur personally is Steve Jobs. And if you go back and listen to like a 20-year-old Steve Jobs, he's talking about Edwin Land's my hero. So the reason I did that is because I want to find out like I have my heroes. Who were their heroes? And the beauty of this is the people may die, but the ideas never do. And so Edwin Land had passed away way before the apex of Apple, but Steve was still able to use those ideas. And now he's gone and we can use those ideas. And so I think what acquired is doing what Founders trying to do as well is find the best ideas in history and push them down to generations. Make sure they're not lost history. I love that. Well, listeners, go check out the Founders podcast after this episode. You can search for it in any podcast player. Lots of companies that David covers that we have yet to dive into here on acquired. So for more indulgence on companies and founders, go check it out. Now without any further ado, over to you, Brian. Guys, thanks for doing this crossover. So yeah, today we're going to be talking about an interesting acquisition story, interesting in the sense that it's not just one company acquiring another because there's a huge major third player that comes into this story. But we're going to talk today about Yahoo acquiring go to dot com, which at the time of acquisition was known as overture dot com. So to set the acquisition groundwork here, go to dot com was a company that came out of an incubator in the late 1990s incubator incubators were hot during the dot com era. And one of the hot ones was what's old is new again these days. Exactly. Yeah, the incubator we're talking about was called ideal lab, which was created by a founded by a man probably most of you know by the name of Bill Gross. Ideal lab generated a couple different companies, cars direct dot com net zero, the free ISP, if you remember that bet for back in the day, the infamous etoys dot com came out of ideal lab, but probably the most successful company to be incubated at ideal lab was go to dot com. And I believe this was 100% Bill Gross's brainstorm. What go to was was a glorified search engine, where the results of a search were generated not by an algorithm based on accuracy or what you were searching for necessarily, but was actually the results were generated by bids from advertisers. So if you went to go to dot com and you searched for flowers, the number one search result would be brought up paid for by an advertiser that had bid the most for that ad. So essentially the you know doing research for this show is just so crazy to even think about today, but you know there were no organic search results. So everything you saw on go to dot com and then and then later over to we'll talk about how they shifted their product and business models was was an ad. It would be like Google, but without the organic search results. Right, I think they might have back fed some organic search results from somewhere else. They would have had to especially at launch, since they wouldn't have had enough advertisers to cover everything. But yeah, it was a bit it's basically Google, but all ads and which basically Google these days, right? Yeah. Believe me. From someone that still owns a business that does a lot of gets a lot of my business from a paid search, I know what you're talking about. It was controversial, especially at the time. I mean, we're laughing looking back at it now, but this was completely antithetical to everything that people thought search should be. Bill Gross announced and launched go to dot com at the Ted conference in 1998. And a funny aside listeners to my show know that I'm associated with Ted. I've been working with them for the last year or so. They don't mention Bill Gross by name, but they do mention when you give a Ted talk, not to sell. And Bill's Ted talk in 1998 was very controversial within the Ted community because it was basically standing up and launching a new product that people were like, well, this is not a world-changing product. You're just up there selling us on your new startup. And so it's sort of without naming him, they use that as an example of what you have to do these days, much cheaper than renting out Moscone Center yourself. Right. Exactly. And not only wants a new product, but a new product that was just ads. Right. Exactly. It's not a new product that's going to cure malaria or something like that. But one thing we have to say about go to is that it was very quickly successful, which makes sense because if you think about it, it's pure advertising. And we'll get to this later on, but the Google's business model, which we now think of as the greatest advertising machine ever created by man, it's already present in this first version called with obvious caveats. But it was immediately successful in the same way that Google's AdWords product was almost immediately successful. There's a couple of things that I need to point out about how go2 worked. First of all, it was a destination in and of itself. They called it because Bill Gross wanted it to be a shopping destination. It also, as we pointed out, was all ads. And it was paid to play, essentially. If you were willing to pay $100 a click, you could be number one on every single keyword That's what we'll get into later, Google tweaks that model later on. But as I pointed out, it started out as a standalone destination, which was not very helpful to overture slash go2's business model because there were already existing properties that got way more traffic. Yahoo, AOL, excite places like that. So even though was successful, it was not successful enough because it wasn't scaling. So Bill Gross has the brilliant idea of syndicating the ad model of go2. This is when they change the name to overture because overture obviously means making an introduction. Go2 slash overture begins cutting deals with every major search portal in about 1999 to 2000, including AOL, Yahoo, excite. You name it. What started to happen is in your normal Yahoo or AOL search results, you would see two, three, maybe four overture results at the top. Those would be the same ones that you would see if you went to go2 slash overture, but they were just the little syndicated paid links now at the top. This model was unbelievably successful. And it was successful at a time when major search portals needed some serious cash flow because by 2000 into 2001, bubble is bursting. And that means that a lot of the companies that places like Yahoo were piggybacking on top of to make their money to sell the display ads that were running against their portal pages and their search results were going out of business. Yahoo, especially, I was just researching this for my book. In 2001, I believe the first quarter of 2001, they suddenly have to announce that their guidance for the quarter is going to be lower by 25%. About a month later, they come back and they say, you know what, we're going to guide down another 25%. So imagine this is how bad it is in 2001. That twice a public company has to lower guidance by 25% within the same quarter. Wow. It's unimaginable today. Well, we hope so. Well, when people talk about how, you know, today's entrepreneurs, you know, haven't lived through the hard times, this is what they're talking about. Right. I got some more great numbers for you. Yahoo, we'll use Yahoo as an example because they're going to come into the story now. Their market cap at its peak was 128 billion by January of 2001. Their stock price had gone down from 118 to $4.05. The market cap had gone down from 128 billion to 11 billion. That's 92% down from its high. So when people talk about the carnage of the Dockham bubble bursting of the nuclear winter, like we call it, that's what we're talking about where sales are just evaporating overnight. Your high-flying market cap is eviscerated. Wow. Incredible. And this is the same time on our Amazon IPO episode. The Tom was talking about, you know, when everybody was hit by this, you know, Amazon, eBay, all the, you know, even the companies that end up surviving and thriving to today were trading for pennies of what they once had been. Well, into this crazy time period where everybody's losing money, all these Dockham companies are going away because that's what's exactly happening to Yahoo is that they had ridden, you know, the, the, the, all these.coms that were willing to spend, spend, spend all their VC money in order to stand out from the crowd and hopefully have a flashy IPO. They're gone. So overnight Yahoo loses somewhere around 60% of its advertising base. Into this breach steps over-ture. And immediately, as I said, is super successful for its partners. Obviously by 2001, all of the profits that Yahoo is making is from its search deal with overture. Yeah. And this is what, I mean, we sort of made, made fun of go to in the beginning of the episode, but we shouldn't sort of change the company and Bill Groß here. I mean, it is brilliant what they do from a business perspective. I mean, they invented the paid search model and then had the insight when they didn't have enough traffic themselves as a destination site to marry that model with traffic, search traffic that other portals had. I mean, it was, it was, these were really two brilliant observations from a business standpoint that Bill Groß and overture had. So I'm going to quickly jump to the acquisition that we're talking about and then I'm going to cycle back to the third player that we're talking about here. Eventually, it's obvious to anyone listening to this story that Yahoo, if they're making all of their money from this deal with overture, maybe wants to acquire the company that is suddenly responsible for most of their revenue. So in mid 2003, negotiations with overture bear fruit and Yahoo agrees to buy overture for $1.4 billion, which was actually 25% less than overture was asking for. So I want to make a quick point here, why