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So like a thousand dollars put in dominoes that its native has a better return than Apple. Wow. I'm gonna wear in the wrong business. Yeah. Right now. Bottom fishing is a dangerous game though. Yeah. Yeah. Welcome back to episode 44 of Acquired, the podcast about technology, acquisitions and IPOs. I'm Ben Gilbert. I'm David Rosenfall. And we are your hosts. So today back by popular demand, we've got Brian McCullough of the internet history podcast on the show for a crossover episode. So thank you for joining us and hello Brian. Hi guys. Popular demand. Are you sure? Yes. This episode was one of the more popular ones of this year. Did we do the other one this year? Trust me. It's in my top 20 for sure. And I'm over 150 episodes at this point. Wow. Sweet. Well, you are in top five. I think that the melting of the format makes us all three of us up our games a little bit. It does. I think because it forced a little change for us. We were just talking about this before the show. But listeners, Dave and I were talking about how we do our research for these episodes with Brian. But knowing that he's got such a clear narrative around it, we just have this spew of facts and we can play the role of, hey, wait a minute, what about instead of actually structuring the narrative ourselves? Continuing a little bit here about, you guys probably want to know what the episode is about. So listeners may remember the last time we did this, an episode 33 with Overture's acquisition by Yahoo. And today we're going back to kind of a similar time in a little bit before in 2000. And we're going to be talking about the sort of legendary, potentially the biggest flop of all time. A legend in the world of M&A, the merger of AOL and Time Warner in 2000. So I don't know the logic because this is the word I would use. Infamous. Notorious, infamous. Cautionary tale, maybe all of the above. Well, let's just skip to the end when we all say worst acquisition of all time. That's the end of the episode. Thanks for having me out. But today, we're going to be looking at it from the AOL perspective. So was it the worst of all time or was it brilliant? We'll find out. Definitely have some thoughts on that. So change in the format where David, David teases the audience and actually listening to the whole episode. Q campy teaser now. Yes. Yes. Well, before we get into it, listeners, I want to mention we've got a slack that is over 900 strong now. So if you like discussing M&A, IPOs, major tech news that happens, come join us at acquire.fm and join the slack. We also love reviews. So if you feel so inclined, pop open Apple podcasts, you actually can pause this episode right now and go and rate us on Apple podcasts and it makes a world of difference. So thanks to those of you who have done that and encourage more to do it in the future. 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. And really, as we use your show for research a lot, I listened to your episode of the story of Akyo Marina before we did our Sony episodes. This incredible primer. You know, he's actually a good example of why people listen to founders into acquired because all of his greatest entrepreneurs 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 because 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 requires doing what a founder 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, Brian, would you like to take us into the story? Yeah. So AOL Time Warner, the notorious Titanic of especially.com era shenanigans, we want to start with AOL because as I've learned by doing my show, people of a certain age have often said to me, thanks for doing episodes on AOL because I kind of never understood what they did, which I get because if if you're in a time when the internet's all around you, it's in the ether then, oh, it was just an ISP. Why are they so valuable? They only ever had 25 million subscribers at their height. So what is that? How is that compared to having billions of users like a Facebook has? So let's start with AOL and and posit that AOL over the course of the 90s was probably the best stock to buy if you were able to buy at its 1992 IPO and sell New Year's Day in the year 2000. Your stock would have appreciated 80,000 percent at its height. Its market cap was about 150 billion, which was worth more than General Motors and Boeing combined. It was worth more than, you know, obviously Time Warner, Disney, all sorts of people like that. It was estimated that more than 2000 AOL employees were on paper at least made millionaires by AOL stock. So you know, you talk of a Facebook billionaire, millionaires, sorry, you know, even Microsoft millionaires, AOL made people, a lot of people on paper really rich. So AOL, yes, was an ISP. Back in our day, kids, you just have to pay for the internet. It wasn't fast and it was a phone call where you couldn't make a phone call because you had to dial in over your landline. Cellphones existed, but most people didn't have them. At their height, AOL had 25 million subscribers. That was 2002. So after this merger takes place, but they were accounting for at various times 60 percent of US internet traffic in the 90s. So there were other ISPs, you know, even ND ISPs, but in the 90s, there weren't cable modems or wasn't broadband. I mean, there was, but most people dialed in and AOL was the main company that people dialed in with. AOL has a long, fascinating, tortured history going back to the early 80s. Again, I have a couple episodes on AOL that they've got some serious name changes, right? They didn't start as AOL. Control data corporation. There was the source. Yeah, one man's pivoting is another man's failing at one business and jumping into another. That's actually, you can look at AOL in two ways. Either it's one of the more tenacious and brilliant entrepreneurial stories because they basically lose money for the better part of 15 years, certainly more than a decade. And what they're chasing is the idea of online, but they're so soon and so early that they have to wait for the world to catch up to them. I think the other interesting thing to point about AOL is it's not a Silicon Valley company. It's headquarters is in Dallas, Virginia. Exactly, which isn't even New York or I mean, it's DC, but so right, it's not even because AOLs will talk about it gets into especially Madison Avenue and creating content and time Warner obviously, but they weren't even New York based. They were in the middle of nowhere and everybody at the time always complained about that. Going to Dallas was like going to Siberia or something. So again, we're going back to the 80s. It's not till the early 90s when they kind of tie themselves to Microsoft and Windows that they sort of leap to the head of the pack. There's a whole pack here. There's Compuserve. There's Genie. There's Prodigy. There's all these. And Compuserve, I was on Compuserve. So my dad was at beta tester for Compuserve and for AOLs. We just got free accounts and I remember being on Compuserve and thinking it was better, but my understanding is that it was only sort of for the super internet savvy nerds and AOL was much better at reaching the mass market. Does that feel like sort of Y-AOL won there? 100% AOL had the derogatory or pejorative name of training wheels for the internet, but they actually embrace that and it makes sense. I've said on the show, a lot of people's first email was AOL in a time when you didn't have email unless you were at a college or at work or something like that. But also AOL trained people how to live online. They gave you a screen name and you went into the chat rooms and you did dirty sex chat and things like that. You could create an online identity. This is what we should talk about what AOLs business was. They eventually basically made their money by allowing people onto the web, but they were also trying to curate the web and create this online experience that would handhold people into it. Yeah. It's really amazing. We're making fun of AOL in a lot of ways here for being a Delus Virginia company. Again, nothing against Delus Virginia, but not where you think of as a tech hub. But they really pioneered a lot of the paradigms of the internet that are some of the most valuable companies and products today. AOL instant messenger AM was basically messenger. AOL was a lot like Facebook before Facebook. Can we remember to bring that up at the end? It's actually yeah. AOL is always about to run out of money, perpetually. What they have to do in the early 90s is they create this called a walled garden. They go to people like Time Warner and they say, hey, can you give us sports illustrated content? They go to this magazine that newspaper and say, hey, we'll pay you X millions of dollars, allow us to republish your articles and your pictures and things like that in our walled garden. There's all sorts of times when they get saved by an investment from this company or like Paul Allen invests a lot and basically tries to take him over in the early 90s and they poison pill him. Again, coming back to this idea that they're either not really a smart tech company or they were these insane scrappers that they held on to this idea that online could be a thing and then position themselves that when the title wave came, they just wrote it. I've talked again on the podcast before about reasons why prodigy dropped the ball, copy served dropped the ball, AOL picked it up and ran with it. Essentially what you need to know is by 1996, essentially AOL is the primary ISP but it also has this huge amount of content that is, so what you would do is you would dial in and you'd be on AOL. You wouldn't be on the web. AOL would give you your email, they feed you their headlines again, you know, paying the New York Times to provide headlines, that sort of thing. And then if you wanted to go to the web, then you bring up a browser or you'd go through them like it was a channel that you would go to. So it was always something that they were sort of wrestling with like they wanted you to stay on there in their walled garden. But then they also couldn't help but be most people's first introduction to the web in the internet, right? And they they write this through the 90s through the. And they they they did eventually have a browser in AOL, right? Yeah. That's a whole nother story about how they double cross and that's scape and a site to deal with Microsoft and right. And then they had because they had bought a browser called book link and so but the but the point is is that people aren't sophisticated in 96 97 98. For all they know AOL is the internet. And so when I say that they're sort of wrestling with this, they want to be somebody describes it as they want to be the carnival cruise lines for an online experience. So they want to curate it for you. But then at the same time, the reality is is that most people getting on the web and doing things like going to Yahoo or whatever are doing it through AOL and they can't conceptually tell the difference, right? I literally I'd love to hold on to this until tech themes later, but like it's over