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Acquisitions Are Hard: Case Study: Third Screen Media

phonesAs always, Alley Insider continues to obsessively cover the soap opera that is AOL.  And why not?  It is crazy there. Far crazier than any 10 other Internet companies in NYC, so the result is that it is simply more gossip-ey, more filled with arcane insider-ey news, and more interesting than most of the rest of the industry – despite the fact that AOL probably can’t win.

The most recent story I read was that every engineer for Third Screen Media took the package.  And there was a comment that AOL would never give up hope for its mobile monetization: it was simply too important.

I would say that all of this is true.  Consider:

  1. Obviously, it was not AOLs intent to lose the mobile wars.  They were the first people to snap up a company in the mobile ad network space and they had their pick of the litter.  They took the best company in the market.  Third Screen was better than the other guys.
  2. Once they acquired it, they had to consider how to help it win.  Many, many, many big companies think: We should have our giant sales force sell this new shiny product and then we will win.
  3. So the sales forces get integrated and you are off to the races, right?  Nope.  This was an early market and it was hard to sell.  I have no direct knowledge of this, but I can imagine: Quickly, the sales force flipped over to selling things they were more comfortable selling.  Those things were also bigger ticket!  With quarter to quarter pressure and constant sales force reorganizations, the focus on selling a less mature, smaller dollar product goes away.  In the face of headcount reductions, there is never a moment of thought given to having a dedicated sales force to nurse this product along.  Sales decline, are flat, or do not grow as fast as competitors.
  4. Networks are a natural monopoly.  The ad sales winner gets the most inventory.  The person with the most inventory gets the most advertisers.  Quickly, a network business can fall into a death spiral without great sales.  Employees cannot fail to notice.

Also, Third Screen employees were in Boston.  Was the organization focused on helping Boston employees feel love?  Nope.  Down-sizing means consolidation.  Also, all of the senior third screen people had left with the acquisition.  That probably meant there were new start-ups to go join if you were a third screen engineer.  And AOL had taught you that start-ups make you richer than working for AOL!

So with the best of intentions, big companies frequently kill small acquistions due to inability to sell the small products in a market appropriate way.  You see this all the time.  Without the laser focus the start-up had, the sales model never matures enough.  Unless the product is right at the tip of the tornado, handing the product over to the old-school sales force will not cause it to scale like gangbusters.

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