Ballmer: I will buy 20 web companies a year
Steve Ballmer has told an audience of foaming Silicon Valley start-up types exactly what they want to hear: he will buy 20 web companies a year for the next five years. — The Microsoft boss made the promise at the Web 2.0 Summit in San Francisco.
Context & Ripple Effects
Ballmer's pledge came on stage at the Web 2.0 Summit in San Francisco, in a Q&A session with John Battelle where he committed Microsoft to acquiring 20 companies a year for five years, each sized between $50 million and $1 billion. The promise landed one day after he told the same audience, in effect, that Microsoft wants to buy their companies — a deliberate signal to the Valley's founders rather than a routine earnings disclosure.
The acquisition pledge sits inside a broader Microsoft push that surfaced the same week: executives confirmed the company is shipping products that compete with popular Google services, argued publicly that online advertising will shift away from search-based models, and joined Yahoo and AOL in bolting social networking features onto web email. A rumored Flickr integration into Windows Live Photo Gallery remains unconfirmed, but points the same direction — Microsoft buying or building its way into consumer web territory it does not already own.
First-order effects
- Web start-ups gain a clearly signposted exit path: Ballmer has put a public price band ($50M–$1B) and cadence (20 per year) on Microsoft's appetite, which changes how founders and their investors price a sale to Redmond.
- Microsoft's corporate development function shifts from opportunistic deal-making to a quota-driven pipeline, with the online services division the stated beneficiary.
Second-order effects
- Google, Yahoo and AOL now bid against a buyer that has announced its volume targets in advance, forcing rivals to either match the acquisition tempo or lose deal flow — and likely inflating valuations across the small-cap web M&A market.
- Yahoo and AOL's parallel move to add social networking features to web email shows incumbents responding on the product side too, since acquisition alone cannot close the engagement gap with fast-growing social networks.
Third-order effects
- If the pattern holds, Web 2.0-era innovation consolidates into a handful of platform owners — Microsoft, Google, Yahoo, AOL — with independent start-ups increasingly built to be acquired rather than to stand alone.
- A steady stream of sub-$1B tuck-ins concentrates frontier capital and talent inside the big platforms, raising the long-run question of whether regulators or market dynamics police that accumulation.
The trend: Consumer web start-ups are being absorbed into a handful of large platforms through programmatic tuck-in acquisitions, with Microsoft's announced 20-a-year pace the most explicit statement of that strategy to date.