and over and over again, the only thing that I'm thinking is bundling and unbundling. Like it is incredible how the entire internet, everything that we know is sort of the open web and various different protocols and things on various different platforms are all just bundled within AOL and they were, you know, they were basically made up of the internet. Making all the revenue for that for a very long time before we started to unbundle it all into these separate services. Now there's some also interesting things about AOL's past which are not, AOL presented this sort of, you know, Steve Kason, his khakis and gap ads, this sort of wholesome all American thing. But they made most of their money by originally charging by the hour and most people were in the chat rooms doing sexy talk to each other. So in the background, that's how they make their money. But also they had a lot of things like accounting scandals where they get sued by even attorneys general that like you're not reporting. I can't even remember the details, but they're like reporting certain sales right away even though it should have been, you know, over time and things like that. So they kind of always were playing fast and loose, but you can feel like again, these are scrappers that are staying alive, staying alive with this dream of online becoming a thing until it finally is a thing. And it's essentially 96, 97 that it is a thing and they wake up and they have 10 million subscribers that, you know, 60% of internet traffic is going through their pipes. You know, in 98 or is it 97, you have, you know, you've got mail the movie like again, they cannot under emphasize how much AOL was sort of the gateway for America embracing online in the web and the internet. They're also on the web. They're a portal like Yahoo is by the year 2004 out of every five web users were visiting an AOL property at least once a month. And they start to make real money by 97, 98. So again, and when you say an AOL property, that's on the web. But something that's on the AOL outside of the AOL wall garden, you know what? I pulled that out of my notes and I don't actually know. But that's what I'm saying is that they're playing both sides of the fence. So and we'll get into this like how how they're starting to make real money. Like they would sell you, okay, be on our AOL wall garden side or be on our AOL dot com side. They had all the stuff to sell. Actually, we're going to get to that right in a second. So AOL starts to make real money in the dot com era and no one is making real money in the dot com. So that's one of the reasons why their stock starts to go through the roof. But then the other thing that Wall Street is seeing is like, okay, this internet thing is happening. And the majority of Americans are getting online via their pipes. So what do you want to do? That's the stock you want to be in. You know, there's a Henry Blodget quote where he says, you know, AOL is the blue chip, the blue chipiest of the of the internet stocks. And they're actually, you know, they're the first internet company to be included in the S&P 500. Guess what company they replaced? Actually, there could be a million. It was will worth. But so, you know, as late as 1998, they're still under a $30 billion market cap, but then like everything else in the dot com era within 18 months, you know, that's ballooned above 150 billion. And we talked about this era on this show before and you certainly have on your show Brian, but like, I think it's worth like, again, as always, just pausing on this like, as late as 1998, AOL was worth, you know, market cap of under $30 billion. And that was insanely expensive. And that was insanely expensive. And then, you know, 18 months later, you know, they're buying time Warner and the combined company is valued over $350 billion. Like, that is how crazy that moment in time was. Well, let me tell you some more reasons why Wall Street was in love with AOL. What they're looking at is, you know, a lot of AOLs called it like a three-legged stool or whatever. So, they're getting money from the subscriptions. Again, I think by 2000, they hit 20, 20 million people paying $20 a month, right? And then they're a content platform. In the early days when they had to go to New York Times and say, we'll pay you $2 million to get your headlines, by 97.98, they can say to the New York Times, you pay us. If you want to be in our wall garden, we've got the eyeballs, we've got the real estate, you pay us. So, they're basically a content platform. That's very lucrative. But the big thing, and this is going to be key to this whole conversation, is that by 97.98, they're making tons of money on advertising. Because, again, they're basically where everybody goes, you know, we think of people starting their day on Facebook now or whatever. So that's where your email was on AOL. By 99.99, that's where your buddy list was on AOL. But this whole concept of people starting their day online, like AOL, again, sort of like trained people how to do that. So I just did an episode with early Yahoo guy. All of the portals in this time period make money essentially by selling ads to other comms. The whole dot com bubble can be thought of as like just a snake eating its own tail. If you happen to be one of the portals though, you're the one doing the eating. If you're one of these venture backed startups, you're the tail. That's pretty easy. So funny, I mean, the parallels to Facebook are just like jumping off the page, right? There was that era, like three, four years ago where everyone was saying that, oh, yes, Facebook discovered this magical mobile news feed ad and they're mostly, you know, on this new format that's to install apps and all the apps are funded by venture capitalists that are just paying money to startups to pay money to Facebook to get the, I mean, it's like hilarious how it's the same narrative around the company two decades later. That may give you some brilliant examples of that. So here's a dot com company called DrCoup.com. See how it coupe was the search in general, the United States. This is how crazy the dot com era is. They, they, DrCoup.com is a company that IPOs to do health, make a health website, right? I don't know the date of their IPO. I, it's probably 98, 99, definitely 99, I think. The IPO and raise $85 million for their website. A month after they debut on the stock market, DrCoup turns around and basically spends all of that money by agreeing to pay AOL $89 million over four years to provide health content to AOL users. So all of the money they raised on their IPO, they turn around a month later and they handed over to AOL. Because everybody thinks that AOL is where you've got to be. And so AOL in 98, 99 is starting to kitching like crazy. There's a company, a long distance phone provider called Telusave that pays $100 million and you know, this is, this is playing off dot coms. Like there's a company called Preview Travel that pays $21 million to be AOL's online travel agent, $1800 flowers, pays $25 million to be the florist. Although I had Jim McCann on the show and he said that that worked out very well for them. But AOL can play off Barnes and Noble who pays $40 million to be the book selling partner in the Waldgarden section versus Amazon that pays $19 million to be part of the AOL.com web portal. EWA ponies up $75 million to be the exclusive auction provider. And it kind of works out for everybody. Like when Dr. Koops deal is announced, it's stock actually leaps 56% in a day. This is the dot com era. But everyone believes that they have to be on AOL. Just like everyone believes you've got to advertise on Yahoo or whatever. So AOLs in this position just start banking money like all of a sudden they're turning a profit where they had it for years and they're meaningful profit and billions and billions of dollars. The guy behind this era is Bob Pittman who I don't know if you if that name rings a bell to you guys. He was one of the original founders of MTV. He became very famous for being the hard driving guy behind this AOL deal making machine. He was their COO right? I think so. Right. We'll get to him later after the deal the deal falls bird. Internally, his team of guys that we go around and shake the trees for these dot com deals were called the hunter gatherers because they quote descended on the dot com's like scavengers and made them offers they couldn't refuse. There's a quote where an anonymous dot com company says that the it was like high pressure just you know boiler room type stuff quote for weeks it was you're great. You're great. We want to do business with you and then one day it turns out that we have to give them every last dollar we had in the bank and 20% of our company. Another dot comers says that AOL demanded 30% of her company quote and then for good measure they tell us these are terms you have 24 hours to respond and if you don't screw you we're going to go to your competitor. So listen, these are crazy times. These are fat times for AOL. But again I want to bring up this idea of culture and AOL being scrappers and doing whatever it takes to stay alive. So why do they stop when all of a sudden they're like in the cat bird seat. They seem to be the nexus of this new internet economy and their bod pitman's army of deal makers you know basically basically drive what is essentially the thing that really makes Wall Street go nuts. So we're going to get into this again later but everyone thinks that the AOL went away because people stopped doing dial up or paying for dial up and they moved to broadband and things like that. But the thing that we'll see actually has the deal sort of collapse and AOL stock price collapse and things like that is the fact that what made their stock appreciate so much was that they had this insane growth and advertising. And that's where the money was coming from. That's where the actual cash flow was coming from. Sure, it's great to have in the background this recurring revenue of the you know the subscription revenue. But that's not what was actually moving the needle in terms of why Wall Street loves them. Yep. It was all of these all of these deals they were doing with all these dot com startups that were giving them all of their money. Exactly. Well, interestingly enough to transition here because they're doing all these deals with these dot com companies they have sort of their ears to the ground and they can start to see when you know the money starts to dry up. VC money starts to dry up IPO start to go bust there are the ones that know before anybody else that listen this bubble might be bursting. And so what in from like a sort of macroeconomic perspective, why are the David you may actually know more about this like what why are the VCs ceasing to invest there. So what's the signal to them to stop? It's hard to say. Again, because we're talking about such compressed time frames here. If I were to speculate, I think it's probably just that so much money had gone into the system without you know, real returns. And so you start getting to the bottom of the barrel. Well, actually, that's that's it. They