
America Online to Buy Internet Chat Service for $287 Million (1998) - ski
http://www.nytimes.com/1998/06/09/business/america-online-to-buy-internet-chat-service-for-287-million.html
======
efuquen
Someone mentioned about trying to find out if their have ever been any other
chat services that have really made a lot of money on it's own, and it sparked
memory of an acquisition that didn't happen quite that long ago, Microsoft
buying Skype in 2011, and here is a good recent article about it:

[http://www.theguardian.com/technology/2013/aug/30/skype-
micr...](http://www.theguardian.com/technology/2013/aug/30/skype-microsoft-
acquisition-analysis)

The bullet point that stands out for me is this:

• Problems monetising it: revenues at the time – $860m for the year, losses of
$7m – amounted to just $1.30 per user per year

So, here we have a company, at acquisition, that was making close to the $1
per year per user that WhatsApp is charging. At the end of 2010 skype had 663
million users and was acquired for $8.5 billion. That's $12.82 a user.

Then, as now with WhatsApp, people are questioning whether Microsoft would
ever make enough money to justify such a price. Then, as now, people justified
the price based on the sort of intangibles (getting rid of a competitor,
strengthening the brand, tapping new markets, etc.) the WhatsApp acquisition
is being justified with now.

But there is still the big difference that Facebook, with a business in a
similar space (obviously still different but they both are chat/communication
based), with a similar revenue model per user per year, but only 3 years later
purchased it for $42.22 per user. That's almost 4x the price for a similar
acquisition 3 years apart.

And people thought Microsoft was crazy for the price they paid for Skype ...
it kind of makes you wonder what the hell is going on.

~~~
shuw
Skype has 663 million "accounts", very few of these were active.

According to [http://www.statisticbrain.com/skype-
statistics/](http://www.statisticbrain.com/skype-statistics/), only 31 million
Skype users are active as of 2012.

~~~
coldtea
The statistics sounds BS (as a lot of them are).

FWIW, I don't know anyone (across 5 countries of friends and business
partners) who doesn't use Skype.

~~~
shubhamjain
Skype's use prevails mostly around international calling, video conferencing
and professional chats. It isn't really an everyday use thing like WhatsApp
which, where dominating, is an entire replacement of SMS. My Skype account
gets sparingly used for anything else than talking to a client.

~~~
coldtea
That could make sense, because that's what I've seen it used for:
international calling, video conferencing and professional chats.

Still, wouldn't that amount to more than 30M users?

------
JoshGlazebrook
I still remember back in 2000 when we still had AOL. I was eight or nine and I
had my own aol account. You could have a dozen or so sub accounts on the main
one. And because it was a "kids account" there were chat rooms for kids. Being
the lovely kid that I was, of course I went into one and was like "how the
f*ck are you all?"

Well the kid chat rooms were moderated and our entire AOL account was
disabled. My mom had to call to have it re-enabled and of course they told her
what I had said.

Fun times...

~~~
gcb0
when my folks got me a modem, the only thing my father made me understand was
the phone bill values... i was 7 or younger. learned all about initialization
strings and the minimal about terminal emulation to get to the message and mud
games part of some bbs. after that it was downhill.

~~~
elektronaut
I developed a serious internet addiction when I was a teenager. My parents
were working class and struggling to make ends meet, and I was always dreading
the day the phone bill arrived. After a couple of confiscated modems (I had a
secret backup box of old 28.8s), I realized I could just trade my web skills
for money and pay the bills myself. I guess that's what I've been doing since.

~~~
nisa
This sounds pretty similar to my experience. Confiscated modems rang a bell!
I've also dreaded the day the phone bill came. A friend and me used all kinds
of workarounds: Free AOL CDs, Toll Free Dailup numbers where the banking data
was not validated in time... got serious trouble (rightly so) for that. Not
much later I got a small job and we had 64k ISDN there, later at that time
insanely fast DSL 384k. Learned Linux at age 13, Debian 1.3, Redhat 5, I now
make a living of that... The addiction is still there, through.

------
slg
I assume the motivation for pulling this out of the archive is the WhatsApp
purchase. However, I don't think this comparison is truly fair. Not only is
WhatsApp monthly adding over twice the userbase ICQ had at the time of
purchase, but it is also actually collecting revenue from them. WhatsApp is a
real company with real monetization strategies.

~~~
alaskamiller
To contextualize requires relativity.

ICQ in 1999 had about 45 million users. There were only 248 million internet
users back in 1999. That's 18% of mostly international users.

AOL was optimistic. So much so this is the actual response when they beat the
street during their earning reports.

