Business Week is reporting that Facebook has turned down a $750 million acquisition offer and is looking for $2 billion. The blogosphere is buzzing about the news.
The source of the information is an executive(s) at Facebook, which as a private company is fairly free to say just about whatever it likes with regard to acquisitions. And what they are doing is clearly playing Business Week to get the word out that they are very much for sale.
And I believe Carlo at Techdirt nailed it when he draws comparisons to the way Skype handled its PR prior to its acquisition by ebay: rumors, rumors and more rumors about very high acquisition prices, almost to see how much analysts and journalists could stomach before saying “ok, that’s just ridiculous”. For Skype, the price was $4.1 billion. For Facebook, they’re just seeing how people react to a $2 billion price tag.
The price, by the way, is high but not ridiculous yet. MySpace was sold for acquired by Fox for half a billion dollars last year and has grown significantly since then. Many people are now saying that Fox negotiated a very good deal for itself. And while Facebook is no where near the size of Myspace, it’s no wimp, either. 85%+ of all college students use it, and they are now moving aggresively into the high school market.
A note on alexa rankings for Facebook: Unless you are a member you cannot view content on the site, making the network much more valuable for members but much less likely to get the massive page views and search engine juice that Myspace sites can generate. It’s not a very fair comparison. The simple fact that just about every college student in the U.S. uses it suggests that it has massive value, perhaps even greater than Myspace in the long run.
It’ll be interesting to see if the niche social networking sites that continue to emerge will end up taking any of the wind out of the sales of these larger, more general interest ones. Maybe that’s a long shot, but it seems it could impact the value of said sites down the road.
Facebook just about updates their website every day with new features
Michael, I think you’ve hit the nail right on the head, this is nothing more than a PR move to test the waters and see what the market can take.
I’ve got a question though…what’s the Facebook strategy to keep all its current users after they graduate from college and move into the workforce? At least MySpace isn’t restricted and gives twenty/thirtysomethings a place to come back to…
Marshall – I agree, the nice stuff is going to be more attractive to their audiences v. a come one, come all site. Facebook is a perfect example of this.
TJonas – As long as you maintain your .edu email you can belong to facebook. I believe they have a couple of years of graduates out now, although I do not know what the maintenance rate is for that audience. It must drop off eventually unless they release new products to keep it relevant to an older audience.
Facebook is also has about infinity times better execution than MySpace. The MySpace interface is so ugly, random, and inconsistent (IMO). This is made worse by the fact that their users “mod” the hell out of it with no taste. Facebook, on the other hand, had limited their users’ ability to customize with the positive side effect that they layout and features can be more consistent and clearly organized. Things are easy to find on Facebook, and it is a joy to use. I’m not sure how much technical quality of the product affects valuations, but that should could for something.
Can they monetize the traffic? Have they done it in practice, or is it just theory?
The fact that they have 85% of the college market means there’s not a lot of upside in users (college populations are not growing particularly rapidly) so they need to figure out how much revenue they can generate per user and how much they can grow that number.
What they really need to do is merge with LinkedIn (already profitable) and transition the Facebook users to LinkedIn upon graduation.
All that said, it doesn’t mean some idiot won’t pay $2 billion for them. After all, YHOO paid $5.7 billion for BCST.
It is a fair compairson: They made some design choices (keep it closed) that will have a big impact on pageviews, etc. Overall, not being an open part of the web makes it far less valuable than MySpace…
Friends ReUnited was bought for £120m in the UK by ITV – one of our commerical TV stations. So far it has been a total flop. If Facebook is anything like the experience on FRU then there was an initial interest to see what your school friends had been upto since leaving. But once curiosity had killed the cat, I have not been back since. So why pay £120m for a site that has a lot of data in but where very few people return frequently enough like MySpace. Is Facebook therefore really worth £2bn?
I question whether the college student market actually has value. Very few college students are frequent buyers, as most are broke. They don’t go see movies often, don’t eat out, don’t buy goods, etc. The only ads I ever see on Facebook are for T-shirts.
Sean, MySpace did well precisely because of it’s flexibility. Facebook is rather boring once you graduate (I was one of the first alum users, graduating in 2002). There is really nothing to do on the site, and I check it perhaps once a month.
Got Link?
http://www.tech...om/tag/Facebook is not Facebook, http://www.facebook.com/ is but I guess since Business Week didn’t bother…
can you define “moving aggresively into the high school market”?
I think $2B is a bit of a stretch, but what do I know?
I’m a bit disappointed that the media hasn’t done enough research to figure out that Facebook doesn’t really restrict registrations to college students. Sure, you need a .edu address, but what university doesn’t give those to alumni nowadays? (I registered a couple months ago with my alumni email and I’m c/o ‘93.) How many university employees and staff get .edu email addresses? And how many students have admin permissions allowing them to create .edu addresses at will?
