Online Acquisitions Often Lead to A Decline In Traffic

ApartmentRating’s unique visitors has dropped 14% since the acquisition by Internet Brands in July of 2007 according to tracking site Compete.com. In the last 2 months, unique visitors has dropped by approximately 100,000 unique visitors a month.

In January of 2006, Primedia, (PRM) purchased RentClicks.com for 12.6 Million cash and a multi-million dollar earn out. As this graph from Alexa.com shows, immediately following the acquisition a large drop in their reach followed.

These two site acquisitions are two of many internet acquisitions that start this way. It happened for HomeAway with their many vacation rental site acquisitions including VRBO in Nov of 2006. According to Alexa.com, their reach is now at about 33% of what it was before the acquisition.

Why might this be? Well, here are some potential reasons why almost immediately after an acquisition a site sees a decrease in traffic.

1) Many of these “Organic” traffic sites, or sites that receive most of their traffic from organic search results, has an Achilles heal. This heal is their dependency on search engines to drive traffic. With that said, search engines, Google in particular, look at hundreds of different variables to determine how they rank sites. After a company acquires another site, they usually change their domain registration and Whois records to the Parent company. In many cases, this effects search engine rankings negatively.

2) These highly ranked “organic” sites did not get there by accident. It is usually because a very dedicated founder spent years doing SEO (Search Engine Optimization) to ensure their site ranked high for their search terms. After an acquisition, the glory of spending nights on SEO is gone. After the buyout, the opportunity cost is no longer there. The founders are usually too busy counting their millions, not focusing on SEO.

3) Cannibalization of similar sites owned by one company. Quite often, a large company may try to enter a market by acquiring the largest player within that market and then buying other similar sites and killing them off to eliminate competition.

Or a large company may buy many of the same types of sites and keep them running independently of each other. This is where true cannibalization takes place because now these sites, owned by one company, offering the same product, are competing for market share, advertising dollars, internal politics, etc.

At the end of the day, a traffic decrease may be inevitable for sites who are looking to acquire another. We are going to see many more acquisitions in the real estate and rental markets within the next few years. Let’s hope that lessons will be learned for those sites who are looking to acquire.