Vine won't be the last tech acquisition to fizzle
SAN FRANCISCO — Vine's death follows the grand tradition of a ballyhooed tech acquisition fizzling. It won't be the last.
The six-second video platform, scooped up by Twitter in late 2012, seemingly disappeared as fast as its videos. It was part of the carnage on Thursday, when the ailing micro-blogging service said it would lay off 350 people, or 9% of its workforce. Twitter said Vine, which had 100 million people watching videos each month, would be shut down "in the coming months."
Twitter kills Vine three years after launch
Shocking as the move may be to some, it should come as no surprise really. The tech industry is littered with dozens of mergers that looked good on paper, but didn't translate to real-world markets.
Tech mergers often flop. The concept of melding two large, disparate organizations and cultures flawlessly can be akin to adding a third leg. Overhead costs and logistical nightmares further diminish chances for success.
“It's an axiom in the (venture capital) business that 90% of acquisitions or mergers fail to achieve the stated objectives,” says Stewart Alsop, a partner in Alsop Louie Partners, a venture capital firm in Silicon Valley.
Examples abound. Microsoft-Nokia. Yahoo-Tumblr. News Corp.-Myspace. Google-Motorola. AOL-Netscape. Yahoo-Broadcast.com (sorry, Mark Cuban). Microsoft-aQuantive. Hewlett Packard-Compaq Computer. eBay-Skype. Excite-@Home.
And don't forget the granddaddy of them all, AOL-Time Warner. It badly scarred both media giants for years.
“There are a lot of reasons for failure: some acquisitions are ego-driven, there is a misunderstanding of technology purchased, management changes,” says Rakesh Agrawal, an analyst at Redesign Mobile.
It can leave you slack-jawed.
And yet in their pursuit of a merger that blows up (in a good way), leaders of Silicon Valley companies and beyond can't always find the perfect match of a Google-YouTube or eBay-PayPal.
Many companies flush with cash — especially large ones such as Apple, Google and Oracle — are simply reacting to fast-moving markets and they’re willing to overpay to play catch-up in emerging technology areas like augmented reality, artificial intelligence and machine learning. Sometimes, the deals are made in haste to block rivals. It’s a risky, imperfect art – similar to what baseball general managers go through when they pursue pricey free agents.
When Twitter closed in on acquiring Vine, some referred to the latter as "Instagram for video." (Facebook bought Instagram for $1 billion in 2012.)
On Thursday, Qualcomm agreed to acquire NXP Semiconductors for $38 billion to grab a pole position in the fledgling market for the self-driving cars. Undeterred by its long-ago AOL experience, Time Warner is pursuing an $85 billion merger with AT&T. And Verizon has agreed to pay $4.8 billion for Yahoo's core assets.
Qualcomm to buy NXP Semi for $38B in massive play on self-driving cars
Mergers-and-acquisitions are likely to accelerate as private companies get older, absent the possibility of an IPO (ride-hailing service Lyft is reportedly pursuing buyers), and larger companies continue to eye promising start-ups in emerging markets.
October has been a bang-up month for deals in the U.S.: A whopping $257.9 billion worth, nearly double the amount in September and one of the top-5 months on record, according to Dealogic.
M&A hit a record $262.5 billion in the last three months of 2015, and picked up the pace in the second quarter of 2016, with $183.8 billion in deals, says Dealogic.
Most acquirers will end up feeling burned, but market conditions, competition and cash almost guarantee more of the same in the coming months, and years.
Follow USA TODAY San Francisco Bureau Chief Jon Swartz @jswartz on Twitter.