got great returns. Again, there's other things I don't have in front of me. Paper returns. Right, right, right. But see for them, it doesn't matter because anything can IPO for a certain amount of time, right? And so once you get past the lock up period, you can take actual garbage public and it doesn't matter, right? Yeah. I was thinking more from the limited partner perspective. But what you said is exactly it is that when they are taking garbage public, eventually everything is garbage. And enough people have kind of gotten rich enough and fat enough that they're like, you know what, I'm going to sit these out. You know, the seventh pets start up, I'm going to sit this one out. And so that in my personal theory is that that was it. It's also a combination of people realizing that the returns on online advertising were not good. The click-through rates are plummeting. So that's always been such an underpinning of things. Like, you know, ad rates, underpinning, it's sort of like, you know, the plankton and the sea or whatever. Yeah. Well, I guess that's what I keep point to. I mean, I think to come back to it. I'm sure that has a lot to do with it too, is these companies that have been venture-funded and then even IPO'd had given all their money to AOL and Yahoo and other portals with expectation that that would drive huge clicks and huge revenue. And then when it doesn't, then they go bankrupt and then there's no more money to feed into the system. Well, there's also, it's the 1999 Super Bowl when I think there were 30 dot-com companies, maybe it was 2000. It makes more sense that it was 2000 that, you know, are paying $2 million a piece for your one Super Bowl ad. And that worked out for certain companies like Hot Jobs famously. But then others, you know, you've never heard of again and they blow, you know, they're $2 million of the $10 million that they raised. And listen, there's a reason why it's a, it's a, it's a, called a mania. There's a reason why, you know, after a party, you have a hangover the next day because you did some crazy stuff. But that, that was the times. So to come back to this, the, as I said, they are known before anyone else because they can see this. They can see, well, listen, Dr. Koops not going to raise another round. So, you know, when that deal is up in three years or whatever it is, where are we going to get another Dr. Koop, right? So as early as, and I want to stop and mention, there's three great books on this. It's unusual that there's been this many books written about a, a doc on everything. There's Kara Swisher's book, there must be a pony in here somewhere. There's Fools Russian by Nina Monk and there's also Stealing Time by Alex Klein. So in one of those, you can see, and there's quotes from internal memos after other later lawsuits. As early as December 98, internal emails show that like Steve Case and, and, and Pittman and the other lieutenants are kicking around the idea that they need to start thinking about a safe lily pad to kind of land this company on because they're seeing the bubble bursting. And so there, this is 98, December 98, but so it's still another 18 months before the bubble actually burst. So they, they think about other internet companies and we'll get into this later, but they, they seriously consider eBay. But case was generally, sorry, like actually have Meg Whitman like waiting in a room or something. I'll tell that story. But the case, Steve Case was wary of doubling down on another internet company because that makes sense strategically if you think the bubble is going to burst, why do another internet company? Two anchors tied to one another. Yeah. Yeah. Yeah. Yeah. He says something like, let's look beyond the internet and quote, identify companies that have a profound impact on how people get information, communicate with others, which is our core business, byproducts are entertained, etc. So there's major courtships with AT&T, the, the, the, the pre singular merger AT&T, Disney that they went hard at Disney, but apparently Michael Eisner was a hard no. And the, the quote, I think this is from Swisher's book, one of the AOL guys says, we all knew we were living on borrowed time and we had to buy something of substance by using that huge currency. We didn't use the term bubble, but we did talk about a coming nuclear winter. Well, one of their problems is that they also know that dial up is a limited technology that's going to be eclipsed by broadband. Again, they're not stupid as much as they're not maybe, you know, a Silicon Valley company, huge technologist, they know that broadband is coming either through DSL, which people thought would be a thing at the time, but mainly cable, modems. So a lot of thinking went into, we should get a cable company or that's probably why they were talking to AT&T, you know, AT&T had DSL at the time. Another quote from Carouswisher's book is anonymous AOL guys says, cable was the driver of everything without it no deal made sense. So time Warner is the biggest of the media companies at this point in time. Also they have a little thing called time Warner cable. So if Steve Case doesn't want to do an internet tie up, he wants something that has more substance, no one's going to believe if they decide they're going to buy an oil company or something like that, though they could have, they had the market captive basically buy anything at that point. So what he believes is time Warner has the content. And remember they spent a decade believing that content was the thing that would make online become mainstream become a thing. And so it's, you know, content is key. How many times have we heard that over the decades? Time Warner has this, you know, Tiffany platinum content going back hundreds of years and by the way they have a cable company. I think it was the third largest, maybe the second largest at the time. So I'm going to take another side here and tell you the story of Jerry Levin and time Warner. Jerry Levin, the CEO of Time Warner at this point, made his bones through technology. He basically, he didn't invent HBO, didn't come up with the idea, but he was the guy behind the strategy of let's deliver this pay channel via satellite TV. He makes his name, rises up through the ranks via the incredible success of HBO. And Jerry Levin believed in technology because of that. And in fact, over the several decades at the company, he continued to try to pioneer technological advances believing that there's untold new ways in the future that technology is going to be able to deliver content and media and things like that. They invest in the full service network in Orlando, which was sort of an attempt before the web took off to sort of do, you know, what they call 500 channels and, you know, shopping with your remote through your TV and things like that. Time, it was time at the time before they bought Warner, spent about a billion dollars on that. They also, when the web comes around, there is a site called Pathfinder that they throw several hundred million dollars after. I have a lovely episode of my podcast about Pathfinder because it's gone down the memory hole, but it deserves to be remembered for all of the things that it pioneered in terms of trying to deliver media on the web. But it also lost them a ton of money around this time. Corporate America, there's a watch word, everyone needs an internet strategy. You know, Disney does the Go network. There was NBC eye. There was all these initiatives. If you're a media company, you're trying anything you can do, very dealer tries to buy a light goes or was it all to this, I can't remember, everyone thinks that you're going to be Amazon, you've got to come up with a way to either embrace the internet in the web or combat it or something. So you have Jerry Levin, who's always believed in technology is going to change content and media. Time Warner has failed time and time again to come up with an internet strategy. And so in 1999, when the People's Republic of China is having its 50th anniversary and all of the, you know, the politicians and business leaders and it's basically Davos and Beijing for that period of time, everyone's in Beijing celebrating the 50th anniversary of the People's Republic of China. And Steve Case starts to seriously court Jerry Levin. Jerry Levin thinks this is great. This is going to solve his, it's going to prove him right that if he can marry the greatest media company in the world to what everyone believes is the greatest internet company, his vision of technology changing media will come true. This is going to be his legacy. There's in the various books, it's a complex courtship. This is where I believe the, the eBay thing comes in. My theory is is that they kept talking to eBay because they were using it as a stocking horse. Like actually, I'm going to open up the Kara Swisher book here. The week before, it might even be the day before. They actually announce the merger, the deal with Time Warner. Meg Whitman and their Goldman Sachs people are at AOL headquarters and they're in one conference room. It's the main conference room trying to work out a deal so that AOL is going to buy eBay in what's called the Malibu room on the opposite end of the floor is Time Warner and their lawyers and they're, you know, working on the deal that's eventually going to go through. So it's a comical scene. This is quoting Swisher executives are shuffling in and out, alternatively apologizing to and ignoring Whitman and her team who are sitting there cooling their heels wondering what well, they're not quite sure what's going on is this is just the way AOL works. They're famously flaky and like aggressive at various times, like sort of passive aggressive almost. And so spending a day there where nothing really gets done and lawyers are running out of the room and disappearing. Where are they going? They don't really know. They don't know that Time Warner is in the other room. So at the end of the day, Whitman and the team is leaving. She goes into pop by Pittman's office to say goodbye and she says, quote, you've got a lot going on here, it seems. And of course, she had no idea. I think it's the next day that they announced the Time Warner thing. But so yeah, they basically now this is definitely on a side. What if they had done the eBay deal? Because eBay survived the dot com bus better than everybody. Huh. Well, and in large part due to because of PayPal, which of course came later. And then that's the counterfactual with if if if would AOL have been smart enough to have allowed the PayPal acquisition. But but if you look if you look at eBay stock, like it basically it goes down some but then it reaches its height. It surpasses its dot com bubble height in like 2003, 2004. It's like the only stock that does like in a time period when Amazon's down to like $5. Because eBay's business basically never dipped. So in retrospect, which we'll get into buying eBay was the way to go. They should have gone with a was an internet company. So I'm going to I'm going to save this. I'm going to come back and tech themes. This is my tech theme here. But you know, this is