is overture willing to sell on the cheap? Well if you think about it, they're in an unsustainable situation. They're making everybody tons of money, but they don't own any of the properties that are getting the traffic themselves. So they're operating a business that is incredibly reliant on their partners if they were to lose say a Yahoo or an MSN or an AOL, which they do, we'll talk about in a second. If they lose any of those major partnerships, they're basically out of the game. So the reason that Yahoo is able to come in and purchase overture on the cheap is that Yahoo knows that they sort of have overture over a barrel. Yahoo is willing to pay a lot because it wants to lock down that revenue, but it's worth pointing out that for all the money that overture was making people, it was basically in an untenable situation and needed to be acquired by somebody. So Brian, do you think that that's always a bad strategy to kind of have all of your potential exits be partners that are direct competitors? I think that obviously doesn't put you in a good negotiating situation because your acquirer can basically save you. We're willing to buy you and save your life. If we walk away from this deal, we're killing you. It's let us save you or we're going to kill you. So that's not a great negotiating situation to be. At the same time though, it was still a $1.4 billion deal. That's a lot of money, especially for a company that was only founded five years earlier and you're in the middle of the carnage of the tech bubble. Absolutely. Here's MarketCap was at that point, would you say $11 billion is it? It's 10 to 10 billion. Yeah, that's more than 10% of their MarketCap. I would say that in this era, the two big acquisitions that made people stand up and take notice and be like, hey, maybe the internet space isn't dead was this acquisition and then the PayPal acquisition. Yep. Yep. And to be fair, this was a 15% bump over where Overture was currently trading. Right, because Overture was a public company at that point. I think we forgot to point that out. All right, so I want to smash cut now over to the third player in this story, which is Google because if you're listening to this, you're thinking, well, what we're talking about is basically Google's business model, which is paid search. What people forget about the Google story is that Google did not have a revenue model for a very long time. Their original business model when they took their money from Sequoia and Clienter Perkins was basically to syndicate search results. So again, we're in an era where there are seven or eight major search players. And I'm saying search and quotes because a lot of them weren't doing real search. They were more portals, but search was a component of what the portals were offering people. So Google's original business model was to basically offer the search results to these seven or eight players and get licensing deals for providing the service. And what's crazy to think about how different the world was back then, I could be wrong on this, but I'm pretty sure that the way Google did that was through the Google search appliance, which was actually a piece of hardware that their partners would install in their data centers. Like, that's for fans of Silicon Valley, they made a box. Well, so now if you're Google in 2001 and you're sort of hunting around for a business model, because really that licensing your search results to seven or eight players doesn't really scale very well, it's a decent business. It's not a multi-billion dollar business. And if you're Google in 2001, you're looking over at Overture and you're seeing that Overture is having incredible success in what is essentially your space. And they're doing it via a business model that is pretty obvious. As an example, 2001 is the first year that Google actually is profitable. And in 2001, its revenues were $85 million. In that same year, Overture had revenue of $288 million. And at that point, Overture was growing faster. It was growing as revenues faster. So Google does what is the obvious thing in retrospect and probably even at the time, they say, hey, maybe let's give this Overture model a try. The original version of AdWords that Google launched was basically CPM. They were still text-based ads and they were put at the top of search results. But they were glorified banner ads, even though they were text. Basically advertisers paid per 1,000 viewers for the ads that showed up. One thing that we haven't pointed out is that Overture has pioneered paying per click, CPC, which advertisers love because it's much easier to measure results versus measuring on a CPM basis. So Google first experiments by doing AdWords at the top and Ford or a Coke or whoever would pay by the 1,000 viewers. And then they start to introduce what Overture's doing. So they're putting search results on a cost per click basis at the top and then later on the side as we're more familiar with. But they do two things that Overture hadn't done, two huge innovations. Number one, Overture always had editors. So if you submitted an ad to Overture and you say I want to advertise for flowers, they would have to make sure that you really were a flower business. They would have to make sure that the ad was copacetic. They would have to make sure they approved your text and all those things. Well we know Google as the company of engineers. There's no problem that can't be solved by math and some decent engineering. So they don't want to do this editorial stuff. And so they create an automated system where whereas with Overture you would submit your ad and it would take a day or two for the ad to go live, Google created an automated system where you would bid on keywords, submit your ad and the algorithms would make sure that the ads were cool and your ad would be running within the hour. They also targeted small advertisers. Overture was still in this sort of display ad business or the traditional ad business where you're chasing big brand advertisers. And Google said, hey, if you've got a credit card, I don't care who you are, throw $50 at us and you can run some ads and see if this works for you. So Google goes after small advertisers and basically creates the modern search advertising marketplace that we're familiar with today. And by going there after those small advertisers, they really created a new market too because if you're a Coke, you can go deploy $100 million on billboards around the country and you can buy these brand advertisements. But if you're using search ads and you have metrics on the number of people clicking through for the first time, there's a real market for direct response advertising and not just brand awareness ads. Right. And it's a different type of advertiser where it's more direct response advertising as opposed to brand advertising, which traditionally still is in the display business as opposed to the search business. That's even true to this day to a large extent. So the second key innovation is it's not just pay to play. You can't go into a keyword, be willing to pay $100 per click and be guaranteed at the top. Google, of course, being Google again wants to have this sense that, hey, it's a win, win, win for everybody. We want to have the most relevant ads so that the ads will almost be useful to a searcher, not an annoyance to a searcher. So they introduced this key innovation of the click response rates affect the bidding process for the keywords. So it's not just the person that pays the highest gets the top. It's some combination of the person willing to pay the highest and the person whose ads gets clicked on the most and thus making that ad probably the most relevant. Yeah. And we'll circle back and talk more about this later in the episode and the analysis. But this is a super key point for two reasons. One, that allows Google through their system to actually optimize revenue, not just the amount of money that people would spend on a given auction, but the way the revenue will be the amount of money spent on a CPC ad times the number of people who click. So by optimizing for also people who click, they optimize revenue. And then the second key point is that this is a really hard math problem and hard data problem that Google is going to need a lot of engineering and technology to solve. And we'll see that come back later. Right. And I think that it's worth underlining that. And that Google actually is able to make more money by this model because by making it more relevant if you do the math and it's too complicated to go into here. But it actually ends up making Google more money because they're getting more money from the ads that are clicked on the most. Yeah. And Brian, is this the point that Google introduces that other innovation of lowering the price of the bid to just above the second highest bidder? Yes. In the overture model, if you were willing to pay 50 cents and the number two bidder was willing to pay 10 cents, when you got clicked on, you still paid that 50 cents. Which sounds crazy. And it was. And so one of the things that really won people over from overture to Google's ad words, and I can speak from experience because I was one of these advertisers at the time, was OK, on Google's model, if I pay 50 cents, my competitor bids 10, if they click on my ad, I'm only paying 11 cents. I'm only paying just over what the second person was bidding. And I don't have to do anything to do that. It's automatically done for me. Which really, that starts to feel like Google being a real enduring company, right? Making these decisions that really bring the marketplace efficiency in line with where the market actually is and not just saying, was this a smash and grab job for cash now, but really we're, we want to have this advertiser relationship for a long time. Indeed. So let me pick up the story. It's February of 2002 that the modern ad words as