The CEO of Broadcast.com was not the founder of the company, and he was not a technology guy. In fact, he was completely clueless about the actual technology behind streaming video. But he had sold his first company, MicroSolutions (a fairly successful systems integration and software reseller) to CompuServe, and walked away with about $2 million in his pocket after taxes. It was enough to resurrect a dying company called Cameron Broadcast Systems, rename it (first to AudioNet, then to Broadcast.com), and set himself up as CEO.
Two years later, in 1999, Broadcast.com was acquired by Yahoo ... for $5.9 BILLION.
And who was the mysterious CEO of Broadcast.com?
His name is Mark Cuban – he became a household name when he used the profits from the sale of Broadcast.com to purchase the Dallas Mavericks basketball team (and a number of other high profile investments).
So how did a struggling company with a measly $13 million dollars in gross sales, who’s CEO would have been very happy with a $30 Million valuation two years before, suddenly become a six BILLION dollar company???
Part of it was due to the fact that it was the middle of the Dot Com bubble, and people just weren’t thinking right. Part of it was that Yahoo wanted to be in the “Media” business – whatever that meant – and they were eager to snatch up the only “Media Portal” before anyone else did.
But mostly, the Yahoo executives were amateurs and got bamboozled by a fast talking CEO who made all sorts of promises that he never delivered on. The Broadcast.com business unit immediately floundered under the incompetent Yahoo management, and today both the AudioNet and Broadcast.com web addresses unceremoniously forward to the homepage of Yahoo. It was a total bomb from day one.
At the absolute very most, Broadcast.com was worth maybe $50 to $100 million – and only then if it was paid out over five years, contingent on the management team meeting strict performance targets. After all, they had no technology of their own – they purchased everything that made their system work from companies like VXtreme. They had no profits, the $13 million in gross income barely paid their bills. What they had was a catchy domain name, a fairly good reputation, and a small handful of cash-paying customers.
Yahoo paid $5.9 billion dollars ... for a domain name ... which they did nothing with ... making Mark Cuban and his business partner Todd Wagner into instant billionaires ... without any accountability for the ongoing success of the business.
And THAT’S why I give it my vote for the worst investment ever made.