I was recently asked if the valuation of a search engine acquisition is connected to its number of users. I’m not an M & A expert, but my answer would be that search technologies are almost never bought for customer acquisition.
I made a list of Search Engines that were Acquired, 2016-2018. Take a look at that list and see if you agree with me on the following:
Not a single one of those acquisitions were made to acquire users.
All of them were acquired for their technology, intellectual property, or a team acquihire. This could be due to the following reasons:
- The list of search engines that have a critical mass of users is very small. So unless Google buys Bing, we won’t see many large scale acquisitions done for the user base.
- There is not much value in acquiring users through a search engine acquisition.
- Some acquisitions, like Elastic buying Swiftype, are made to acquire B2B customers (I’m just guessing on this specific example. Possibly the acquisition was made for reasons #1 or #2 above and not for customer acquisition.)
- Most search related acquisitions are done to accelerate an initiative by quickly plugging in an existing technology and/or team that’s already been working on a specific problem, rather than starting from scratch. It also removes potential competition.
- Similar to #4, some acquisitions are specifically acquihires, like Bing buying Powerset’s impressive employee base in 2008 for “roughly $100 million”. Suddenly Microsoft got a jolt of search and NLP engineers.
- The buddy acquisition – there seems to be a cycle of people leaving big companies, like Google, to venture out on their startup dream. Then Google swoops in and buys the startup. (See Aardvark’s acquisition in 2010 for $50 million.)
The takeaway, if you agree with this list and are building search, is to focus on something very technically focused or innovative, rather than worrying about getting users.