we know it, with the change to cost per click and with this quality score on ads is introduced February of 2002. And one of the executives that is brought in to lead the ad team at this point is a young lady by the name of Cheryl Sandberg. And Cheryl as we know, basically, I feel like I've heard of her somewhere. Makes her early career by the success of ad words. But let's go back to the Yahoo overture Google triangle here because Yahoo had a pre-existing relationship with Google. Google had been since 2002 providing the search results for Yahoo. People always forget this. Yahoo was never technically a search engine. It started out as a human-powered directory and through the mid to late 90s, that was their differentiator. Search engines just didn't really work very well. And so Yahoo sort of made its name by saying, if you come to us, go through our directory, you're going to find what you want to look for because we've taken the time like actual human beings have taken the time to sort this out for you. And they were touting the fact that they were a media company and their primary revenue driver at that point or at least a little before was the banner ads that they were putting on their own first party media content, right? They did a lot of things to try and introduce e-commerce. There was Yahoo shops and things like that. But yeah, there's still 80% of their business as we discussed were people buying banner ads, especially the dot com companies buying banner ads. So Yahoo already has this pre-existing relationship with Google. And Google has seen that overture has created this incredible business by syndicating these paid search results. So around 2002, Google starts to do the same thing. I remember there's still these multiple players. There's still AOL is the biggest player at this point. Yahoo is the biggest portal at this point. And so Google is starting to shop around this idea that, hey, we can syndicate our ad words in the same way that overture does. And so the first person that they go to to try to cut a deal like this is Yahoo, who they have this pre-existing relationship with. And so that is really when Yahoo starts to get the idea of maybe it itself needs to get into the search game. As we're saying, search was not their business. They were basically selling ads against eyeballs, thus we're calling them portal sites. But an interesting thing is that since Yahoo and Google have this relationship, Yahoo is able to take a look at Google's internals. And so in the same way that it can see on its bottom line all the money that it's making with overture, it can see when Google is similarly having incredible success syndicating its ad words at. The big deal that Google is able to pull off is when it steals AOL from overture. Overture had been providing those paid links at the top of AOL search results. Google swoops in and steals that business from overture to the tune of about $100 million. At least that was the deal and guaranteed revenue that they had to offer to AOL. But again, because Yahoo has this relationship with Google, it can see that the AOL deal is instantaneously extremely successful for Google. This is around the same time, if you guys might remember, the summer of 2002, that Yahoo first tries to buy Google, before they make the overture to overture, they try to buy Google for $3 billion and are rebuffed. Which is interesting because at that point, Google's revenue was probably only about $240 million a year. And Yahoo's yearly revenue was $837 million. It's starting to recover in this period from the Dotcom bust. A CEO by the name of Terry Semmel comes in and basically doubles down on the display advertising business and turning Yahoo into a media destination. So Yahoo's stock price was only about $7 a share. And so the $5 billion purchase price that Google wanted, Yahoo's offering $3 billion, Google wants $5 billion, would essentially have meant that Yahoo was going to spend basically its entire market cap to swing the deal. It definitely would not have been a merger of equals. It would have been basically Google taking over Yahoo by proxy. Wow. So Yahoo does not get to buy Google. And so in its mind, it has to do the next best thing. Overture is obviously the business model that Google has copied and is having success with. So why can't Yahoo just go ahead by Overture, by another company getting to the search game and basically replicate the business model that Google is having success with, that it has copied from Overture. Sounds great. What could go wrong? What could go wrong? And so this is essentially what happens. The first thing that Yahoo purchases is ink to me. So that gives them what a lot of people at the time thought was a search engine that was equivalent in quality to Google. Or at least the second best search engine on the planet at that point. So they buy ink to me in late 2002 at a relative bargain. The acquisition was $257 million. And so then on top of that, they turn around and pay the $1.4 billion for the search ad pioneer. Overture. So those are two big acquisitions, remember Yahoo's market cap is under $10 billion at that point. But it's a lot less than what Google had been asking for, right? Right. So the acquisition goes through and it's immediately a big win for Overture because overnight, or sorry, a big win for Yahoo, because overnight acquiring Overture triples Yahoo's profits. In 2004, it's revenue doubled and the profit more than tripled by bringing in by bringing Overture's search ad business in house. And it actually immediately has a positive impact on Yahoo's stock, which goes from $16 to share the day that the Overture deal was announced to $37 to share about a year later. And there's an ironic quote from Terry Semmel around the acquisition where he says, we got into search to change the game. It's ironic because most of us thought that Yahoo was a search engine, but as we're discussing in reality, they never were. So Yahoo's plan here is to integrate these two things, to bring the search engine in house, to marry it to Overture's existing paid search business. And bam, they can replicate everything that Google has rapidly seen success with. And there was some precedence for this because remember, Google used to be the search results for Yahoo. So basically, you swap out into me. That's relatively simple. Seems reasonable. The problem was integrating the Overture search ad business. If your Yahoo and your existing business for your entire life is this display ad network, where you've got hundreds of salesmen, and basically you had been in the game for a long time of just getting eyeballs to your site, people coming for horoscopes, for maps, for checking your email and things like that. All of a sudden, you basically have to upend the culture of the company and say we're in this engineering based search business. And it turns out that that was the problem of the acquisition. That it was a huge, on some level, technical headache to integrate the Overture business into Yahoo. But more than anything else, it was a cultural headache, a cultural clash of trying to change Yahoo's business model basically midstream. So many thoughts, but holding my tongue for analysis. Well, let me wrap this up then and explain why the acquisition we can say was not entirely successful. They bring in Overture and the Overture team conflicts with the existing Yahoo engineering team. The Overture business model conflicts with the existing Yahoo display ad business model. People don't get along, people aren't executing or let's just say that different teams are moving in different directions, not everyone's rowing the boat in the same way. At some point in 2005, they fired the original Overture CEO that was brought in with the acquisition. And here's another name that you might recognize. Guess who they bring in to try to save the Overture business, the integration of the Overture business. We did an episode about his company being acquired. It was a young gentleman by the name of Jeff Weiner, who we know are more familiar with as LinkedIn CEO. And Weiner did have success integrating the empty me search, just swapping them out that had been done before. But he had an incredibly difficult time putting the Overture business together with the search business. There was this huge project called Project Panama that Yahoo promised for years and years and years would launch and it would be just as easy to use as ad words. All you had to have was a credit card, we'll have the automated system, we'll do the ad scoring so that we're going to reward people for the most times they're clicked on, the ad relevance, that sort of thing. Basically everything that Google had done with ad words. Project Panama was supposed to do the same thing only better, of course. But they never really pulled that off. I believe that Project Panama was announced in late 2004 or early 2005. Panama does not actually launch to the public to companies willing to buy ads until February of 2007. So long after Google had IPO'd, by 2007 when Project Panama launches Yahoo sales that year were almost $7 billion. So in the intervening years, they have been successful at turning their business around and making some money off of search. But the problem was they were not as successful as Google who in 2007 reported revenue of $16.6 billion. So because of the integration issues, because of the cultural issues, by the time that Yahoo finally realizes its dream of building ad words based off the acquisition of overture and ink to me, it's too late. Google has already run away with the search crown. It has by far the largest measure of the search market overall. And Yahoo is basically an also ran. And by the way, even when it launched Project Panama was not that great. And for acquired listeners, Brian's previous episode of the Internet History Podcast was an interview with Gary Flake, which is really, really