ParentCos: Just Don’t Understand & That’s A Good Thing

Big companies buy hot web startups for their audiences and their cool factor. Increasingly, along with the transaction is the up-and-down pinkie-swear promise to have little-to-know impact on the acquired company. No name change, no office location change, little-to-no leadership change.

Acquirers, despite their enormous and asymmetrical audience, money, and power compared to their purchases, seem like awkward first-time parents afraid of hurting a baby. They are more than conscious of their status as old farts swooping in and quickly turning cool to lame. It’s not just media companies; Google is doing exactly the same thing with YouTube, which captured global attention like its internally built competitor, Google Video, could not.

“We have to keep the communities, otherwise what is the point,” CBS Interactive President Quincy Smith told us when his company bought for $280 million. “In the end that is what we are buying. I think we want to do some minor grafts with the start-ups we acquire, help enhance their business without coming in their way.”

Community building is serendipitous and often unexplainable. When it works, it works in the ridiculously viral way that all web companies live for. But impressive registered user counts don’t pay the bills; so nine times out of ten you’ve got to sell out to a big awkward parent. And that’s unlikely to make your members happy.

“If the Man buys a social network,” Smith said, “the key is to keep our influence away from it.”

Yahoo bought Flickr and kept the name, but made the company move from off-the-beaten-path Vancouver to blah Sunnyvale. These days, it seems, making the move from San Bruno to Mountain View (YouTube) or London to New York City ( is not a requirement. Even little Wallstrip isn’t shacking up at CBS HQ, staying at its own studio across town.

Buying a cool startup wins you media coverage, cocktail-party relevance, and other things that fade over time. But maybe you can hang onto that fresh feeling — the awkwardness of explaining every time we write “YouTube, now owned by Google” — a little longer. We’ve even been told by startups bought three years ago, at the beginning of the current wave, that their parents are trying to bring back their brand names and the sort of indie cred they bring.

Peter Chernin, president and COO of News Corp, said that his company bought Photobucket because its photo-sharing site figured things out better than the one developed internally at MySpace (a purchase that couldn’t be left alone because of its massive infrastructure needs, though it hasn’t changed a ton since being bought).

“We developed our own photo tools and we increased capacity to 300 photos,” said Chernin, “but we looked around and Photobucket did a better job. Photobucket is going to be left alone, because it is doing what it is doing.”

And what is it that it is doing? It’s hard to explain.