The irony of the French government’s intervention in the Yahoo! – Dailymotion deal…

The irony of the French government’s intervention in the Yahoo! – Dailymotion deal…
Photo via Les Echos
Photo via Les Echos

Last week, my cofounder wrote about how the French government’s may potentially be slowing the deal for Yahoo to acquire 75% of Dailymotion (currently 100% owned by Orange). This morning, Les Echos confirmed that the government is indeed looking for alternative solutions, and, essentially, refuses to let foreign companies buy a majority stake in Dailymotion. The French government currently maintains a 27% stake in the Orange’s parent company via the French sovereign wealth fund FSI, and thus has a bit of power over this deal, unfortunately.

The Irony of it all….

In the aforementioned article, Les Echos states that the government wants to “give Dailymotion what it needs to grow” – what a bunch of bulls$%t. The Dailymotion executives stated that, in visiting Fleur Pellerin last week, they said that they were looking to raise 50 Million euros (despite being profitable for the last 2 years), in order to expand into new countries (Brazil, Spain, Japan, etc.), as well as make acquisitions and invest in R&D. The French government’s response: Don’t worry, we’ve got tax payer’s money. You can have it all.

The French Government = Dumb Money

The French Government is the embodiment of dumb money. Dailymotion is currently valued at 300 million euros – the new BPI (Banque Publique d’Investissement) will have 400 million euros to invest in startups – and the French government will likely empty its coffers in order to keep Dailymotion ‘Made in France.’ What the French Government doesn’t realize is that when companies want to go global – take fellow French startup Criteo, for example – they seek for investors that have more than just wallets, but have experience in the markets, a network they can take advantage of. In Criteo’s most recent round of funding, they raised from Yahoo! Japan – likely to enter the Japanese market.

Like a parent who hugs their child so hard that they suffocate them, the French Government has already shown that it’s willing to pick winners. Imagine an investment fund that invested half of its round in one company – no hedging of bets, just an uneducated desire to maintain what works moderately well.

Dailymotion has an opportunity to work with a global internet portal that is still undervalued, and being led by someone who knows Google inside & out. If Marissa Mayer thinks she can create value out of Dailymotion, the best thing for Dailymotion is to explore that possibility.

8 Responses

  1. Christian Baudry

    Right on!

    The French government does not understand that Internet companies do not prosper in a vacuum. They need an eco-system. Staying alone will be a disaster.

    Orange is a telco, not an Internet company and they have little synergies to offer. They are not going to invest in Dailymotion because they are already tight in terms of money.

    Dailymotion is valued $400 millions. That’s not much. It shows that they are not a key player in their market.

    Another disaster in the making!

  2. Julien Duponchelle

    I think you need to see that as strategic investissement for international political influence via medias. It’s the same thing than for France24 or RFI.

  3. admin

    Has it occurred to the author that Yahoo’s only interest in buying this company would be to shut it down? The French Govt is not as stupid as you think.

    • Chris

      Right because Yahoo is willing to pay megabucks to shut down a company. Makes total sense, especially when you know that Yahoo’s video service (screen) is completely underused on the web.
      Just like Google acquired YouTube despite have a negligible influence with Google Videos, Marissa Mayer was attempting the same deal for Yahoo: shut down Yahoo Screen and acquire DailyMotion.

    • Joe

      @Chris – it may not be an intentional shut down, but Yahoo has a history of buying companies and then failing to integrate or invest in them properly. They instead set-up new vertical portals where the owners favoured third party monetisation thus ignoring their new acquisitions in terms of platform investments or share of voice for investment. Marissa’s aim is clear in changing that, but it is why people are very sceptical.

  4. Rememberer

    Remember Yahoo! is sentenced to pay 1 billion to a local in Mexico. Thanks for the expertise.

  5. Cédric Giorgi

    The reason given by the French government is very, very sad as it gives a bad sign about the French startup ecosystem.
    But… honestly, Yahoo… Do you remind what they’ve done with all the startups they’ve acquired? Very often, they just close them or let them die, or let them independent, but don’t work on making them staying innovative (think Flickr).

  6. Juan Diosdado

    I’m impressed by the stupidity of this intervention. It’s better to have 25% of something than 100% of nothing. I wonder how do DailyMotion employees feel about this.

    Not only will this scare foreign investors, but it will also force local entrepreneurs to think twice before fighting to build an ambitious company in France lest they be held captive.

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