 _" (ICQ is) growing like a weed," said AOL President Bob Pittman. "Monetizing
it" will be "relatively easy," he added._

WhatsApp has 450 million users where there are 2.7 billion internet users.
16%. Of mostly international users. Where, again, monetizing it, should be
relatively easy.

But then again, why does any of this matter?

Genie's out of the bottle. The game has changed. We're playing a game of
scaling now. Less than a hundred dedicated folks can change the world.

That 19 billion is a clarion call to attract even more people to what it is
most of us here have been doing for decades.

If there is to be a singularity moment for the generation that grew up
remembering the difference between real life and internet life, we have
arrived at the internet life.

10593577

~~~
Implicated
10554049

how do I remember that?

~~~
89vision
2476319

~~~
s0rce
15254346

~~~
batpad
17876045

~~~
PakG1
Screw all you guys and your good memories, why can't I remember mine? :P

~~~
mseebach
I remember when switching from ICQ to Microsoft Messenger thinking "good
riddance". Messenger employed the not the least bit novel approach of letting
users sign in using a self selected textual screen name.

~~~
lostlogin
My god those were awesome. A great friend of mine typed in his name, Ben
LastName. It said it was taken, but how about Ovenproof Ben? Mine was also
taken, how about Mucous Robin? Both have stuck. Its name generator was
fantastically random.

------
drawkbox
It was mainly purchased for the ICQ instant messaging patents rather than
userbase: [http://www.haaretz.com/print-edition/business/u-s-awards-
icq...](http://www.haaretz.com/print-edition/business/u-s-awards-icq-founders-
patent-for-instant-messenger-software-1.25222) AOL still owns that patent,
HTTPS/SSL from Netscape and the cookie from netscape as well. They loaded up
on patent nukes in '98:
[http://news.cnet.com/2100-1023-218360.html](http://news.cnet.com/2100-1023-218360.html)

------
nailer
40979067\. I don't even know how I remember. I haven't used ICQ for 15 years.

~~~
w1ntermute
Why didn't they allow strings for username? Technical limitations?

~~~
aylons
Actually, the uin was not that important. You could be identified by your
email, for instance, or name and surname.

But people had the habit of exchanging UIN and this was it.

24811423

------
gee_totes
I'm going to speculate that this is a very strategic move from Facebook.
Remember BlackBerry Messenger? one of the early selling points of the phone
was that BBM let you communicate for free, instantly, with people all over the
world. It was pretty revolutionary at it's time.

Facebook is already becoming the world's phonebook. Connect with someone and
you have a way to contact them.

Facebook is also heavily pushing it's messaging app on the main Facebook app.
I think that WhatsApp will be integrated with (or replace) Facebook messenger.

This combination builds a powerful base for an eventual Facebook phone with a
free data/voice plan (the phone would have a base price, but service would be
free thanks to the sale of ads ala Kindle Special Offers). Think about it --
if you could call, text, and message all of your contacts, for free, from
within the Facebook app, why wouldn't you do it?

If Facebook follows that strategy, they will get their 19 billion out of this
deal for sure.

~~~
alexeisadeski3
>BBM let you communicate for free, instantly, with people all over the world.
It was pretty revolutionary at it's time.

It was not.

------
hazelnut
There are still people out there who try to sell their ICQ numbers:
[http://www.ebay.com/sch/i.html?_trksid=p2050601.m570.l1313.T...](http://www.ebay.com/sch/i.html?_trksid=p2050601.m570.l1313.TR0.TRC0.H0.Xicq+number&_nkw=icq+number&_sacat=0&_from=R40&exttype=501)

~~~
digz
I haven't used ICQ since 2000 or so, but as soon as I read your comment, I
immediately remembered my old number!

For context, I rarely remember my anniversary.

EDIT: I just logged in. Out of the hundreds of contacts I had, there's one sad
guy still online.

------
WaterSponge
Either 300mill was a steal for AOL or Valuations are out of hand?...

Which one is it?

~~~
majormajor
Well, 300M for 12M users, which is a lot fewer than the services that get
bought for big numbers today.

But magnitude of the money aside, has an online messaging service ever been
able to really turn a huge profit? chongli points out that AOL eventually sold
ICQ for less than they paid, and I can't think of any others off the top of my
head (AIM didn't prevent AOL from being overtaken by Facebook, say). They seem
to be very un-sticky in terms of user retention by their nature.

~~~
ama729
Apparently it wasn't a bad according to wiki (but the source is in German, so
I can't confirm if it's true):

> Orey Gilliam,[6] who also assumed the responsibility for all of AOL's
> messaging business in 2007, ICQ resumed its growth and turned into a highly
> profitable company, and one of AOL's most successful businesses.

[https://en.wikipedia.org/wiki/ICQ#History](https://en.wikipedia.org/wiki/ICQ#History)

~~~
mattmanser
If I make $10,000 a year yet spend only $1,000, I'd be highly profitable too.