exceptional. If you get a chance to go listen to that. And Brian and Gary were discussing this notion of a multi-sided marketplace as a living breathing ecosystem. So when the overture deal went through, there were customers on one side of the ecosystem and searchers on the other side of the ecosystem. And then a third party, which is the actual search providers. And this is an interesting takeaway for other businesses that we'll be analyzing in the future. But when they decided to put a lot of the overture engineers on pause to go and start, well, become Project Panama, you really slow down the fuel into the ecosystem and the machine stops working. So you can't just tell all your customers, like, hey, bear with us for two years. Well, we build a better widget here for you guys. Google very, very much took that opportunity to swoop in. And then you're kind of starting from a not quite a cold start problem. But anybody who started a marketplace from scratch knows that how inefficient and how rough they are at first. And by kind of going and hitting the reset button for Project Panama really cost them a lot of ground in those intervening years. Yeah, absolutely. Well, and there's one more twist to the story before we can start to get into analyzing all of this. For everyone acknowledges this, Google basically copies overture's business. Adwords was not a direct copy of what overture was doing because clearly Google did it better. But everyone noticed, including overture, that Google had basically copied them. And so even before Yahoo acquired overture, overture sued Google for either copyright infringement or an IP infringement or something, it's actually a little murky because it turns out that Yahoo acquired overture at this point eventually settles with Google. If it was a slam dunk case, why would you settle with a competitor that basically has in your eyes stalled in your business model and is having great success with it? In the end before Google, sorry, goes public in 2004, they settle the litigation with overture slash Yahoo. And Yahoo gets, and we were talking about this over email, the numbers were not sure about. I believe something like $400 million of Google stock, pre IPO, Google stock, the only numbers that I'm sure about, and then you can cut in and correct me if you know more, is that I believe at some point in 2005 after Google goes public, Yahoo sells 4.2 million shares of Google, pocketing nearly a billion dollars, which very much boosted its bottom line in that year. So there's further irony in the sense that all along, Google is still helping keep Yahoo afloat, basically because Yahoo has so much Google stock. But this is something that's always puzzled me is why would, I know why Google would want to settle, they want to have this litigation go away, they're about to go public, but why would overture slash Yahoo have settled? The best that I configure is that the patents that overture originally had weren't that good. I found in Stephen Levy's book about Google called In the Plex. I found a quote from Bill Gross where he's talking about the patents before overture itself goes public. Apparently they hadn't nailed down many patents and Bill Gross says that they're rushing to patent everything they can. I don't know why they hadn't done this before. And the quote is we patented everything else we could think of a bunch of obscure things like the way we could accept the bids, but these were silly patents. The real patents would have been worth billions. Interesting, because in several places that refer to these patents, they talk about the quote essential components related to the features and innovations surrounding our bid for placement products and our pay per performance search strategies. And it seems like I don't know, maybe they didn't fully think it through and like you're saying, patent did a lot of the less valuable stuff, but there was a failure to see the forest through the trees there. I in my conversation with Gary Flake, I also got the impression that Yahoo just thought it could do it better. Who are these upstarts at Google? We're Yahoo. We've been in this game since 1995. We've got more money. We've got more talent, engineering talent. We've got more resources. So maybe it was a question of they didn't think that the patents were that strong. And hey, by the way, it's not going to matter anyway, because we're going to kill these guys soon. Yeah. Yeah, I don't know. It's also kind of a fun aside, a little mini tech theme in the what's old is new again. It's like this is like the OG version of Instagram stories. You know, if you can't, if you can beat them, copy them. Well, and then there's always the, you know, none of us are lawyers or at least I don't think either of you are lawyers, but you know, the whole idea of, you know, there's some things that are fairly obvious so that it's not like you have to go steal industrial secrets or something in order to copy a business model. You know, there are certain things like bidding that are fairly obvious to people. So yeah, I just would have to speculate that maybe the case was not that strong. And so, hey, Yahoo, settles gets a decent chunk of Google stock. And then they think it's not going to matter because they're going to do better than Google eventually anyway. Yeah. And one thing that I think is worth separating out a little bit here is, Overture nailed the product model. For the first time, somebody had a performance, you know, for-pay search model that totally turned the industry on its head. But that was really the product model. They were a B2B provider. They tried to be a B2C provider, but couldn't get the traffic to their search engine. And Google was the one that sort of ended up nailing the business model by stealing the product model from what Overture had created. And then building that actual B2C business that has incredibly outsized returns. And I think this is probably a well-known, well-researched thing, but it really just occurred to me that if you think about the value chain and everyone that ends up contributing to the ultimate search results that you see or the ultimate social stories that you see on Facebook, the biggest companies that command the most market cap and capture the most value are these B2C companies. And if you're deciding, you know, swing in a miss on B2C with, we're going to be Obacher and be a B2B provider, you may have pioneered the best product, but you're settling for a smaller opportunity in being a B2B provider if you're in a single industry like that. I could see making a case for B2B having potentially larger upside if you're serving multiple industries. But you know, search was this brand new thing and the only thing, the only companies that they could serve were the search engines themselves. So they naturally had to be smaller than the combined value of the search engine and the way that they were positioned, you know, smaller than any single search engine or any, any, or the largest single search engine anyway. Well, and then that's the original sin of, or any way because remember the reason they were in a precarious situation is because they didn't actually own the underlying properties that were generating the traffic. They thought they solved that problem by hooking up with Yahoo. The problem is is that Google did such a good job at being everybody's favorite search engine, of being the best in search, that by the time they, if we give them credit and say they eventually got their act together by 2007, it's way too late because everyone has already learned to Google it. And at that point Yahoo as a search destination was significantly less in market share than Google was. Totally. And this is a really great transition into acquisition category. So for listeners that are new to the show, we assign a category to every acquisition and those, those buckets are people, technology, product, business line, asset, or other. And I think so that when we look at this, this acquisition, it was really a vertical and Yahoo buying a horizontal in Overture. And Overture obviously trying to serve many search engines with their technology, Yahoo buying them to integrate with their one search engine. And you know, these are sort of hard because the, let's assume that a lot of the value created by Overture was by summing across all their different customers. Well, as soon as they get acquired by Yahoo, it's pretty easy to see that boy, if you're not prioritizing for the vertical for Yahoo, you don't want them serving all these other customers. But the issue was like even if you're going to take that value destruction hammer and do that because you believe that the, the synergy and the sum of the parts created by that acquisition is better than all the, the previous value by serving all those customers for, for Overture. They actually didn't pick. And the issue is I think the acquisition category I'm going to assign is the problem is they acquired a technology and they also acquired a business line and tried to keep both going. So you know, they, they had the technology that they were integrating into project Panama, but they also had this business line and Overture continue to serve other customers. Like you got a pick one and you got to go hard at a strategy. Yeah, I'm going to, I'm going to say something similar for me. I'm going to assign to the technology category, but my take on it was Yahoo acquired a technology they just acquired a, you know, I was going to say bad technology, but the reality is it wasn't bad in and of itself. It was just bad relative to Google. It was orders of magnitude less powerful. And I'll get into in what would have happened otherwise in tech themes a little bit about the importance of the technology that I referred to earlier, but, but yeah, for me, this is clearly an attempted technology acquisition. It is. If I, if it's time for me to chime