The Ultimate Guide to Internet Deals

What's the deal with Internet companies these days?

Deals! Lots of deals: High-priced acquisitions of fast-growing startups. Marketing alliances between old-media giants and new-media innovators. Distribution partnerships between companies that sell stuff and Web sites that attract eyeballs. It's a fact of life in the new world of business: Companies live and die by how well they do deals. And their leaders have to cut make-or-break deals at speeds that would paralyze their counterparts in slower-moving industries.

"There are two options for Internet companies," argues Kevin O'Connor, 38, cofounder and CEO of DoubleClick, the Web's advertising superpower. "Get bigger fast, or get smaller fast. If you're not one of the top three players in any category, eventually you'll be eaten -- or die. That's a pretty good incentive to find partners that can help you grow."

"Everyone on the Net is scrambling to get big fast," agrees Bob Davis, 42, president and CEO of Lycos, a Web portal that recently signed a high-profile -- and decidedly controversial -- deal with USA Networks to create an e-commerce giant. "We did five acquisitions and three strategic investments in less than a year. There's a clear sense that speed is a necessity. This isn't just about building companies. It's about laying the foundation for an industry."

In some sense, doing business has always been about doing deals. And many of the old rules of deal making -- about knowing if you can trust the folks across the table, about preparing for a negotiating session -- still apply. But there are new rules as well. Internet deals get done in weeks (and sometimes even in days), and negotiations are just as likely to take place outdoors -- perhaps after a game of ultimate Frisbee -- as they are in a conference room. More and more negotiations take place through email rather than in person. And because so many Internet companies have neither tangible assets nor an established track record of success, the human factor looms larger than it ever has before.

"If you're buying a television station, you're buying an awful lot of fixed assets and a lot of history and predictability," explains Bert Ellis, 45, chairman and CEO of iXL Enterprises, an Internet-service provider in Atlanta. Over the past few years, Ellis has been a single-minded acquirer of small Web-development agencies. Back in the early 1990s, he was a serial purchaser of television and radio stations. (He later sold his group of 15 media properties for $745 million.) And he sees a big difference between those two industries: "In the Internet business, it's much more difficult to assess value. All we're buying is people."

Of course, as more deals get done, and as those deals get done faster than ever, more suspicions get raised as well: There is a big difference between making a deal and issuing a press release. "Pressware" is to the Internet business what "vaporware" is to the software business. "We don't do 'Barney deals' here," insists Bill Nussey, 33, president of iXL. "That's what we call it when you announce a partnership that's only about 'I love you, you love me.' "

"We're looking for properties and technologies with high rates of growth," says Bob Davis, whose bookshelves are lined with baseball caps that commemorate past deals. "That's why we've acquired companies like Tripod and invested in companies like Bidder's Edge. The opportunities come at us in a fire hose, and the trick is to know what to pursue and what to decline. What's clear is that you need to make deal making a core competency."

O'Connor, Davis, Ellis, and Nussey are writing a new rule book for how deals get done, for how deal makers do their job -- and for what happens after the deal. Fast Company turned to them and other elite Internet deal makers to create the ultimate guide to Internet deals. Are you ready to deal?

I. How to Buy on Instinct

From the day he came on board at Lycos, Tom Guilfoile, 34, knew that he was in for a wild ride. He had been a senior manager at Ernst & Young's entrepreneurial-services group, one of the giant accounting firm's nimblest divisions. But that was nothing compared with life at one of the Net's fastest-moving portals. Guilfoile started work as Lycos's controller in February 1996. By April, he had helped the company to navigate SEC regulations and to float an IPO. That IPO took place just 10 months after Lycos was founded, making Lycos the youngest company in NASDAQ history to go public.