well, I'm going to save much more on this later. Suffice to say that you know, eBay was the much better business for the internet. Certainly than Time Warner. Well believe it or not guys, I'm going to wrap this up. Let's do it. The the I promise 20 minutes. I'm way beyond that at this point. The deal is announced January 10th 2000. It's the merger of $164 billion AOL with $83 billion Time Warner. The deal it's announces a merger. But the reality is is AOL shareholder is controlled 56% of the merged company and Time Warner shareholder is 44% so it's an acquisition in all but name. And you know, I actually remember very vividly this happening and in my memory, I forgot to look this up. Like Jerry Levin and Steve Kess are on Charlie Rose that night. Like they were everyone like. They really rose. Yeah. Steve Kess vowed that one day AOL Time Warner would have $100 billion in revenue would be the world's first trillion dollar market cap company. There's a quote from Roger Mackney, the venture capitalist who says, quote, let's be clear. This is the single most transformative event I've ever seen in my career. Cara Swisher has a quote from her book where she says quote, in one major move, the two companies had seemingly addressed both of their weaknesses and intensified their strengths. I won't deny that I really believe that as did many others. Many of whom now pretend they never did. So I mean, this is January of 2000. This is the height of the bubble. What's also happening around this time, the Microsoft antitrust trial has come to an end. It looks like Microsoft's about to be broken up. Who looks like is the new king of the technology hill. It's AOL of all people. What happens is so the deal is announced in January of 2000 on four days later, the Dow Jones industrial average peaks at a level that it would not return to for more than six years. On March 10, 2000, the NASDAQ peaks and at a level that it would not reach again until March of 2015, losing 80% of its value at its low. The bubble bursts and we'll get into why the culturally why the acquisition was a disaster, the merger was a disaster. But again, the reality of it is not that people stopped doing dial-up. Actually, until 2002, the dial-up subscriptions were still growing. It peaked at 26.7 million. The thing that kills this deal is that as soon as it happens, all of those deals that AOL did with the dot-com companies disappear evaporate. I'm not just saying that the three-year deal runs out. I'm saying that the companies are bankrupt and are not going to be sending you any more checks. Essentially, that insane growth and advertising that had exited Wall Street, at some point, Wall Street was estimating that AOL by 2003 would have more advertising revenue than an ABC or a CBS in television. They're thinking this is it. This is the next big thing. Goes away almost from the moment that the deal happens. Culturally, I don't know how interesting this is, but those AOL cowboys move in. They try to tell the time Warner guys, okay, we're going to run this like a tech company now and it's like the host body rejecting an organ. Time Warner was always notorious for having these worrying fiefdoms of like, you know, eye-control magazines, you control cable, you control book publishing, you know, they don't... And not dissimilar from AOL. I mean, I think AOL had the internal fiefdom culture too. You mix two of those together that can't go well. And then with AOL coming in as the conquering heroes and being like, we know this new media game better than you Yahoo's, you know. But like literally... You Yahoo's, no pun intended. That's not true. There's practical things about culture clashes. Like if... And one of the books like Sports Illustrated just refuses to play ball. Like we're not going to give our content to you. We're running our own...in fact, Sports Illustrated famously never really gave much to the web anyway. Or think of there's a story about like Warner Studios after the merger refuses to let AOL take over the Harry Potter website and the online promotion for the Harry Potter movies are just getting going, right? So that's why Warner Studios is... So an AOL says to them, okay, let's take this over. Warner Studios says no. Right? And then the thing that AOL wanted the most like to save their skin was AOL's... Well, I'm sorry, Time Warner's cable division. Time Warner had Road Runner famously, which is another thing. Like they couldn't even get Warner to give them... License them the Road Runner cartoon. That's the infighting that is at Time Warner. But so when AOL says, okay, listen, let's brand AOL into your expanding cable internet service. Time Warner cable says, get bent. Right? So even though they're the acquiring company, essentially, the entrenched power brokers at Time Warner just tells these guys to screw off and basically waits them out until the disaster of the merger becomes evident and get kicked out. What point... And if you think about the power dynamics generated by the revenue, I think AOL's total revenue in 2000 right before the merger was like 9.5 billion or somewhere in that neighborhood. And Time Warner had a much more narrow price to earnings ratio of that... What were they valued at? Like a 150 million or something there. 60 billion, yeah. Yeah, I'm sorry, 160 billion, like they had real material revenues such that that had to be like a 3X or something, not like a ridiculous multiple like AOL. Then I know what article you found because I found that one too. I think that was adjusted for inflation. But it's even worse. AOL had less than 5 billion in revenue. Right. And Time Warner had... It was that small. Yeah, and Time Warner had over 25 billion. So over five times as much. And AOL's quote-unquote revenue as we've talked about was the snake eating its tail. You can see how you're like a Time Warner mid-level exec and you still feel like you have all the power in that organization. Or you should by right. There's also... Think of this strategically. So AOL thinks we'll have a cable company and then that'll solve our problem with the transition to broadband. But then if you're Comcast, why do you want to play ball with AOL now? Right. Like if AOL had been independent, they were trying very hard to do things like go to a Delphia cable or Comcast and say like, let's co-brand AOL and we'll take a certain percentage of the monthly fees and you take it. But we'll value add to this. But once they're with Time Warner, then why would any other broadband player play ball with them? Right? So in a way, strategically, that never made sense. But then like we've been saying, essentially the money just dries up not again because of the dial-up subscriptions are drying up. But the... It's all of that... Add money. It's all of that when they could charge the New York Times to de-da-ne to be on their screens and things like that. It evaporates in the nuclear winter of the dot com bubble bursting. And so just a year, the one year anniversary of the merger being announced, the combined companies are only worth $147 billion. At the time of the announcement, AOL was worth $160 billion. So essentially, the combined companies a year later are worth less than AOL was at the time of the announcement. Yeah. And I think they continue to go down from there. They go down below $100 billion, even I think below $50 billion for the combined companies. Yeah. I had a bunch of stats on that too. The only thing that's relevant is... So essentially, they... It's because of the AOL side of the equation is delivering no profits and the revenues are shrinking. And they still... And they still 55% of the company. Exactly. So the write downs, $54 billion write down the company has to announce in 2002, which was the largest ever at that time. It might still be the largest ever, I don't know. $55.5 billion in 2003. The overall loss for 2002, this says, is 99 billion. So I don't know if that's like a fiscal year versus calendar year thing. So basically, AOL, everything valuable about that company is completely an illusion. And Wall Street notices. And so it's announced, what is it, January of 2000? By December of 2001, Jerry Levin steps down. The AOL people are still thinking that they're in charge at this point. So they want to take over the CEO ship of AOL, the control of AOL, specifically. And actually, that's where Bob Pittman really was the guy that thought he was going to take it, because he wasn't feeling like Steve Case would step down at some point. But no, as we know, it went to Dick Parsons. And so Bob Pittman is out by July of 2002. Steve Case finally leaves in May of 2003. On September 18, 2003, Time Warner officially drops AOL from its name. The combined company was called AOL Time Warner officially. But just three years later, AOL, or Time Warner basically wants to pretend like AOL never happened. And at this point, they still own the asset. Like they're not saying, all in one fell swoop, oh, we're going to spin it out. Like it is still on the company. It's just not doing anything. Well, you always hear those numbers now and again about however millions of people are still paying every month for AOL dial up. I mean, it's... Oh, yeah. I've actually got the number as of Verizon's bid in May 2015. They're still making $606.5 million in dial up revenue. And I looked up some, it really actually hasn't shrunk much today. So they're really actually still maintaining that. Well, you know, there's other assets in there. Remember, they bought a net scape, only to... A little company called NetScape. Yeah, yeah. I mean, so, you know, there's a reason why Kara Swisher's book is called There's a Pony In Here Somewhere. It's... If there's a mountain of shit, this big, there's got to be a pony somewhere. So they tried, man. It was a little pony. Well, actually, it was a huge one. And you remind me, I'm glad you reminded me of this. I made a note. AOL Instant Messenger. At its height, I think, has over 100 million users. Okay, so like 2003, 2004, people have a buddy list. It's your social graph. Okay. You know, for the research that I've done on Facebook, basically, they wrote Facebook. They didn't talk to each other. They sat across tables from each other. They're on AIM chatting at each other. Like that's how Facebook... There's quotes that I found, like, you know, people in charge of AIM and things like that are like, yeah, we had social networking, you know? So again... And again, AIM became from ICQ and... Which I think AOL acquired ICQ. AOL acquired. It didn't actually come from ICQ. ICQ was another thing. No one knows why they bought it. AIM, it's an interesting story. It was an internal thing that AOL didn't want to do. Like people thought it was cool. Why are messaging platforms always internal things slack, discord, AIM that are like not actually going to be a product and then shocked. Like, we should be less shocked by now that messaging platforms make good spin out clients. And AOL should have known because they're the ones that... I didn't say this before, but the reason they beat prodigies is because they let people chat. Proudigy tried to, you know, don't do sexy stuff. So