in, I'd say I'd, I'd agree with attempted technology acquisition. I don't know if this is a category though. It's, it's an aspirational acquisition because it's in the, in the same, in the same way that, that Google had looked across at Overture and said, Hey, there's golden them their hills. Yahoo has looked over at Google and said, there's golden them their hills and guess what, it's search. Again, we can't underline enough that what, what essentially Yahoo fails to do is that it fails to recognize just like everyone else did that there was actually money to be made in search and that Yahoo should have been in the search business and was in the search business. That's essentially the main reason why people first came to Yahoo in the first place. But so they look over, it's aspirational. They're looking over at Google. They're saying shoot, they're playing in our ballgame, it's the game that we should be winning. We're going to win at this. So it's an acquisition where they're looking over the fence, looking at their neighbor and deciding to build a pool, an in-ground pool as snazzy as the Jones itself. Yeah, it's almost like they wanted to build a new business line in search. But rather than taking the market cap and cost pain of just acquiring Google, which they should have done, they decided instead, well, we'll buy these couple other players and search these technologies and build it ourselves into this new business line and clearly failed miserably. Well, you know, a more recent analogy would be Google looking over at Facebook and saying, wow, socials where it's at. And they did make several attempts to become a social media company to their credit. They didn't drive their business into the ground to do it. But in essence, that's the same thing that we're looking at here is looking at the young upstart coming up behind you, seeing that they've created this amazing business and trying to copy that business or get into that business at the very end. Oh, that's not that hard. Yeah, and I think the huge takeaway and the thing that we forget today in the world of, you know, but my job is professionally to try and start new startups. And so all the time I'm going, well, let me go, you know, see what keywords are going for in this category right now as my very first step. And you know, in the absence of that world existing, we completely forget that it was not a parent that a marketplace for search ads was going to be an incredibly lucrative business. And so if you look at the steps, steps that Yahoo took as a business, kind of growing up, Paul Graham has this really great piece about Yahoo called what happened to Yahoo. And sort of points out that, you know, they went from things web directory and then they had to become grown ups. And the way that they did that was say, what's it? You know, where are we sort of directionally pointed right now? That's a big company and they decided media where, you know, we're going to be a media organization. And even though they included search, they were like, well, search is sort of just a way to get people to the site. But really, we're a media company that sells these banner ad impressions. And then Google comes along and they sort of accidentally discover the incredible power of having really, really good search for the first time. And then overture, you know, discovers the, that sort of second innovation, the first being actually very good search using the page rank algorithm, the second being the sort of business model of selling paid search ads. And oh my God, it's, it's tens or hundreds times more valuable than anybody thought it was going to be. So then Yahoo very quickly has to try and figure out how do we pull in about face and get into this new really big business that's even bigger than, you know, the media business that we thought we were trying to get into. Yeah. And I think this is, if you guys are okay with it, I think this is a great point to jump to what would have happened otherwise because I've been itching all episode to bring this up. So the, and the, and the ultimate point of PG's post that Brian sent to us is that Yahoo wasn't an engineering centric culture. And Google was and that to win at search, you needed to be have really excellent engineering and technology. And this is sort of what I've been referring to all along. I want to make an argument here in what would have happened otherwise that had maybe not the overture acquisition specifically, but had Yahoo not gone down this path with trying to build Panama and compete directly with Google. We would not have seen any or at least they would have looked very different. Any of the great startups that emerged out of the web 2.0 era right after this and then even into today with Airbnb and Uber because the most important thing to me, the thing that comes out of Yahoo's attempts to compete with Google is Hadoop. And for our listeners who aren't super familiar either with what Hadoop is or the history of it, when I was referring to the really hard math and engineering problems that Google had to solve there, both the organic search results and manage the data to deliver the best search results for what people are looking for, but also to serve the best ads that requires orchestrating just this huge huge amount of data. And so Google invented two things that allowed that. One was the Google file system. And the second was this computation paradigm called MapReduce that allowed Google to basically operate on this huge amount of data that they were storing in the Google file system. So Yahoo, when they then tried to compete with Google, they basically fund this open source project called Hadoop, which was trying to recreate Google had published papers about how they were doing this, but they were trying to recreate these technologies that really had founded sort of the quote-unquote big data world in paradigm. And Doug Cutting was a researcher who was building Hadoop and Yahoo funds him through this period in the mid-2000s and its Hadoop that really then enables Facebook to do all of the data work that they do to create the newsfeed that enables, you know, an Uber, when you order an Uber for it to get, you know, you get matched to a driver who's two minutes away that enables when you search on Airbnb for you to find the best property. This technology that gets open sourced was all of Google's core technology innovation. And I think without this battle, wouldn't have just emerged for free for the community to innovate on. Yeah, that's a great point. And this is also kind of a not a tech theme, but a company theme that Google has is they often will write a research paper about a new method or new paradigm they've discovered. And then there's these open source projects that come out around it. And those things are lagging what Google has developed internally by about three years. So for anyone who's sort of worked at Google and worked outside of Google, I've heard over and over again, oh man, yeah, I wish we had this tool that we had at Google. It was like this, but on steroids. And it's interesting to hear about, you know, the announcement of TensorFlow was after they had a very similar machine learning system at Google for about three years before announcing that. Contains the same thing. Well, I mean, Docker. Yeah. The same thing. Google was running on containers long before Docker existed. Yeah. And so it's really like, I think one of the themes of this acquisition is how the heck are you supposed to compete with a company that is that engineering centric and has built that far into the future relative to other companies? Well, my, my counterfactual would maybe go away to answering that because if we're speculating about what would happen if Yahoo had never purchased overture, then I would speculate maybe they would have been more motivated to double down on their existing successful display business. What if they seed search advertising to Google, which we know only goes so far because there's this whole universe of existing brand advertising that is more suited to display? What if instead of double click being purchased by Google, Yahoo doubles down on display and it purchases double click and then in the world of mobile that we now live in where display is more suited to mobile advertising, would Yahoo have been in a stronger situation to be a major player in the next paradigm and the mobile paradigm? Oh, man, I love that because that touches on a few things here that the, I love that idea that if you are, if you're missing the current round, then you're actually in a better position to take on the next round. A la, you know, the iPhone being in a better, or Apple being in a better position than Microsoft to go into mobile because they had nothing to lose, whereas Windows was hugely successful and was hard to move into a mobile form factor. Sort of the same analogy of, you know, if Yahoo had really just totally lost the search ad war, would they be in a better spot for the, you know, display war and for listeners, not familiar with double click, that's basically the off property Google ad network. So when you're going to a publisher like New York Times and you see an ad there that's provided by an ad network that's probably provided somewhere in the chain of Google and double click, which they acquire delivering that ad off of the search page. So yeah, Brian, that's a super interesting what would have happened otherwise. Yeah. Like Yahoo, punting on, on, you know, paid search altogether. And just maybe throw in the towel, say, yeah, you know what, just give us ad words, we'll put them at the top. And our core competency competency is something that it turns out Google had to chase when, when Google buys double click, it is to expand beyond just search ads and into the broader internet advertising arena in general. So if, if, if Yahoo had just thrown in the towel there, seeded the