Will Avis Ruin Zipcar?
If you can't beat 'em, buy 'em. That seems to be an increasingly popular mantra these days, and that's exactly what Avis will do, as the aging car-rental giant announced Wednesday morning that it plans to acquire Zipcar for $500 million. Avis, stuck in the traditional pay-per-day model while rivals Hertz and Enterprise offered hourly rental options, will pay double what Facebook paid for Instagram, a service that made zero dollars, for the startup that creeped on its own market share — Zipcar made $4 million last year. That's not a bad deal to take over a 12-year-old disruptive competitor, but as we've seen recently with Facebook and Instagram, there's always the risk that the big old owner can ruin its disruptive little brother.
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Of course there are upsides to the new deal: Zipcar gets a bigger budget, more infrastructure, and no more weekend rental shortages; Avis says its services can save $50 to $70 million for Zipcar each year. And Avis now has an even bigger piece of the coolest thing in car rental than you might realize: ZipCar grew itself by buying up Avancar, CarSharing.at, Streetcar, and Wheelz, and merged with Flexcar in 2007.
What happens when the old favorite snatches up the new(ish) startup? Priceline, a dot-com survivor, bought the more user-friendly travel-booking disruptor Kayak for $1.8 billion, after just one quarter of public trading on the stock market. Amazon has scooped up a host of online shopping sites, such as Zappos and Quidsi, the parent company of Diapers.com. In some of these cases that means the end of a beloved servie as we knew it. Other acquisitions have allowed the disruptor to flourish — under the thumb and bureaucracy of its new owner, but still. And sometime even that part doesn't go well, as we saw with HP's acquisition of Autonomy, which not only wiped out HP's profits but led to the unraveling of Autonomy, too. Even in that best case scenario, we have to consider all the possibilities that weren't. What could the competition between the two companies have led to? We'll never know. But we will have more than that sub-compact available for a weekend road trip.