AOL... People want to do the sexy stuff. Just let people talk. The number one thing, if you have a product... If you have a technology product, a new technology paradigm, the thing that will be the company, the first successful company is the one that just lets people talk to each other. I guarantee you the first billion dollar software platform or whatever company coming from VR is just the one that allows people to talk to each other and VR the best. You know, with the iPhone... It's a little solid bet on that. Yeah, yeah. With the iPhone, what are the things that came through, you know, things like, you know, WhatsApp and things like that? Yes. Any paradigm in technology, allowing people to talk to each other is the safest first bet. I didn't know that number, the hundred million number for aim, but it makes sense. Like I had formative, formative, like growing up experiences where I, you know, had social... Like the first experience socializing with people, you know, at least people online and also actually meaningful relationships. Even when we like went to the same high school or middle school, like we'd chat on aim until like two in the morning and you like get to know people and you like care about what's in your profile and you care about away messages. Like that was before Facebook, wall posts and like you, you have all these things where like it's social status, it communicates your personality, it, the number of people on your body list and the way you have it sorted is like representation of strong and weak social ties. Like that was an essential fabric of life. Well, you know, I would even say that same thing from the business perspective, you know, my three startups were mostly in the 99 to 2005 era. So before even Skype becomes a thing like that's how we did business, you know, Skyping people all the time. It was people's, if you knew their, their instant messenger screen name, I'm going to talk to Omalec next week and, but like he was famous for that. Like he would give that, like that's how, if you wanted to get on GIGO, you, we were talking earlier about, you know, promoting startups and things like that. Like if you knew Omalec's instant messenger and I think Michael Errington was the same way, like that's how his was Skype, I think. I remember. I'm like, it's being a huge, yeah. Yeah, but so right, you know, business was done over that. Again, it's the social graph. It's like, it was your role at ex. It was your, it was how you kept up with people. Yeah, it was everything. So I need to do an episode on that. I got it. I got to track down some aim guys and have them basically. Totally. Totally incredible. Like it was, we talked about it earlier, but like it was Facebook WhatsApp, you know, WeChat, like, you know, all of this Snapchat, like Instagram, not Instagram, maybe photos weren't that big a part of it, but like all of the most important ones. Oh, you could trade files. I don't know if you remember that. Yeah. Well, you could trade music. It would fail all the time. Yeah. Like it was one of those things. It was like, yeah, I give it a shot, but we'll see if it actually happens. But it was, you know, for all the, you know, lots of people ourselves included make fun of these, you know, non-technologists, cowboys in Virginia, like they invented the internet to borrow an Al Gore phrase. It's a little, I mean, it's a sad thing to watch, really, because like, you know, Facebook was their opportunity to squander. And I mean, it's, it's, as you sort of study network effects and how people build a responsibility around their business, there's some fascinating stories about, I think it was ICQ trying to reverse engineer the aim protocol so you could chat aim people from the ICQ client and these basically engineering wars back going back and forth of how could they keep tweaking the protocol to keep the other guys out and keep their network effect to themselves. There was a whole cold war between AOL and Microsoft because you had MSN chat, you had Yahoo chat. And so yeah, that's what it was. That's what it was because as soon as MSN messenger, right, as soon as MSN messenger would crack the code, AOL would change it and, right. And you saw these network effect, you know, local network effect dynamics taking place, like just like there is today, I mean, MSN messenger in live was the dominant network in a bunch of countries and aim was the dominant network in the US. And you know, it's just like, you know, I message and, you know, in Facebook messenger here versus what's app in Europe. Well, listen, remember Steve Jobs famously told us that they were going to open source FaceTime. FaceTime protocol. Yeah, I haven't seen that happen. I think that's actually less of a business decision and more of an engineering decision. I think the, as the, as the lore goes, the team that built FaceTime was sitting in their row when he, they heard it for the first time when he announced it on stage and they all looked at each other like, what? Yeah. I think I heard that too. Yeah. Well, all right. That's my, I'm sorry. I drone down so much, but that I will hand it down. I'm sorry. I will hand the keys back to you guys. Where do we even pick up? I know. I know. I mean, well, David, do you, do you want to talk into anything at all? Any, any more acquisition history and facts? Or should we go into the acquisition category? And I can kind of frame that up a little bit. The one thing I want to add, nothing more on the history and facts of this itself, but it's just such a, you know, such a fitting code to this whole story is history repeating itself. So again, and look where we are today and AOL is owned by Verizon, AOL spun out of Time Warner in 2009. Most valued it just over $3 billion versus the astronomical heights of, you know, nearly 10 years before that. And that's mostly because they had all this ad tech that they've bought over the years, you know? Yep. Yep. So they get acquired by Verizon. And then on the Time Warner side, the deal hasn't been approved by the government yet, but they are in the process of getting acquired by AT&T. So, you know, there were all these jokes about the worst merger of all time and, you know, this tech internet company AOL, you know, merging with an old media company. And here we are in 2017 and both of them are owned by phone companies. Yeah. Really, really hard to imagine. Well, for acquisition category, I think why don't we actually take a stab from both directions? So let's say first, because it actually was, you know, AOL taking over Time Warner, what kind of acquisition was that for AOL? Our standard categories are people technology product, business line, asset or other. Ryan, if I may be so bold as to voice what I think you would say, this is actually another, because it's not necessarily acquiring, if anything, it's maybe acquiring a business line, but it's like acquiring stability and liquidity. It seems to be what you're applying, like, like, an applying and exit strategy. So, see, here's what I would say. The rationale is that they're buying the business line of the, or the technology, it's murky to me what the category is, but they want the cable company so that they can transition into broadband. That's the rationale. What are they really buying? The assets. They're essentially trying to say, listen, if our stock is a femoral, we need to convert it into something that'll last forever. Any magazine has been around since the 20s, Warner Brothers has been around since the 20s. So, it's the asset of content is king that they were really in their heart going after. Yeah. Well put. Man, and as a little aside, like, if you are at the negotiating table there and you're AOL, how do you keep a straight face through all this and really represent what you're in this for and what time we're getting? We can get into speculating on that later. All right, I'll save it. So then let's take a stab from the other side. Actually, before you do, David, do you agree with that? What's your take on it? Well, I think I would classify it as, I think you guys are totally right, but to me, I would classify it as an other because I'm trying to wreck my brain here about any other deal we've covered on this show where the rationale for it has literally zero to do with the business. There is nothing going on here except it's not an asset that's valuable to AOL as a business. It's certainly not technology. It's not people. It's business line, sure, but like, there's just tons of business lines. They're essentially buying a conglomerate. The only reason they're doing it is to just save their own net worth, personal net worth. This might be a crazy analogy, but the analogy that springs to mind is how Dubai and all the Gulf countries, they know that oil is going to run out someday so they're trying to turn into tourist destinations. So that has nothing to do with energy or natural resources, but they're like, yeah, we know. We've got to do something that's sustainable. Yeah, exactly. I think that's what's going on here. It's like Snapchat today if they were to decide to go buy land in Manhattan. Right. Or an oil company, which famously Zingga did when they bought their headquarters in San Francisco right in the heart of so much, huge building right across the street from Airbnb and by far the most valuable part of Zingga. Well, the most valuable part of New York Times is their building or which did they sell that? I don't know. They sold it and they leased it back. Yeah. Gotcha. Gotcha. Okay. So let's do the reverse. So you guys go first and I'll go last. So what is time Warner thinking it's doing? So in my head, I'm wondering if they're buying technology or they think they're buying technology or if it's really buying distribution that like they've somehow missed out on the internet and they need this way to distribute their content and it's much better to actually own it than to partner and by buying AOL or by getting bought by AOL, then suddenly AOL has all these dial up customers. They're in all these homes and they have a brand new channel to get their content to them. I think if I was going to try and rationalize it from time Warner side, that's what I would go with. Yeah. I mean, I think they're just some amazing quotes doing the research here from all the principles involved and from media and observers at the time. But I think it's kind of like Cara Swisher, as you quoted Brian from her book, she's the one who's honest about this. Yeah, at the time, people were writing high on something and they thought that this made sense. Jerry Levin, the CEO of Time Warner and then CEO of the combined company, he has this quote from when the deal gets announced. I think he said this to maybe there's a big Washington post article. I think it was in this, might have been written by Cara. Yeah, she was with them at the time. Yeah. But he says this new world of valuations in the internet economy is something I accept. So I mean, he's basically saying like this company that's buying us like it kind of has no business. I don't understand the business, but like there's the new normal. You know, that's how people talk back