game at that point and then gone back to its core competency, then maybe it would, we would have seen a situation where Google's knocking on Yahoo's door asking to acquire them somewhere. Interesting. And if you look at, you know, what even, even today, I think, I was looking at these numbers maybe six months ago. And I think so Google makes about 93-ish percent of their revenue from advertising. And about 80% of that is search ads and about 20% of that is display ads. And it's interesting that like, you know, even though Google spent all that time sort of chasing the display ads business, their real cash cow is and continues to be search ads. So you know, could, could Yahoo do something really meaningful or could they have done something really meaningful in the display side? You know, only history knows. Well, and of course, famously, you know, Yahoo's kind of like, I don't know what the right analogy is here of, you know, always the brides made never the bride or just what, but they famously attempt to acquire Facebook as well. That's right. Shortly after this and really interesting to think about, you know, display and more impression based advertising, let's say, open it up beyond just display is really much closer to Yahoo's core competency than search and performance based advertising, which of course is what Facebook does and, you know, in a large amount. That was exactly sort of the counterfactual dream that I was having. Not that I have any vested interest or love for Yahoo, but in a world where, like you said, impression based ads are more important or growing more important every day, could Yahoo still be a major player had they stayed, you know, in that core competency? Yeah, well, I think no matter what, what's cool about this acquisition and this period of history and, you know, why we're doing it on both of our shows is not some of the acquisition itself, most people have forgotten, but like this really was a crossroads of history. I mean, the amount of things that both happened and didn't happen because of this really shapes, you know, every major platform that's emerged ever since. Yeah. Yeah. And absolutely did. And we also, you know, there's two major innovations here and one of them, Google came up with and one of them didn't. And, you know, one is the PageRank algorithm to actually have good search on the internet. And two is the business model of search and that business model was, was overtures innovation. While we're talking about counterfactuals a little bit, Brian, you'd mentioned on your, your last episode with, with Gary Flake that Yahoo never had any power over their customers since they never had a first party offering. I would seem that there's, there are business model ways to make this not a big deal. Like you look at Microsoft, you know, until recently they never made hardware, but, you know, boy did they, they command power over all the OEMs that were installing windows. Do you think that the, the way to stay in a good position when you're a horizontal provider like this is not to let any of your customers get too large on their own? Or do you think it's that you do have to have a credible first party offering or maybe it's that you're so big that you're never trying to sell? What do you, what do you think the, the way that Overture could have solved for that problem would have been? Yeah, you said, you said Yahoo at the beginning, but I, I know you met, you met Overture. Yeah, yeah, sorry about that. Um, yeah, I, I don't, I don't think so because this, I, the answer to your question, no matter how many ways I could twist my, press tool logic to try to make it happen, what fundamentally, Overture was in was a platform business. And so without a platform of its own, it's, it was, it was never sustainable in the end. I, I, I mean, I, I see what you're saying. There's gotta be some sort of a world where you, you, you supply the ammunition to all sides and you're, you're just a, a neutral arbiter in the middle. But that would never happen because of the politics involved the next time, um, you know, a three year deal with AOL was up for the next time the deal with Yahoo was up because your partners at the very least are always going to try to pay less. Uh, and at the very least they're going to play, if you try to play each other off each other, um, you know, you're going to piss one guy off and then maybe they leave your network. I, I just don't see a scenario unless, unless Overture had been lucky and, and had been earlier and so it had the larger market cap and so it could have started buying off its, or buying up its, its partners, um, by being late, by being smaller, it, I just don't see any scenario where they would ever be able to relax. It would always be a, a shifting sand that they were standing on and, and I, I just don't see it could ever work. Yeah. Yeah, yeah. All right. Any, uh, anybody have anything before we move into tech themes? Not the word. I feel like we're already deep in detect the air. But, one of you, one of you, one of you, one of you kick it off in. Yeah. You know, I, I actually don't really have one right now. I like, I've talked a lot. You're going to leave me for words. We've been doing it for 15 minutes. Yeah. I'm looking here at my list of tech themes and I'm like, talked about that, talked about that. Well, I want to, one thing I want to put in there, which is, um, a little bit of tech theme a little bit just like a rumination as I was thinking about this, um, you know, we talked in our last acquired episode. We had Brad Stone on and we talked about Uber and D.D. and, um, probably by the time we post this on the acquired show, we will have done, um, the Snapchat IPO is this week. Uh, and we're going to do a, uh, sort of real time reaction to that. So I suspect this episode will come out after that. Um, but I think these three episodes together sort of form sort of a series here on acquired about kind of the nature of competition and, um, the importance of sort of sustainable, defensible competitive advantages. You know, like I'm thinking about in Uber and D.D. how we talked about with Brad, how this sort of idea of like scorching the earth versus building a moat, um, that, uh, ride sharing companies have all taken and, and then certainly with snap, you know, we haven't recorded that episode yet, but there's lots of discussion and consternation in the market about what is, what is snap's moat? Does it have a, does it have one or is it, uh, as Ben Thompson says, uh, you know, pursuing the Digibread man's strategy of just constant, um, undefensible product innovation. But this, you know, Google, I think is really an example. And maybe one of the best we've had on this show of an incredibly sustainable, defensible competitive advantage. And we see it at work here between, um, you know, overture had the bed's, the head start had figured out the business model. But then Google came in and just eat their lunch and, and sustained that. Why was that? I mean, I think I'm tempted to say it was the technology. And that's why I got all excited about, you know, GFS and MapReduce and then Hadoop that comes out of it. Um, but I think it's even more than that. I think it's using that technology to create this platform that is matching supply and demand and both users on one side and producers and advertisers on the other side, producers of content and advertisers just in a fundamentally better way. Um, then, then other people are capable of, but I don't know. Curious what you guys think? Yeah. Yeah, David. You know, it's, um, I think we touched a little bit earlier on it, but the, uh, the reason that they have long term defensibility is, is, I think is related to that, um, you know, whatever the second person was willing to pay auction and extrapolated out real far. It looks like everybody is getting a good deal. It's a continued feeling that me as a customer, when I'm, or as a searcher, when I go to search on Google, yeah, there's a bunch of ads, but it's, it's, you know, either they're relevant, they're most of the time relevant or, uh, other times I can very quickly get to the organic search. Like I feel like there's a free service out there that's really good. We're, I'm getting a good deal. And many times as an advertiser and Brian, you can probably shed some more light on this, um, I give money to Google and I get more value out of it. Like I feel like I'm getting a good deal and over and over again, I think that, um, these and during companies are made when everybody in the ecosystem looks at it like, hey, this is, this is not a zero sum game thing here. Like everybody's doing well by this thing existing. I think that's a great point. And if you think about just to jump in real quick and then I'm curious, Brian, you're thought on as an advertiser in Google. But, um, Amazon works the same way, right? Like as a consumer, you're like, yeah, I'm getting a great deal here. I'm getting, you know, better price, more selection, more convenience. And as a seller on the marketplace, I think you also feel like you're probably getting a pretty good deal, um, in terms of the volume, you're going to be able to sell versus anywhere else versus you'd look at something like Uber and then Uber certainly is, you know, has still as potential to be, you know, an incredible company and a dominant platform. However, I think there's a whole on the driver side right now. Like I don't feel like drivers on Uber feel like they're getting a great deal. Yeah. My, my closing point, then Brian, I'd love to hear your thoughts. Um, this always comes down to the network effect, the flywheel, the ecosystem, you know, they're all slightly different. They refer to slightly different things. But when you bucket them all together, it really comes down to the engine for continuing to grow those things is incentive alignment. And for everybody on each side to, to, I keep saying