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Starving to Death on $200 Million: The Short, Absurd Life of the Industry Standardby James Ledbetter
In early 1999, I added $350 million worth of value to one of the world's largest Internet companies — in a single day.
I did this by publishing the details of a prospective merger that never actually occurred.
The deal was a proposed strategic partnership between NBC and the search engine and Web portal Lycos. Toward the end of January 1999, it became well known within the Internet industry that Lycos was seeking a buyer or investment partner. After all, the Lycos network had tremendous reach — nearly half of all Web users at the time visited a Lycos site at some point every month. Although it had never made a profit, its stock was worth more than $5 billion.
Multi-billion dollar deals like this one were occurring almost every week; in November 1998, America Online bought Netscape for more than $5 billion. And Yahoo had just bought GeoCities for an astronomical $5 billion.
We prepared a short article to run on The Standard's Web site, laying out what we believed to be true. Executives from the companies were in talks, and Lycos was seeking to sell between 30 and 35 percent of itself — a deal worth billions. We were ready to post the story at about 2:45 p.m. East Coast time. I called a source at NBC who had helped me before, a source I referred to as Deep Peacock. We exchanged brief pleasantries, and I brought up the Lycos talks. He was slightly evasive, but acknowledged that the subject was "super red-hot right now." I asked: "If we were to publish a story saying these talks were going on right now, would that be wrong?"
He responded, "What do you mean by wrong?"
"I mean, would it be inaccurate?"
"Oh. No, it wouldn't."
"Thanks. Gotta go."
Our story was up on the Web instantaneously, and within 24 hours, Lycos's stock had risen by nearly $8 a share, adding more than $350 million to its overall value. Ironically, the negotiations between NBC and Lycos had apparently stalled, and Lycos was never able to complete the deal. When the dust finally settled, the value our story had created was gone, along with about another billion dollars.
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