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from the bankers-replaced-by-a-toothbrush dept.
When deciding whether Google should spend millions or even billions of dollars in acquiring a new company, its chief executive, Larry Page, asks whether the acquisition passes the toothbrush test: Is it something you will use once or twice a day, and does it make your life better?
The esoteric criterion shuns traditional measures of valuing a company like earnings, discounted cash flow or even sales. Instead, Mr. Page is looking for usefulness above profitability, and long-term potential over near-term financial gain.
Google’s toothbrush test highlights the increasing autonomy of Silicon Valley’s biggest corporate acquirers — and the marginalized role that investment banks are playing in the latest boom in technology deals.
Many of the biggest technology companies are now going it alone when striking large mergers and acquisitions. Companies like Google, Facebook and Cisco Systems are leaning on their internal corporate development teams to identify targets, conduct due diligence and negotiate terms instead of relying on Wall Street bankers.
(Score: 0) by Anonymous Coward on Monday August 18 2014, @07:24PM
Ahh, but we're talking about potential here, not implementation. The potential Facebook offers is easy availability of your social network (family, friends, co-workers) in a way that brings you closer to them.
You take issue with it's current implementation (One friends new interest in Candy Crush starts to overwhelm your page, difficulty in segregating disparate parts of your social network, and the steady degradation of privacy)
I don't think it is as hard as you think to estimate the potential usefulness of an app. I DO think where this method breaks down, and they have to turn back to "the old ways" is in estimating it's value, or worth. That seems like an important question in a Billion dollar merger.