then. Absolutely. So I think it's just like, you know, I want to be too disparaging of them because really as Cara said, like everybody believed it then, but like they drank the Kool-Aid, they thought that there was, you know, a new reality there. Jerry Levin bought the Kool-Aid. Yeah. Which is why I'm going to make the argument bizarrely enough for people because that's what he thinks. He thinks, you know, he's coming to the end of his career. This is going to be my legacy. I was the guy that was smart enough to hitch this company to the, to the horse, the thoroughbreds that are going to take it into the 21st century, right? And so it's, it's not people because he thinks that, you know, they're, they're these brilliant business and it's just that they have cracked the code of something that we old media people can't, haven't been able to figure out and we've been trying to do it for 10 years, you know, so it's people in that sense. And there's such a great quote from, from Bob Pittman from AOL. Who they're totally like the pushers, like just, you know, feeding more supply into, you know, these guys, you know, via, you know, mainline. He says, he's quoted in the press at the time, uh, saying that, uh, this is, uh, I think it might be from the same article. The slow moving time Warner would now, this is the, the author of the article writing would now take off at quote, internet speed accelerated by AOL and then Bob Pittman comes in with a quote, all you need to do is put a catalyst to time Warner. And in a short period, you can alter the growth rate. The growth rate will be like an internet company. Right. This is like the, this is like, uh, it's alchemy, you know, alchemy via, um, you know, buzzwords of it. Eventually. Here, David, past some of that over here. This is like when the Beatles period, when, you know, they went and lived in India and like, it started doing their heavy drugs like, I mean, it does feel like, like literally nothing in that sentence is grounded in reality. Like, and you can understand and broad strokes how you look at a tech company and you look at the way that it grows. But like zero of that was connected to like the intrinsic value and why tech companies get the multiples they do and why they have the growth rates they do and like any discussion of zero marginal cost, it's like, well, catalyst, you know, well, can I make a point here? In my research at the dot com, the bubble generally, what you have to understand is everyone was saying, okay, this is a bubble. This is a bubble. This is a bubble. This is a bubble. From 97 on and kept being proven wrong. And like, you know, in my book, like there's a thing, you know, where there's quotes from like, you know, bears on Wall Street or whatever. Eventually, everyone just capitulates because you've been wrong for so long. You know, when, when, when you're like, there's no way Yahoo's a $10 billion company. And there's no way they're a 30. There's no way there's a 50. When they're over $100 billion at some point, you just got to be like, well, shit. So it was, and you know what? There's all sorts of theory about bubbles and things like that. That's when the bubbles burst. When you finally slay the last bear, you know, when people's careers have been destroyed because they've been Cassandra's for so long. And it's like, listen, I've been listening to you and I missed out on like a 500 percent upside, you know, like, so I guess I'm buying Bitcoin at 4,600. Yeah. I was just thinking this whole time. This will maybe transition to what would happen otherwise. I would have loved to have like had a conversation with Steve Jobs during this period and been like, dude, what do you, like, what's your take on this? I can only imagine what he would have said. Yeah. I don't know. I have thoughts on that in the sense that he, I mean, because what happened in history is that they waited until the, till the, everything exploded. There's ashes on the ground and they sort of rise up in a place where no one thought, you know, hardware or no one thought anything was going to be everyone is going to be on the web. Well, but Steve's laying the groundwork for that all through this period. The next acquisition is at the end of 1996. And then they have the sort of that hub, the digital hub strategy. So they kind of do ride with the IMAX. That's when this is happening. Yeah. They do kind of position themselves as we're the best computer maker for this new web era. So well, we had a few, few counterfactuals throughout history and facts about what would have happened otherwise. But maybe a word on like, what would have happened had these companies stayed independent? Yeah. So the one thing that I really want to explore here, I think we sort of have a, we could talk about AOL, but I think my just base assumption there is that it goes to zero or close. But the thing about, the thing I'm curious about is, is time Warner potentially, do they end up in a way better spot today in 2017 if they hadn't gone through this or did this have some kind of positive effect on them that we haven't really talked about? They gained some DNA maybe or some thinking. Yeah, I don't know. I would actually, again, my most recent episode was with a Yahoo guy that, you know, Yahoo surviving the dot com bus. Like they had the same issue of all of their dot com advertisers going away. So where are they going to get their money from? And, you know, they basically Hollywood eyes themselves, but they, they, they successfully turn the business around. So it's, it's almost like that idea of if you do have to struggle, you're forced into creativity to find ways. So I'm not saying that AOL would have, you know, succeeded in anything, but, you know, maybe if they're desperate, they do take a look at the one thing that's actually still growing aim and try to figure out. So it's, it's sort of like it's, if you've got the parachute, then you just kind of enjoy the ride down and you're not, you're not hustling. Well, I think we covered the counterfactuals there. I don't have anything else for what would have happened otherwise. Should we move on to tech names? Yeah, let's do it. Let's do it. There's a few that we've talked about, but I, one that we haven't talked about yet and the AOL is completely notorious for is a lot of their rise. And especially in branding and then brand recognition and then in distribution is really like one of the earliest internet growth hacks ever. And that's distributing the CDs. And it's doing something that other people aren't to get noticed and to get distribution because they're, the point I want to make here is there are, there's a trick. And then the earliest people make out like bandits. And then everybody realizes what's going on and then it becomes the normal thing. And then there's basically a CPM race to the bottom and then you're competing events and everybody else in sort of a commodity, highly efficient marketplace. Like if you're buying Facebook ads now and it's not any of the new formats, you're not jumping on whatever the new flashy thing is, like you can basically, depending on your category, understand what your cost of customer acquisition is going to be. And if you're AOL and you do a very brilliant marketing move of putting these CDs at the checkout where no digital company and really no company is doing their, their distribution, like it's in movie theaters, it's in blockbuster, like all these unconventional places. And you're giving away something, you know, the benefit of, of AOL is 100 hours or 1000 hours for free. Like there's so much that they can give away for free because it's the internet and it's software and it's, you know, reduced marginal costs relative to hard goods that it's shocking to people. And for the first time, they're like, oh my god, this seems like a crazy deal. And I've never, no one's ever tried to reach me at this point before. So to me, it's like a lot of times companies succeed because of the initial basically distribution hack or, or, you know, I guess growth hack, but really like figuring out how to get in front of people where no one else is getting in front of them. I love that image of like the, you know, Virginia suburbs, AOL, you know, 80s and 90s guys being the original growth hackers. Well, hustlers, that's what I always say. Yeah, hustlers. I mean, they are definitely hustlers now. David, you want to do it? Yeah, yeah. Yeah, so mine, I mean, I alluded to this a little earlier, but I think this episode for me is a great counterfactual illustration to, I've been thinking a lot about this recently. What really is like the power of the internet, right? Like, they, this merger is everything, getting everything wrong about the internet. And what I mean by that is like, the internet connects people, we were, you know, Brian, you're talking about aim and like letting people talk to one another and like, how do you, you know, how do you build value and create platforms on the internet? Like, as we've learned over the last 20, 30 years, like you let people talk to one another, you let people connect with one another. And AOL, instead of doubling down on that side of what they were doing, they doubled down and they bought a media company. The thing about a media company is there, it's a manufacturing based, you know, analogy. Like you're not manufacturing physical goods, but you're manufacturing media, like you're making movies, you're writing journalism, you're making music. Like that stuff you got to pay and make and sell. And like that's, you can build great businesses doing that. Of course, like Time Warner's a great business of not to knock it, but like that's not the internet. What works on the internet and why, you know, the promise, the dream of the 90s, right, was, you know, what has been realized now, which is Facebook, Google, YouTube, Airbnb, Uber, Twitch, you know, like Amazon, Amazon originally wasn't this, but now is this, they don't make stuff, like they connect people. Facebook is a bundle of content and they don't pay for any of it. That's exactly what I was going to say. So what actually succeeded in the next decade, it was Facebook and Google, who essentially make money off of everybody else's content by doing nothing. Well, I mean, they sell the ads. They sell the ads against it and they're the platform that people find it. Essentially, where do I find my sports illustrated article or my, whatever, in my Facebook feed, right? Or I, you know, do a Google search for something and some evergreen article from somebody's website, you know. But right, so AOL is going after the content because they think, well, that's the evergreen thing. That's the actual value. Right. But they're getting in a worse business by doing it. And the value of that content has been completely undermined because of what the Facebook's and the Google's did. Now, thinking about that, why is everyone getting into content? Why is, why is, why is Apple going to buy James Bond? Yeah, I don't understand it, honestly. So either we're not smart enough to know how the worm has turned or people are making similar mistakes or what? Because we're now entering an