it, but feel like they're getting a good deal. It, it being in their own personal selfish incentive to continue to pour resources and time and effort into that platform and, and Google definitely had that going on here. Well, I, you know, again, to, to mention that Gary Flake episode that I did, he, he, to him, that was the miracle that you create a marketplace where everyone feels like they're coming away, uh, better off. And, and I want to point out in a way that was super important that maybe we don't remember. I'm, some of the shine has come off of the Google halo and the, and suing 20 years or so, but I guess the shine is come off a lot of tech companies in that time too. But it's easy to forget how much everyone thought Google was this angel in the early days. Don't be evil is their motto. Um, when people, you know, every time in the internet history advertising was introduced, people complained, but then grudgingly accepted it. Um, Google already had this reputation of, oh my god, it just works. Um, they're the don't be evil people. And when they introduce ads to us, it doesn't feel terrible. It feels like Google intended. It felt like, yeah, these are ads, but they're not, you know, whack-a-mole animations flashing, taking over my screen. They're just, you know, text ads off to the side. And by the way, um, they're useful when I decide, you know, I search for flowers, but, you know, Valentine's Day is coming up. Let me take a look at those. It's actually, and so the fact that they did make that, that key change to make the ads relevant fit into the opinion everyone had of, of Google, the, the good feelings everyone had about Google, it, it, it fit their mo. Um, and, and so I think that, you know, uh, we shouldn't overlook how important that was, uh, at the time that, that sense of good feelings that it engendered. Um, but then the, the ultimate story here, and this is where I'll bring in my personal experiences as, as an advertiser, um, my first startup, uh, when I was 22 in college, um, I bought an ad on go-to before it was even overture. And I paid $40, and I paid $40, and got $80 back within 24 hours, and, you know, I, I, that's an amazing event in the life of any business person where you think, if I, every time I spend 40, I get $80, I'll do this all day, every day for the rest of my life. It's like you've learned how to turn lead into gold. Right. So like that was the magic of paid search of, of, of like we said, the, the greatest advertising engine ever, ever devised my man for reasons that other people have talked about because you're at the point of intention and things like that. Um, but then that business, my first company was actually built on ad words. And the reason was not that, um, oh, when I used AdWords for the first time, it was more magical. No, it was the same magic, but the difference was that's where the traffic was. So even though for years and years and years, I still probably maintained a certain budget on overture and eventually Yahoo. Um, that business was built on Google. It was built on AdWords because it was a business that the, the best way to market the product was, um, direct marketing at the point of intention. It was a web based product. And so, you know, I, I was never going to buy ads on TV or magazine. Um, I was always going to buy ads online and most of the audience, you know, in, in my mind, it felt like 90% of the audience, even though I don't think Google's market share has ever surpassed 70% or something like that. But it felt to me the audience that mattered. And the same way that people talk today about the, for app development with iOS versus Android, the money is really in iOS for, for whatever reason iOS users spend more than, than Android users. It always felt that way that the money was with Google, that the market, the, the, the, the, my customers were on Google. And that's why that, my first company was built on Google, which is just such a great, like, real world illustration of the flywheel, right? Like more customers bring more advertisers, which gives more money to Google, which for, and, and all the data generated by both further improve the search results, which bring more customers, which bring more advertisers. Yeah. Yeah. Oh, and shameless plug here. I, uh, for listeners that are interested in like real zooming in on, uh, on network effects and, and flywheels. Um, that, that, that, David, I mentioned a few, a few episodes ago, but the, uh, the talk that I gave on that is up. So we'll, uh, we'll, we'll, we'll tweet that or, uh, maybe put on the website or something, but, um, I, it'll definitely been our Twitter. So, so go check that out if you want to, uh, hear me ramble about network effects and flywheels and ecosystems for a while. Um, it feels like we're, we're drifting aggressively toward rendering conclusion. Yeah. You guys, you guys first. So did it end up being a, a good deal and I think the, the way that we talked about these things on acquired is, uh, was it a, uh, it, in the long run, did it end up being worth it and strategically a good decision and a good use of capital for the acquiring company to buy the acquirer. And for a variety of reasons, uh, no, I think there was big integration failure. There was lack of clarity on why they were making the acquisition internally because they, they tried to have it both ways by being its own business and by integrating it. Um, Yahoo really wanted to be a media company, not a tech company, got to the tech company, uh, a game kind of late. And if we look at what they are today, it's still a media company. I mean, they've bought up all these other media companies, Tumblr and, and, uh, Flickr and, and, you know, the things that do well are stocks and, and, uh, sports and, you know, none of these are, are their search business. And at the end of the day, they're getting sold to Verizon. I mean, I think maybe I would call this successful if they had managed to get more out of the patents, maybe some kind of like rev share on a, in perpetuity with Google where they could actually make money from each and every one of, uh, of Google searches through that license or, or something. I don't think that's the best way for a company to make money or the most noble way, but it, it seems like a way that they could have gotten something better out of, uh, out of this deal. And I'm going to call this a D because I, it, while not being a total failure, this did not help Yahoo compete in what would eventually become entirely Google's market. Yeah. I am, I'm going to give two grades here as I sometimes exercise my right to do. Um, I'm going to grade Yahoo and yeah, I'm with you like D like this was the wrong thing to do. Like, uh, everything about it was wrong. Um, they should have just like essentially sold themselves to Google. Um, but regardless, like trying to acquire all these Mishmash companies and rebuild Panama and like we're going to beat Google at their own game, even though we're not a technology company, culture wise, wasn't going to work. But I'm going to say like a plus plus plus for the startup ecosystem because I, you know, I know I've said this several times on this episode, but like I can't underscore enough how important Hadoop and all of the technology and all of the people who come out of Yahoo's efforts with Panama, um, become in the next 15 years of tech. And you know, we talked about Jeff Weiner. Um, we talked about the importance of Hadoop, the technology, um, and then, you know, Horton works in Cloud era directly, you know, come out of those people as well. Um, but there's actually, you know, even, even another set of companies, um, WhatsApp would not have happened. I don't think without Project Panama because Brian act on and, and, and Yan Kuhm, um, you know, they worked on Project Panama. Yahoo, that's where they met. And then they left and they started WhatsApp. So, um, the list just goes on and on. It's almost like a, a, a PayPal mafia type moment. Well, actually, and people forget that, that Yahoo was a huge player in, in, in Web 2.0 and, in, in Web technologies coming back, I mean, with the, the flicker acquisition, uh, delicious acquisition, um, you know, they made a stab there. This is almost an aside. They made a stab there at, at a very important moment of, in time, um, remaining relevant and, and, um, providing support for a lot of people, um, that would go on to do things that, that, that create the world that, that we know today. Yeah. And that's what makes it, you know, and you mentioned flicker, you've installed Butterfield, right? Who's, you know, founder and CEO of Slack now. It's, it's both so sad for Yahoo that they had this talent and these, these, these technologies within the company and, and now they're part of Verizon. Um, but, uh, but also just so great for innovation and the ecosystem that, um, these people pass through there and, and met one another and, you know, I think that's the, the magic of Silicon Valley, right? Is these, um, these interactions that you can't foresee between technologies and people and companies, you know, lead to this innovation that, um, takes the world in new places. Well, my grade, um, is going to end up being a C, and I'll explain why in a second. It's partially, uh, grating on a curve because the intentionality of the acquisition is to buy the pieces that will allow you to copy the greatest advertising machine, as we said several times now, in the history of the world. So if, if, if that's your intention to, to create the, to put the pieces together that, will create, um, what we, what we now know to be Google, then absolutely A plus, you've got to make that acquisition. Um, it's an F on terms of how it turned out because, you know, in the end, like, you know, they say, don't bring a knife to a gunfight. Um, if you fail to bring, if you fail to bring engineers to an engineering battle, then you're, you're, you're