Not worth a lot though, as the subsequent sales showed just how much money
they'd lost.

------
securingsincity
$19 billion and whatsapp has 465 million users, and ICQ was purchased for $287
million had 12 million users at the time. $40 dollars per user vs $24 dollars
per user.

Now if the goal were to acquire users. its far more likely that facebook would
have a huge overlap in the number of users it has already and those on
whatsapp. That means maybe a cost of acquisition at let's completely speculate
$100 dollars per user(maybe more). It seems kind of silly. but then you think
about their penetration in developing markets and network effects... I don't
know I'm not zuck.

BUT on a complete tangent of my comment. I should start an Israeli chat
company. they've had some big exits.

~~~
securingsincity
oh and the fact that whatsapp actually is very profitable __ __

~~~
MichaelGG
If you can call a P/E of 800+ "very profitable"? Making $20M a year profit is
no small thing at all, and I'm sure if it was bought for a billion, you'd see
far less comments on the subject.

~~~
corresation
It makes $20 million in _revenue_. I've read that they're profitable, but
never the number.

~~~
ulfw
Goes to show that only 20 Million out of 430M paid the $1/year (which has
something to do with it not being charged everywhere and people having a 1
year grace period and a majority of their target market having no credit card
(young audience in emerging markets)). Let's see how Zuckerberg plans to
change that drastically.

~~~
err4nt
With advertising or selling user information? That seems to be the most likely
to me given Facebook's history

------
MichaelTieso
Is it bad that I can still remember my 7 digit ICQ number? It's probably been
over 14 years since I've used it. I use to judge everyone that used AIM but
eventually I switched over to AIM because all my friends in school had AIM.

~~~
fletchowns
I just knew one of the first comments was gonna be about "my x digit ICQ
number". (mine was 6)

~~~
F1reman
Sorry to ruin the party... but I had a 5 digit ICQ number. I used to work
there.

~~~
almosnow
that means you're oooooooollllllllldddddddd

------
MichaelMoser123
It's funny how these ICQ like messenger applications always end up being
bought out with heaps of money. When you see it all over for the nth time than
its just funny.

I mean: you are supposed to learn a real profession so that you will be able
to create real value, whereas real value is actually assigned to messenger
apps.

------
BlakePetersen
12834982 -- can't believe I can still remember it. I haven't signed on in well
over a decade. Kinda proud, not gunna lie. And according to Google, my last
nickname was "Blake's Alright", must have been going through some teenage
melancholy at the time, haha

------
beagle3
And since this is HN, you probably wonder where the ICQ founders are now? As
far as I know, 3.5 out of 4.5 (one quit early) are busy having fun and
enjoying life, and the remaining one has since started and sold companies for
$100m each at the rate of about one per two years.

------
iamsalman
Just a naive comparison, AOL paid ~24MM/user for ICQ. Facebook is paying
~42.3MM/user for WhatsApp. That's about 76% more. IRC wasn't making any money
when it was acquired. WhatsApp was making some.

------
jcurbo
7-digit ICQ number here, but since I'm seeing people post 6-digit ones, I'm
guess I'm not that special :) Still have my 3-digit Slashdot UID though!

------
bane
I really wish valuation was a measure of how much value you can get out of a
company and not how much somebody is willing to pay for it.

~~~
MichaelGG
If someone is willing to pay that much money for the company, then you _can_
get that value of it.

------
eyeareque
I remember when this happened. I was quite the upset teenager :)

~~~
chris_wot
So was I! Funnily enough, I was right, AOL killed ICQ. Then again, AOL killed
most everything they touched.

------
coltr
Wow, I forgot about Tripod. Had a few sites on there.

------
ninive
1315453 - A great collection of memories, indeed ;)

------
petercoolz
what exactly happened to ICQ? i haven't used it in years and years

------
Kluny
Is this an ironic comment on Facebook's recent purchase of Whatsapp?

~~~
almosnow
naaah

------
booleanbetrayal
243121 <3

------
jetsnoc
575061 ;)

------
_of
1369500 :)

------
solarmist
33493376

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notastartup
I actually didn't notice the date on this, and thought after Whatsapp, another
one?!

We are in a bubble now I presume.