One of Facebook’s greatest feats has been fashioning itself as a “restrictive” site in the press. I concede that the .edu restriction does act to limit the universe of random people who join the website— and the value of that itself cannot be dismissed— but Facebook is not all college students.
It’s only a college market for now…
Facebook has 85% of current college students today, but they also retain a majority of the students in Alumni status. Even if the number of active college students doesn’t grow radiply, the number of facebook users will.
Facebook has only recently captured the entire college scene, and I’d imagine the plan is that the number of alumni users will eventually far exceed current college students.
The obvious negative of facebook is a limit of the number of potential users, but at the same time it empowers a level of trust in users that isn’t there on myspace. And trust of course can lead to P2P payments, file sharing, etc…
“The price, by the way, is high but not ridiculous yet.”
Give me a freaking break. You’re telling me that a valuation of $100 per user isn’t astronomically ridiculous? No company could ever, EVER hope to make their money back with a price that high. Facebook is worth, at most, 100-200 million. Look at revenues, look at growth (going to stop growing soon), etc.
Facebook is suddenly for sale b/c universities start disliking them.
No university is really happy if a third party knows all their students or uses the university emailsystem as a business channel.
I wonder what they must be turning over to try pull in such a big multiple of an acquisition initial request. My gut says they’re playing the old game of ‘promise’.
There’s a huge difference with Skype: Skype had already proven that it can monetize its traffic, and had in the works many more sources of revenues. I don’t see $2Bn for Facebook, and franly they should be in the Idiotbook if they turned down $750M. But did they really?
To answer TJonas question since most colleges recycle .edu email accounts facebook allows users to change their email to a private account in the user setting page. Keeping graduates as members isn’t hard after that… FB makes keeping touch with people much easier. Not only that but the facebook team is constantly rolling out new features and updates… which keep people coming back. For example for March Madness they allowed users to create a bracket. From there users were ranked against other users at their respective school, schools were ranked against each other as well. I believe prizes were being offered for the best brackets.
I am college student. I use facebook all the time. My friends use it 50 times more than I do. It is the cleanest, most efficient, and most socially “networked” site I have ever seen.
I hate MySpace. Someone here said they modify their pages and make them look ugly. I agree a 150%. I have seen many social networks and none seem to be as mature as facebook is.
Here is the downside. Now that facebook will be bought, the new owners might change it around. In that case, I will cancel my account.
The best thing about facebook is that you need to be qualified to join. This does not let everyone come in the game, but those who do are serious about networking. Some idiot is not allowed to create an account and portray himself as someone else.
In an answer to NicolasV, facebook does not have ads. It has got something else. It has a loyal community. I REFUSE to join myspace and spend even an once of time on it.
Think about it this way. This is a forum for college kids. They have money. They are working. They are working and earning much more after college. Which community is a bigger industry?
Sean said: “This is made worse by the fact that their users “mod” the hell out of it with no taste. Facebook, on the other hand, had limited their users’ ability to customize with the positive side effect that they layout and features can be more consistent and clearly organized.”
That is *exactly* why MySpace is flourishing right now – they let users do the stupidest, ugliest, nastiest html hacks right now, and all the kids who could care less about web standards or ajax love it. You can embed video anywhere, put pictures in stupid places, use horrible color schemes, whatever. Thats one reason the 13 year olds love it. It literally is _their_ space.
So please, don’t try use that as a negative against myspace, since its actually one of its greatest strengths. It bothers you and me crazy, as programmers or designers, but its perfect for the target audience.
see: http://www.dana...SpaceEssay.html
Guys, we aren’t arguing that Facebook isn’t a nice site (it’s nice, not awesome. Nothing they do is innovative). We’re arguing that it’s not worth anywhere close to $750M, let alone $2B.
100% agree with Rob above. Myspace is incredible popular b/c of it’s cheap design and “Customizeability”. It is 2006 and people saw the same corporate design over and over.
Facebook did do something innovative. They realized they could group people by the domain name in their email address. Microsoft saw the value in this practice and incorporated it into Expo Live.
Facebook does have ads (in response to Anas’s comment). If I had the time, I would try to calculate how much they make from these ads.
First my sources at Facebook say there never was an offer for $750M and that was simply BusinessWeek speculating. Second, Facebook does have ads so I am not sure what you were looking at Anas. Thirdly, any amount of money they get is going to be a lot for a 21-year old guy and mad props to him for pulling it off.
So far facebook has avoided the negative media attention surrounding myspace. But what if there are some unfortunate incidents and college’s start to block incoming email from the facebook mail server? It seems to me that facebook’s added value to the market is how they authenticate users via their .edu address.