era where, you know, Twitter and NFL games on, you know, like, what is it? Is content valuable or isn't it? I don't know. I guess the only thing I could say, I'm not smart enough to a pine. So, you know, I think back to our episode on, on Bam Tech, which was really fun to dig into. These companies, the Apple's, the Amazon's, the Facebook's, they're a little bit playing a different game now that they're so big. They are so big they have so much money. And I think in a little bit they're playing defense versus like versus offense. That's something we've talked about on the show. Defense in that like, they want to keep people, they need to keep people on their properties. That's how the, the Mary go around keeps spinning. And by going out and buying these super expensive manufactured content, I think the hope is that that'll attract and keep people on the, on the platform. That'll attract people or retain people on the platform and then they'll stick around for, you know, all the stuff they're not making, which is making the wheel go around. But if they, if they move to a paradigm where they're paying for all the content on their platforms, like that, that's a worse business. I think it might be, there's like a TikTok thing here, right where first everybody's free and open about their content being aggregated because they like, I mean, if you just look at what Disney was doing for the longest time, they're like, well, we create content and then it needs to be viewed everywhere because we're horizontal. And so then they spend five to 10 years executing that strategy. And then suddenly the world starts to change and people start locking up their content vertically and upgrading. And then you're like, well, okay, now we need to change our whole strategy and, and, you know, own every dollar that comes from serving our content. And it's, it's the aggregators that lose out in that world where the content starts getting locked up. And so when you see a, you know, Apple or a Netflix or any of these, you know, Netflix so much more so because they, they started as a pure aggregator. You need to make your own stuff because if everything's living in silos, you get to have a good silo. The history repeating itself lesson is that Yahoo, this is going back to our, our previous episode we did together. Yahoo and the portals wanted to keep everybody on their pages. Google found a way to make money by being like, no, leave our page. That's fine. We'll still make money off you. So the question actually is, is that a dead paradigm? Is the open web a dead paradigm? Because if it is that it's all wall gardens all the way down from here on out. It's turtles all the way down. Turtles all the way down or, or is that sort of freedom of digital makes everything a commodity? Something that always comes back and rears its head. No, I mean, high quality content is very expensive to make and very valuable. But it's only gotten even more magnified in this world where everybody is talking about the same thing at the same time. They've been saying content is king since the 90s, my friend. Yeah. Well, but I think it is like the, the promise of the internet though. I don't know. Maybe we are, you know, talking back into a world where content is the most valuable. But what Facebook and Google, you know, another's proved is like, before them, you know, content was king, but it's not king anymore like being the platform is king. And that's not the same as distribution. Like it was always content is better than being the cable company, the dumb pipe or a, but being the platform where you control the user experience and funnel and you control attention. That's better than making the content. So it's the newsfeed versus the, you know, it's, I'm thinking about it like rather than me having the choice in my RSS reader of choosing from any of the feeds I subscribed to Facebook slam something down my throat and I say, like, yep, I'll read that. And so if you're, you know, yeah, because they get all your feedback from Facebook. Yeah. Yeah. I don't know. Sharp listeners might, we might have all argued both sides of this. But we might have. Yeah. We might have. Uh, tech. Well, David, I'll, I'll, I'll give you credit for that, that point. I've never thought about that before. The distribution is, is, you know, if you're going to make a line and say content or distribution, there's something sort of different in being one of these platforms that dictates where your attention goes. I'll use another analogy before I give up the guest here. Airbnb, right? Like, the analogy right would be like, you know, it would be great to be, you know, you should want to be like, or a boutique really high-end hotel chain. Like, you do really well. You'd make money. But like, it's way better to be Airbnb because then you, you know, you don't have to make the hotels. You don't have to build them. You don't have to run them. Uh, but you can access everybody and you can open up all this new supply that, um, didn't exist in the marketplace before. Um, like, that's, to me, that's like the dream of, you know, the internet, um, uh, going and, and buying, you know, if Airbnb were to go and buy the rights to list, um, you know, uh, fair monitor, ritz, you know, Carlton hotels on their platform because it's super premium, super exclusive content. That seems odd. So again, I'm confused. Are we arguing that content is? Well, I'm arguing, I'm arguing that content is not king. That's what I'm talking about. Okay, gotcha. Gotcha. Yeah. Yeah. I don't know. You guys are still in this game. I'm not. I withdraw formally. All right. This is great. This is our first, like, uh, not first, but in a long time, uh, debate on acquired. Wait, Brian, do you mean, do you mean because you're, you're a, uh, an author, an author, an author, a podcast, you're now moving on to being a historian author? Yeah. Exactly. No more starters for me. And I just withdraw from, from this specific argument. All right. All right. All right. So, so moving on to grading. Um, the funniest part about this whole thing is since AOL is actually the acquireer, uh, like what I thought I was going to grade, like I came into this thinking, like, well, this will be a fun first F. But like for AOL, I mean, it's, it's like an A minus, right? Like that's the question. Okay. And anyone that has access to a Bloomberg term, like I do not, I don't know that anyone's done the math on that. So if you're an AOL shareholder and you have 10 shares before the acquisition, before the merger, what is that value of that? And then what is the value, say of the day that they remove AOL from the AOL time Warner name? Now it's got to be less. We know that, right? How much less? And then if you compare that to like, you know, the counterfactual of if they had never combined with AOL have gone to zero. So is it actually a success? There are lots of people. You read these books. You get the quotes from the time Warner insiders. They absolutely believe this was money laundering. They absolutely believe that they got held up. Um, the AOL cowboys come in with their hugely valuable stock. They laundered it into this, you know, actually valuable time Warner stock and they got away with a heist essentially. That's the view of a lot of time Warner people. But I actually don't know the math on that. And if someone can do it, like so even if, even if like that that that 10 shares of AOL, even if it only goes down by 60%, that's better than going down 99% right? So is it actually a success? Yeah. Well, I mean, I think so. Like it's, in the one sense, you could look at without doing the math on share prices and holdings, you know, if AOL was worth whatever it was, 200-ish billion, you know, before the merger. And then, you know, ultimately got spun out of time Warner at a value of 3 billion and got acquired by Verizon for 4.4 billion in, you know, 2015 or whatever it was. Okay. So that's like a huge loss in value. But you still had your time Warner shares. Right. But instead you got shares in AOL time Warner and then after the spin off, you kept your time Warner shares and time Warner just got acquired for, you know, it's in the process of getting acquired for about 85 billion dollars. Yeah. So, you know, you now have joined about $90 billion versus five. That seems good if you were an AOL shareholder. I mean, of course, you could have just, you should have just sold at the top and like put your money into, you know, Amazon, but, or Domino's pizza. Or price line, Domino's pizza, yeah. That's right. I was going to say the only way this could be better for AOL is if they had actually bought a growth company like eBay. Yeah. That could have been a win. But then like we said, listen, the cabways come into eBay, tell them how to run things. They have been smart enough to buy PayPal. PayPal was the real valuable business there. It's got to be an F guys. It's got, there's a reason that people call it the worst merger of all time because it destroys so much value. Well, it destroys a ton of value for a 10-warn-air, for sure. It destroys $100 billion worth of value in the end. Yeah. Yeah. The problem is, was that all from AOL? It feels crappy to like consider giving them an A just because like the AOL, you know, management team and shareholders like save their own, you know, personal wealth essentially. Well, but isn't that what we grade on? Was this a good thing for the shareholders of the acquirer? Oh, well, this is good. If shareholders or was it a good thing for the business, terrible for the business, good for the shareholders. What do we do? It's better for the acquiring shareholders than it could have been. It's bad for all of the shareholders involved in the end because essentially AOL is a thinking ship that just grabbed another ship and brought it down with it. And didn't sink as far as it was. Slow, yeah. Slow, yeah. You don't reach the bottom, but you're still underwater for a... There's gotta be, there's gotta be 30 Harvard Business School case studies that are telling us that this has to be an F. If this is the first F, if you're ever going to give an F to something in this show, there's also gotta be some nice case studies and some sort of like, like business epistemological thought. I don't even know if that's the right word that I'm trying to think of. And basically around that question, David just asks, is it the shareholders or is it the business? And David, is there a difference? Well, corporate behavior of the past 50 years would imply no. But I think if you look back farther in history than that, there absolutely is a difference. If you can't save the patient, you know, like... But if the enterprise itself dies, so keeping the enterprise itself alive even in some sort of mutated form is valuable. Because I guess if the patient is dead, they're dead. Well, it's sort of like, I mean, I think what we're coming to here and we have been for the whole episode is like exactly what you said, Brian. Like they were drowning and they grabbed a, you know, life vest and that kept them from drowning. On the other hand, it didn't get them to shore. They didn't catch up boat. They