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Stupid Business Decisions: Excite Rejects Google's Asking Price

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A $750,000 price tag was deemed too high.

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In 1994, six Stanford University students created a primitive search engine called Architext.

The following year, Stanford alum Vinod Khosla, who had joined venture capital firm Kleiner Perkins Caufield & Byers, secured $1.5 million in financing, followed by another $1.5 million from Geoff Yang of Institutional Venture Partners.

In December 1995, Architext was re-launched as Excite -- the search engine to end all search engines.

At the beginning of 1996, Excite strengthened its brand by bringing on a CEO with absolutely no dot-com experience whatsoever -- former documentary filmmaker George Bell. Bell's first move was to acquire two other search engines, Magellan (the purchase price wasn't disclosed) and WebCrawler for $19.8 million. Months later, on April 4, Excite went public with an initial offering of 2 million shares at $8.50/per. The company garnered distribution deals with Netscape, Microsoft (MSFT), and Apple (AAPL).

In October 1997, Bell pulled the trigger on another purchase, scooping up comparison-shopping-service company Netbot for $35 million.

Soon after the Netbot deal, Bell bought iMall for $425 million in stock and online-greeting-card company Blue Mountain Arts for $780 million. In 1998, Bell dropped an undisclosed amount to sponsor Indy driver Eddie Cheever Jr.

In 1999, Larry Page and Sergey Brin, the founders of Google (GOOG), decided that their creation was interfering with their studies and offered it to a slew of companies (including the defunct Alta Vista, which passed, and Yahoo (YHOO), which also passed, but had a strong enough product that they were able to stay afloat with their own technology). An offer was then made to Excite's George Bell, who deemed the asking price of $1 million too high. Vinod Khosla of Kleiner Perkins went back for another attempt -- this time for $750,000 -- and was thrown out of Bell's office.

On September 21, 2000, George Bell stepped down as Excite's CEO. The stock was trading at $15.38 a share -- down from $128.34 a share in the first quarter of 1999, a 90% drop in value.

Gone were the heady days of Excite's $35 billion market cap.

By the time the third quarter of 2001 rolled around, Excite stock had fallen to $1 a share. Chapter 11 bankruptcy came next.

"They don't have any defensible proprietary content that anybody really needs," Patrick Keane, an analyst at online research company Jupiter Media Metrix, said at the time. "They have a huge database of names, and a direct marketer might want to purchase that."

Excite announced it had "initiated a wind-down of Excite.com and other portions of the Excite Media Network."

Google is now the undisputed leader in search, with 65.4% of all Internet searches and a market capitalization of $167.5 billion. The closest competitor in the search space is Microsoft's Bing, with 11.3%.

And Excite?

Um…who?
No positions in stocks mentioned.
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