@Dave
You totally understood the problem. I work in the college market and this is exactly what turns the colleges against the Facebook. The facebook needs to share with the universities and cannot just use their infrastructure. It is a big fear of universities to loose control over their students, especially if very sensitive data is involved.
Any investor who pushes big money in this site will face earlier or later this issues.
Myyearbook is capturing a lot of collegestudents (35,000 signups/day) chances are these people will not migrate to facebook once they enter college. Myspace has huge marketshare as well.
Everyone should keep in mind that monitization of the web is still in its early stages, once google or yahoo start showing ads based on previous search history sites like myspace/facebook could suddenly be worth 4 to 5 times the current value.
I have no doubt the value of facebooks traffic could be on the order of 2 billion in 5 or 6 years, the real question is will facebook still have much of its current marketshare?
Oh and facebook could make a killing upselling student loans.
facebook could be the next evite if they are not careful. the only reason they are rejecting the offer is that they have a ceo who wants to be ceo becuase it is cool. the notion that they will be more valuable than myspace is ridiculous–facebook has yet to prove it can retain any users more than 1 year after they graduate. they are also basically break even and not really profitable despite a decent revenue run rate. college kids are fickle and time-insensitive, they will switch to the next cool thing.
1. I do not believe that facebook has 85% of the college market. Where’s the proof of that?
2. The statement that facebook retains a large number of alumni is just more BS. Alumni? How long has facebook been out there? Four years? It takes four years to become an alumni.
The whole thing reeks of hype and the usual Web 2 Internet Bubble 2 greed.
$2B for a social networking site restricted to college students only and relying on banner ads for revenue …
>>>
Mike Drips,
I agree with the bubble sentiment to a certain degree. However, on your point about alumni: If you sign up as a senior, you will be an alumni user in less than a year. Remember that
This is just disgusting. $500M for myspace was bad enough, there’s no way that Facebook is worth that much, let alone $2B. The point brought up multiple times earlier is the exact reason that the price of this site SHOULD be very limited. I finished college in December 2003. At that time my school was not available on Facebook. My school dropped my email address a few months later just like almost every other college in the country would do. I have not and will never be able to access the site, even if I wanted to. Which I don’t. Talk about a incredibly limited audience.
Facebook is a very tough in terms of its value. First, it is clearly the gorilla in its space and still has a great deal of potential for growth, even within the college sphere. Facebook began as a very exclusive social networking site. In the early days participation was limited to exclusive schools, namely Ivy’s. Its growth outside of these elite institutions really didnt begin all that long ago. The real value of facebook is if they can figure out way to retain their alumni population. Looking at the frequency in which my friends (class of 2004) still use facebook, it has declined, but only slightly. It is still the place to go to ping your friends, check out the hot ‘friend of a friend’ and more. College students today use facebook everyday. All I know is that that is an awful lot of very very valuable pageviews.
I find $100m ridiculous for this fad forget $2B. Reminds me what Yahoo paid for Boradcast and Geocities. Our memory is so short…
It is Bubble 2.0 (credit me for coining this term)!! My 2c (or 2Billion c), whoever is on top of this web2.0… cash it while you have it. At the end Mark Cuban (the Broadcast founder) turned out to be the smartest guy… he sold BCST for billions and then shorted Yahoo’s stock and made double the money.
Even if MySpace is a fad, with ads on the home page running $500k per day, NewsCorp should be able to easily recoup the $650m it spent.
Michael, I am surprised you are not raising any privacy concerns about facebook as you did with jigsaw. Facebook allows people to write about the people they are dating. So essentially, they are uploading information about other people without their permission. Dont you see the privacy intrusion here or did you just not like jigsaw.
any educated guesses on who facebook’s potential suitors may be, or when the company might sell?
Facebook isn’t worth that much. Like someone else already pointed out, is exclusivity is its downfall. Accepted that it is a U.S fad that has spread here, it only currently lists 20 odd English universitys, leaving them with a very very small audience here. Myspace, however, has taken over Friends Reunited as the place to catch up with old school chums -primary, secondary and college-wise (grade school to high school)
Facebook is monetizing traffic very well and has since the early days of the business, that is a key part of what Matt and Sean were able to make happen.
Check out the flyers you can post on it and the cost per flyer and then quickly look at how many new ones are being posted per day. A quick estimate from that suggests they are generating some real money every day.
Yes they are currently accuring some real dollars, I doubt anyone’s disputing that. It’s the company’s growth and longevity that is being questioned.
I like this free dating site …. it looks like they are on the move…
http://www.friendpad.com
I’ve been on friendpad, full of fake profiles… I can recommend LiveDateLove.com if anyone is interested. And about Facebook – many people use it but new sites are coming out almost monthly and noone can afford to sit on several sites… so it will be downfall for some and uprising for the others…
its great comapritions between them, i like this stuff……..well done
its great comapritions between them, i like this stuff……..well done