grabbed like a piece of driftwood. I think I'm ready to put forth a grade. I think I give them, I give the acquisition AC for AOL shareholders because of that. Like, yeah, you did, you know, keep the business alive. You preserved shareholder value relative to the alternative. But you didn't, you know, relative to what, you know, are two best acquisitions of all time on this show that we've rated thus far next and Instagram. Like those are businesses that... To use Bob Pittman's, you know, drug pusher like analogy, you know, accelerated their company, you know, their acquirers at internet speed. Like there was no acceleration happening here. There was just, you know, buoyancy. I'm going to do F because if there's, if there's never been an F on this show, you're never going to get a better chance. No one's going to begrudge you giving this the F. Like we kind of sent a bookend. Set the scale. Listen, yeah, the scale doesn't have any meaning unless there's a top and a bottom. Like, well, if it were time Warner acquiring AOL, absolutely. Yeah. Well, I do have sort of a logical reason for it, which is that the, the, again, it's sort of what we said about what happens in the next decade. It's not like being in the magazine business, being in the television business, being even in the movie business has was not actually the evergreen thing. They didn't grab something that turned out to be the thing that, look, movie attendance goes down television, watching goes down. Magazines are basically on life support. Newspapers are essentially dead. Like, so this idea that they jumped into media that would always be valuable was not right. And they were, they were a part of the disruptive force that made that happen. And so I, this plunges back in this argument about the value of content and things like that. But I think it's a bad thing because in the end, I would view it as too doomed businesses or at least too, not doomed. Let's say extremely challenged businesses. So embracing each other and so a successful, get out of jail by AOL would have been a better company, an eBay or something, but would have been staying independent, struggling. What's the one thing we've got? It's aim. So the failure is two companies that were going down, embracing each other. So it's bad to me because they clung on to the wrong lily pad. How many mixed metaphors can I do? Love it, love it. Well, I was trying to think what would my FB? And I think, you know, an A is a business is dying and acquires something and then can become the most valuable business of all time. So that's Apple. I'm sorry, an A plus and then an F would be a company is the best business of all time and acquires something and that acquisition manages to sink it to zero. Don't interrupt them. You're right. You're right. Yeah. And so with our scale, you know, it's almost sort of like logarithmic toward the top because we often are like, well, we gave Instagram an A. So this thing has to be like a B plus. And like there's very successful acquisitions that we don't give A's. I think, you know, I think like I've given and we may have to go back and revise at some point, but I've given YouTube a C because like it didn't, I was worried about the opportunity cost of focusing on that for Google when it was a break even business. So to me, like, well, I don't know if I could go F because AOL didn't completely crater their own business by making this acquisition. But I don't think I time Warner did, but they're the acquirer. I mean, I don't have to go like D D minus because, you know, I think had buying time Warner destroyed AOL, then it's an F, but it's certainly worse than a C for me. So I'm going to like, and way, way worse. So I'm going to go like D minus and like I hope to one day find something on acquired where something went from like a fortune 10 to destroying themselves. Well, I don't hope. But, you know, if we ever have an F, that's what it would be. Like some company that buys something that causes cancer for 10 billion dollars. Yeah. Which actually I shouldn't joke about that. That's probably happened or something. All I want to do is as far as long as this show goes on, I'm the one that first gave an F. Let's put that in the record. You're forever. You know, you know, you have, you can put in your trophy case, the original. We'll change the Twitter bio. Yeah. There is no F. Carbouts. Awesome. Carbouts quick. Yeah. It is a book that I'm almost done listening to on audio book and I'm going to be really bummed when it's over because it's really nice to have a dose of this kind of reminder in my life every day on my commute. And that is give and take by Adam Grant. And it's really making the rounds right now. So I'm sure a lot of listeners have already already heard of it or had people tell them they should read it. It's so awesome. It's research backed descriptions of the behaviors of givers, takers and matchers in our lives and what the results are of those personality types and litany of examples of givers and what they've done and how they've succeeded in their careers. And the super interesting thing that pops out from the book is if you look at sort of a spectrum of people's success in their careers, takers, if you look at a span from one to five where one is not succeeding in all in five is succeeding fantastically, takers occupy two and four, matchers occupy three and givers occupy one and five. And so it's this interesting dissection of just by being a give first person, it doesn't guarantee that you're going to end up on top or bottom. And it tries to sort of tease apart what are the traits of givers that can make you someone that ends up ahead in the long run just because you truly care about people and you're truly someone that looks out for the interests of others. And it's just a really interesting to understand something that I never had a mental structure for before. And it's also like just a good little kick to be a better person. And it's nice to have that voice every day. And the narrator sounds like Craig Federiki. So if you like watching Apple Keynotes, you'll like listening to this guy's voice. My carve out, which is appropriate for this episode with Brian and the Internet History podcast and has been a deeply historical episode. Another book, a great one that I'm also a little over halfway through reading and can't wait to finish called season of the witch. And it's on my Kindle. I haven't read it yet. Oh, you'll love it. It's the history of the dark history of the dark side of the counterculture and San Francisco and what happened to San Francisco in the 60s and in particular in the 70s. The Manson murders, the Zodiac killer, the Zebra killings, everything that was really the not often told, we remember the 60s as like peace and love. And it's the 50th anniversary of the summer of love in the city this summer. And what gets celebrated is the happy, the psychedelics, but there was a true, true dark side. And it's very, very fascinating to read about and really shaped the city. And again, like we've talked about on this podcast too, it was the tech movement in Silicon Valley that really came out of the next period in history in this area. And it was shaped by the dark side as well. Is the tech angle in the book? I, not thus far. And I don't know because I haven't gotten to the end yet. So I'm curious to see. But I'm also started reading another book called What the Door Mouse Said, which you probably read, which is about the tech angle and the 60s in the counterculture. I just watched for the first time recently the Zodiac movie, David Fincher's Zodiac. And I had always heard it was a good movie, but I tend to avoid serial killer movies, but that really is a good movie. I was going to do a book anyway. So I'm not going to, not going to buck this trend, but Clod Shannon, people might know from the book the information, but also basically the guy that invented information, theory, you know, Alan Turing, knew the dude and like, he shows up in the intersections of all sorts of things with computing and the internet and things like that. I think it's the first full comprehensive biography of him. It's called A Mind at Play, how Clod Shannon invented the information age. The authors are Rob Goodman and Jimmy Sony. I have not read it at all, but it is number, it's the top of my list to read. And so I think that, since that's my sort of gig is, you know, the history of technology and things like that, I'm eager to learn about the minds that shaped information technology and Clod Shannon. And I heard, if you read the information, you should know about him, basically formulating the theory behind essentially coding and how logic goes into programming and things like that and taking it from the philosophical into the practical. So yeah, I haven't read it yet, so I can't say that it's great, but I want to know more about Clod Shannon and you should too, probably. Well, that's it for our show. One thing I forgot to mention earlier that might be interesting to listeners is, you know, we spent a couple of episodes asking you guys to fill out a survey and we posted the results on acquired.fm slash audience. So if you're interested, we've got some interesting stats on there. Two-thirds of our audiences is based in the US. 24% of you are engineers. 26% of you are currently or have started to start up and there's loads of other good information in there. So if you're curious about, basically, acquired listenership, check out acquired.fm slash audience. Yeah, and one more bonus slash super carve out for the end of the episode is of course the internet history podcast as we have told you guys many times on this show, you know, Ben and I are both huge fans, Brian, of your work. It's awesome. And this has been so much, I think even more fun than last time having you on the show. I think we got to know each other. Like I totally was so geeked to do this because I was like, okay, I know, I think we're good to get it. So I knew the rhythms. And so like I was like, oh, this is going to be great. The peanut butter and jelly of tech history podcast. Well, thank you. And since I'm going to just basically post this on my side completely unedited, I promoted it last time. I know I got feedback a bunch of you listened and subscribed and listen. You can hear that these guys are smart and they come at it from a different angle than I do. And it's fantastic acquired acquired FM right? acquired.fm on the internet, AOL or otherwise. Yeah. AOL keyword acquired. I was going to say they used to have keywords. You could buy keywords. Yes. Like literally if you wanted books, you didn't have to, it wasn't, it wasn't Google ad words or ad sense. It was literally you would type books into the AOL search bar and they would give you not web pages, but just what they had in their system in terms of books. And you could buy that keyword. I think I did it once, actually. Well guys, that's it. If you're not subscribed to want to hear more, you can subscribe from your favorite podcast client to acquired or the internet history podcast. And if you feel so inclined, we would love a review on iTunes. Have a great day.