How to Blow $3.5 Billion

Yahoo finally shuttered Geocities today. Acquired in 1999, Geocities was one of the costliest dot-com duds of of all time: $3.5 billion for an ugly, cash-bleeding homepage hosting service. And to think Google's founders were simultaneously begging server funds.

Yahoo had a shot at acquiring or investing in Google before purchasing Geocities; according to John Batelle's The Search, Google's co-founders Larry Page and Sergey Brin approached Yahoo in 1997 or 1998, but Yahoo passed. Page and Brin were becoming desperate for resources — they had scrounged far more than their fair share of excess servers, hard drives and bandwidth belonging to Stanford University — so on the advice of a professor they turned to Sun co-founder Andy Bechtolsheim:

Brin sent Bechtolsheim an e-mail late one night requesting a sit-down, and Bechtolsheim answered immediately. He suggested meeting the next morning at eight o'clock... They agreed to meet, on the porch of [a mutual friend's] Palo Alto home...

[Page:] "We did a demo, and Andy asked a lot of questions. [Then] he said: 'Well, I don't want to waste time. I'm sure it'll help you guys if I just write a check.'"

...When Bechtolsheim went out to his car to get his checkbook, they pondered how much to ask for and at what valuation... "We told him our valuation and he said, 'Oh, I don't think that's enough, I think it should be twice that much...'"

Minutes later, Page and Brin had a check for $100,000.

This happened in late 1998, right around the time Yahoo would have been negotiating its Geocities boondoggle, which was consummated in January 1999. To think the company could have had Google for a song. Google users should be glad Yahoo didn't — Yahoo's bumbling managers probably would have run into the ground. Twitter investor Fred Wilson should be glad, too: the Geocities deal earned his venture capital firm a hundredfold return.