December 17, 2005
@ 05:15 PM

A friend of mine called me yesterday to ask for my opinions on the fact that Meebo just got a few million dollars in funding. For those not in the know, Meebo is an AJAX version of Trillian. And what is Trillian? It's an instant messaging client that supports AIM, ICQ, MSN, Yahoo Messenger, and IRC.

In his post How Much Did Meebo Get? Om Malik asks

Here is the rub: Since the company basically aggregates all four major IM networks in a browser, all the four major IM owners - AMYG are out of the acquisition game. One of them buys the company, the others shut down access to their respective networks. The very quality that makes Meebo attractive to end-users will make it difficult for them to be acquired. But there is one option: eBay. When all fails, you know who to call. Skype did. Interactive Corp is another long shot, but they are bargain hunters not premium payers.

Regarding acquisitions, there are three reasons why one of the major players would buy a company; users, technology and people. Unless the start up is in a brand new market that the major player isn't playing in, buying a company for its users is usually not the case. This is because big players like Google, Yahoo! and Microsoft usually either have orders of magnitude more users than the average 'popular' startup or could get just as many or more users when they ship a rival service. The more common reason for a big player like Microsoft or Yahoo! buying a company is for exclusive technology/IP and for the development team. Yahoo! buying or Flickr isn't about getting access to the 250,000 - 300,000 users of these services given that they have less users than the least popular services on Yahoo!'s network. Instead it's about getting people like Joshua Schachter, Caterina Fake and Stewart Butterfield building the next generation of Yahoo!'s products. Don Dodge covers this in slightly more detail in his post Microsoft will acquire my company.

Let's talk about Meebo specifically. The user base is too small to be a factor so the interesting things are the technology and the people. First we should look at the technology. An AJAX instant messaging client isn't novel and companies like Microsoft have been providing one for years. A framework built on reverse engineering IM protocols is cool but not useful. As Om Malik points out, the major players tolerate activities like companies like Meebo & Trillian because it is counterproductive for [example] AOL suing a tiny company like Trillian for misusing its network. On the other hand, they wouldn't tolerate it from a major player like Microsoft primarily because that becomes a significant amount of traffic on their network and licensing access becomes a valid revenue generating scenario. Thus, the technology is probably not worth a great deal to one of the big players. That leaves the people,  according to the Meebo team page there are three people; a server dev, a DHTML/AJAX dev and a business guy (likely to be useless overhead in an acquisition). The question then is how many million dollars would Google, Yahoo! or Microsoft think is worth for the skills of both [most likely excellent] developers? Then you have to factor in the markup because the company got VC funding...

You can probably tell that I agree with Om Malik that it is unlikely that this company would be of interest to any of the four major IM players.

If you are building a Web startup with the intention of flipping it to one of the majors, only three things matter; technology/IP, users and
the quality of your technical team. Repeatedly ask yourself: would Microsoft want our users? would Google want our technology? would Yahoo! want our people?

It's as simple as that.


Categories: Technology
Tracked by:
"Interesting Finds" (Jason Haley) [Trackback] [Pingback]
"Selling your start-up to GYMA" (Don Dodge on The Next Big Thing) [Trackback]
"Flipping your start-up the smart way" (Greg Yardley's Internet Blog) [Trackback]
"The Power of Venture Myth" (EarlyStageVC) [Trackback]
"Keys For Flipping A Start-up" (Somewhat Frank) [Trackback]
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"Built to flip" (Startup Blog) [Trackback]
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