never going to have a chance of success. The reason I'm going to give it a C is because of the fact that Yahoo existed as long as it did because remember, they're coming out of the bubble. Their entire business model is evaporating overnight. I think, you know, their revenues were about a billion dollars around 2001 and then, um, you know, as high as seven billion dollars by the end of the decade. The fact that Google made billions and billions and billions more than them does not hide the fact that, um, they were able to sputter along. Even if they weren't able to successfully copy the model, that, that, that acquisition still allowed Google to be a big enough player that, that Microsoft wants to buy them for what was it? 35 billion or something. Um, and, and kept them going as a multi billion dollar profitable concern all the way into the second part of this decade. Got them to 20 years as an independent company. So I'm going to give it a C because it did do its intention, which was save the company, shift to this new way of doing business, um, survive the dot com bubble and, and remain a player. They, they're not a player. They didn't become the player that Google became, but they, the acquisition did allow them to get this far. That's, that's, that's a great point. Yep. A lot of shareholder value for a lot of years there that I glazed over and saying they didn't beat Google and then sold to Verizon. Like, there's, there's 15 years in the middle that were, weren't so bad. All right. Uh, with that, should we move on to carve outs? Yeah, let's do it. Let's do it. I've got a, a quick, easy read that is, uh, I would say fun, but it's, it, it might make you, uh, take a hard look at things. It's, uh, my buddies getting married, uh, in, in, in September and he sent me some of the stuff he was, he was reading and he loved this one article. The secret to love is just kindness. And this is a, a, a bunch of research done over about a 20 year period by Dr. James Gottman, actually here at, at the University of Washington, um, from research, yeah, research conducted with couples. And there's a lot of really good stuff in there. Uh, if, if you're, you know, interrelationship, not interrelationship, like whether you're looking at your relationship with someone romantically or if it's other people in your life, co-workers, friends, family, it's, it's a lot of really interesting, uh, just observations about the way people who are together for extended periods of time interact. And here's, here's one quick little, uh, quote from it that I found really fascinating. Having a conversation sitting next to their spouse was to their bodies, like facing off with a saber tooth tiger, even when they were talking about pleasant or mundane facets of their relationships, they were prepared to attack and be attacked. They sent their heart rate soaring and made them more aggressive toward each other. And this is, uh, this is talking about there's sort of two different types of couples that, that from all these years of research, they were sort of the ones that, that succeeded in the ones that failed. And the ones that failed years before they failed were exhibiting these like intense biological signs of, of, you know, heart racing when they were around each other. Yet we're exhibiting a complete sort of like calm stone faced demeanors to the world. So, you know, imagine trying to read a person that you're around extremely often and having that internal, internal turmoil in both of you biologically, but representing it as, as, you know, a very amicable relationship. It's, uh, the findings are super fascinating. I highly recommend you go read it for, uh, whatever purpose in your life. That sounds, uh, that sounds, uh, especially dangerous as a recommendation though because what if, what if you're in a relationship and you read this and you're like, uh, oh, I'm identifying with, with that problem. Well, you know, I, I, I, I zoomed in there on the, on the sort of one of the most crazy negative comments of the piece, but really the goal is it, it turns out that it, yes, every, the, the secret to love in all forms truly is kindness. And I think, uh, you know, there, there, there can only be a gain by more people. Um, whether you, it's you and your partner, are you and the people around you reading it? Yeah. Well, the, this discussion is, um, judging up memories and, and emotions in turmoil for me because I have, uh, a lot of experience with, uh, Dr. Gottman's work, his research basically forms the core of this really famous course, uh, at, uh, GSB at the business school at Stanford that I took and that almost everybody takes called touchy feeling. And it's basically one of the most intense, it's certainly the most intense experience that you go through at GSB. Oh, wow. And I did and, uh, it was, um, you get put in these groups of, of 12 people, you and 11 other people and then you sit in a room, uh, once a week for six hours at a time with, with a food break in between and, and you just sort of talk and, uh, see what happens, but, but you prepare for it by reading, reading Dr. Gottman's research. Anyway, it's, it's a really cool experience and had a big impact on me and generations of people that have gone through GSB. Cool. With that, mine is really quick, uh, as my friends know and, uh, many of my friends know and, and other folks, uh, my wife, Jenny and I are on a, uh, extended, uh, trip throughout Europe right now, which is why Ben and I are recording remotely for the next few episodes. And, um, we just visited Berlin last week and I'd never been before, but I was blown away such a cool city. And the fact that everything was just destroyed and, and in World War II and, um, and, seeing this, you know, incredible architecture of sort of modern new building and growth, you know, in the ruins of this old city, um, and the culture was there. We got to meet with a bunch of really cool startups there, great tech scene. Um, I can't recommend it highly enough. If you have a chance to visit Berlin, lots of cool stuff going on there. Uh, my carve out for you then in particular is, I hope you get to go, uh, to Vienna soon. Uh, oh, we went to Vienna, uh, right afterwards. Uh, so different, but also very cool. Right. What I like about that is Vienna actually does have a, uh, a center, a core of the city that survived that wasn't completely bombed into ruins. But then it's, it's environs is sort of like that modern, modernist architecture that, uh, Berlin is so famous for. So, um, but my, my larger, uh, takeaway aside from, um, I, I recommend everyone check out the internet history podcast because, so good. I think it compliments, it compliments this one in the sense of that. This show looks at, at, at history from sort of an analytical angle from a strategic angle, um, from a sort of an MBA angle. Um, and the internet history podcast is trying to look at it 100% from, from a historical angle. Um, I like to call my interview episodes, uh, oral histories where I just let people sit down and, and tell me how they did the stuff that they did, um, and, uh, there's going to be a book coming out sometime next year with Norton, uh, currently called How the Internet Happened. And I'm basically going to be using what I've learned from the podcast to tell the story of tech, um, from, from the Netscape IPO through the, uh, launch of the iPhone. However, uh, plug aside, shameless plug aside, because I'm coming here from the history angle. I thought I'd, I'd, I'd come to the table with a history book. Um, it's one of the, the, my favorite books that I've ever read and I basically only read history. It's called The Dark Valley, uh, I panorama of the 1930s by Pierce Brendan. And the reason that, first of all, it's just amazing one way or another. I read it maybe 20 years ago now. But the 1930s is obviously the, the decade of the Great Depression, the Nazis coming to power the prelude to World War II. And I always thought of this book as, wow, can you imagine what it would be like to live in interesting times, you know, that, that, that prover, uh, you shouldn't wish to live in interesting times. Well, I'm not making the analogy to today that we're living in a new 1930s, but I do think that the, that book is probably, uh, more relevant now that we're definitely living in, in interesting times to say the least. So I'm recommending The Dark Valley, a panorama of the 1930s by Pierce Brendan. Very cool. And, and we should say too, we've, we've talked about Brian show, um, you know, on our show several times in the past, but it is so good. And if you, if you like our show or if you like Brian show, um, you know, I think our show is form a, a natural, um, counterpoint to one another. So like, like two hands clasping. Yes. The, the, the great work that Brian does over it over at AHP. Yep. Well, thank you much. Well, uh, Brian, thank you so much for coming on. Um, we really appreciate it. Uh, an absolute pleasure because I, again, doing the history angle, I would have told the story. And actually, I probably wouldn't have gone into much detail. So the, the ability to, to flex my muscles a bit and, and analyze, uh, is a lot of fun. So it's, it's, it's been fantastic. And boy, I'll tell you it was, it was awesome having your, uh, your, your diligence and, research and kind of academic historical approach, um, here on this episode today. Well, listeners, uh, that's it. Feel free to join us on the slack. I looked last night. We're 470 strong. So come join us and, uh, and talk all things, uh, M&A, IPOs, tech and strategy. And if you, uh, if you have been a, uh, a fan for a long time, or if you're new to the show and want to give it a little boost, we love, uh, reviews in the, uh, in the iTunes store. We can continue to grow the show, have, uh, more guests and continue to dedicate more time to, uh, to producing more episodes. So yeah, that's it. Thanks a lot, everyone.