Risks of Corporate Shopping

Recently we saw Ms Marissa Mayer of Yahoo go on a shopping spree – buying tumblr for a billion dollars and another gaming 5464704-yes-i-did-it-bought-what-i-wanted-shopaholic-woman-it-is-extremely-happy-and-laughing-and-the-guy-smcompany for an undisclosed sum. So what is she buying for Yahoo?

Once upon a time CEOs would go out and buy factories, products, teams, etc.,. Most of them were hard assets or at least something that could be felt. You knew what you were buying into and what you could do with them in almost all the cases. There was also some possibility of selling them off, in case the acquisition does not result in what was expected.

But as the trend continued,  we saw companies buying brands, intellectual property, and customer bases, sometimes to buy revenue, and many times to kill the product that was eating into their primary sale. While the assets were becoming more intangible – the potential worth justifying their purchase costs were getting more difficult to justify.

These days you see purchases being made on traffic and engagement. If a website has routine visitors or a high number of unique visitors, then it is becoming an acquisition target. While there have been successful acquisitions by Google and Ebay, will the growing valuations provide their buyers adequate returns before the attention deficit syndrome kicks in and moves the web-citizens to move on to newer properties? The longevity of investments in the online world assets is like perishables (airlines seats or fruits) – so it will be useful for cash rich companies to be wise in spending their money.

While only history will show whether the acquisitions have been useful or not – the risk of making hard cash evaporate into thin air is just getting higher! Did we not hear that the planet is getting warmer?

Think about it…

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One thought on “Risks of Corporate Shopping

  1. In an attempt to fast track growth corporate boards are potentially missing some critical issues! Not only hard cash being evaporated but potentially capitalizing expenditure through the medium of acquisition costs.

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