Wednesday, August 22, 2007

AKQA/SearchRev: revenues & profits still matter

I just read that AKQA acquired SearchRev, that most fearsome of SEM competitors for...


...less than $10M.

[CZ note added Oct 26th: apparetly the acquisition price was somewhat higher, but no one knows and I still maintain that <$50M acquisition price means there's little or no technology, despite my ex-Netscape colleague's claims to the contrary. Proof, please!]

What? Only $10M? How can that be? SearchRev claimed to have developed groundbreaking technology that tests every possible variable in a search campaign. Wasn't that the ideal way to optimize a search campaign?

At $10M many of you are probably saying "No, that can't have been a good way to optimize campaigns, or they would have sold for far, far more."

The reality is that you're right - $10M means they didn't actually build anything, which is what I've been saying all along. Their real business timeline:

1)While working at Yahoo, the founders realized Yahoo didn't know how to manage its search campaigns (call that Semel-itis).

2)Founders sign a couple Y! business units to their fledgling startup and THEN realize they need a solution (guys, you got it backwards).

3)To build a solution, they realize they need $$. Hence they spend approximately 5 minutes thinking up a technology spin, hence 'test every variable'. That approach, incidentally, is analogous to 4th graders adding up 24 17 times for lack of knowing how to do multiplication.

4)Once VC money's in hand, they start selling to other advertisers, making promises to marketers who know little and expect much.

***Still no solution***

5)12-18 months in, they start to realize the only business they're winning is with their pants around their ankles, and the desperate fire sale begins.

6)Enter wise AKQA who buys at the right moment = The Breaking Point.

This, folks, is what you get when dumb VC money is too plentiful and an industry has too much demand for suppliers.


Blogger SearchRev said...

The Wall Street Journal article said our revenues were less than $10 Million. Not that the price was less than $10 Million. The price is not public information.

We raised very little $$. We ran the company using our revenues for 4 years before we raised any investor money, profitable all the way.

The invetors did very well, so did the founders.

AKQA is very happy with the acquisition.

Success Story all around.

Thanks, Eduardo Llach - Co-founder, CMO, CRO

3:05 PM


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