September 21, 2006

Facebook And Yahoo In Acquisition Talks for $1 billion?

Michael Arrington

119 comments »

The Wall Street Journal is reporting (behind their damn paywall) that “people familiar with the matter” are saying that the company has had separate acquisition discussions with Yahoo, Microsoft and Viacom over the last year, and that they are again in serious discussions with Yahoo for around $1 billion.

We’ve been through all of this before with Facebook, back in March. There isn’t much in the WSJ article to suggest that the talks are serious other than the unnamed source they cite. I’ve put in emails to Yahoo corporate developement and Facebook PR for comment. I will either receive emails back saying they never comment on acquisition discussions, or they won’t respond.

There are other interesting tidbits in the article, however, which includes a “dot-drawing” of Mark Zuckerberg and a couple of priceless quotes:

During one series of talks with Microsoft, Facebook executives told their Microsoft peers they couldn’t do an 8 a.m. conference call because the company’s 22-year-old founder and chief executive, Harvard dropout Mark Zuckerberg, wouldn’t be awake, says a person familiar with the talks. Microsoft executives were incredulous.

and

At one point in the Yahoo negotiations, the talks extended into the weekend, says a person familiar with the matter. Mr. Zuckerberg, this account continues, said he couldn’t take part because his girlfriend was in town. Others pointed out they were closing in on a billion-dollar deal. Mr. Zuckerberg said it didn’t matter: his cellphone would be off, this person says.

Our previous coverage of Facebook is here. Thanks Richard for the heads up.

Update: Facebook Marketing Director Melanie Deitch responded to my email: “No Comment” :-)

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Trackbacks/Pings (Trackback URL)

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  18. Facebook to Sell? » Personal Insights on Web 2.0, Blogging, and Business
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  21. Tecnorantes » ¿He oído burbuja? II
  22. vrypan|net|log » links for 2006-09-22
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  24. Will Yahoo buy Facebook for 1 Billion dollars? at MySpace Latest
  25. Interview with StudentFace - The Australian Alternative for Facebook « TechAddress
  26. TimChapmanBlog.com » Blog Archive » Weekend links…and video
  27. Confessions of an Undercover Geek » Mark Zuckerberg is living the dream…
  28. TechCrunch Japanese アーカイブ » FacebookとYahoo、$1B(10億ドル)で買収交渉中?
  29. Currants » Facebook selling to Yahoo?
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  31. TechCanuck Podcast: Episode 5 | TechCanuck Podcast
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  33. TipsyTech » Blog Archive » Facebook has finally opened it’s doors
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  42. Be an early Entrepreneur at My Passions. My Obsession. My Soul.
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  44. Tyler Reed » Mark Zuckerburg And Facebook Don’t Matter
  45. News Corp: MySpace Worth $6 Billion
  46. Webrazzi » Google, Microsoft’un Yahoo!’ya yaptığı teklife sert çıktı!
  47. Blog @ Sakinlestirici.Net » Blog Archive » Google, Microsoft’un Yahoo!’ya yaptığı teklife sert çıktı!
  48. Some interesting Facebook facts at Charl Norman </ Social Media Entrepreneur >

Comments

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  1. Andy

    Web 2.0 VC’s are looking smarter and smarter everyday.

  2. My name is Earl

    I really enjoy Mark Zuckerberg’s management style. How many of us waited for M$ and Yahoo many times in their life? Karma always comes back.

  3. BO

    I think that’s what we call whipped

  4. Brian

    It’s “cite”, not site.

  5. Adam

    If this kid keeps passing there isnt going to be to many big companies with deep pockets willing to buy them. Personally I would have taken the first offer and if this second offer is legit I would be signing away over any weekend or holiday. He can then buy his girlfriend… well whatever she wants. History shows that social networking sites are often fads. Before long he will be dumping the company for 20 mil and spending hundreds of thousands in therapy

  6. Julio Nobrega

    Damn Zuckerberg is my new hero.

    I bet all these billion-dollar executives forward emails saying “enjoy your life”, “live the present”, “family first, work later”… And a 22 year old teaches how to do it.

  7. Paul Montgomery

    I hope Zuckerberg got something really good from his GF, he would have been able to use a killer line. “Hey baby, I blew off a billion-dollar deal with Microsoft to be with you today. How about it?”

  8. overcast

    I’m sorry but if I told my girlfriend, I can’t spend time with her tonight, because I’m about to sign a deal for ONE BILLION DOLLARS. She would understand. If any of this is true, he doesn’t deserve the offer.

  9. Sean

    Mark really annoys me. What an arrogant ass he must be to pull stuff like this, especially back in March when he turned down a 750 million dollar deal, because he wanted 2 billion. I mean, sweet Jesus.

  10. mesattack

    Wait, I have to hit my crack bowl before I finish this post…ahhh…that’s better.

    One billion? Based on *any* financial metric this is just insane. It’s irresponsible not to take it if it is, in fact, legit.

    Speaking of irresponsible…it’s very dangerous to act with such hubris. Zuckerberg has a responsibility to his shareholders which includes having m&a discussions at inconvenient times if it will benefit the stakeholders. Maybe he should start shooting stupid videos of himself like the American Apparel flake.

    We couldn’t even send a message to our group members at FB! It’s almost like a joke or something…nice to write off goodwill I guess.

    Mesattack
    http://www.markseremet.com

  11. Jason Drohn

    Mark is in a place to negotiate. Sure, we might think it ridiculous to turn down or blow off a $1 billion dollar deal, but honestly what does he care? He owns the company. He is 22 years old and calls the shots! He makes more than enough money on a daily basis to live life without worries.

    The offers will still be on the table on Monday morning, and who knows it may have increased by then..

  12. Daniel

    Yeah, I mean… he turned down 750 million, and now he’s in talks for 1 billion? That’ll learn him.

    In all this talk of him being an arrogant ass, we also forget how irresponsible busy-ness types are to simply *assume* they can infringe on your week-end. Why not wait until Monday? Don’t they also have friends, family, spouses or children to come home to?

    Few people regret on their death bed not having pulled more overtime on week-ends instead of time at the cottage with the kids. At least the 22 year old has the excuse of being a young’un… what’s the excuse of the microserfs?

  13. Patricia

    Meh. I can’t help but to lose interest in anything that resembles the 22 year old CEOs of the last time we were all sitting around, excited about the booming business in technology. Who can forget them (and in a way, who wants them back?). :)

    Maybe he was doing it on purpose, like J Lo did with Sony’s executive, who kept messing around with scheduling and finally, J Lo said she wasn’t available. It worked for her, maybe it’ll work for him. hehe.

  14. Robert Dewey

    I’m not sure which is more insane: Blowing off a billion dollar deal so that you can “sleep”, or a company offering one billion dollars for such a site.

    Oh well, I will say both are equally insane. :)

  15. cg

    i’m surprised that Mark still carries that much clout around the office. I would have thought with all the VC money pouring in over the last year or so, his equity and voting rights would be eroded away. I thought he was no different that our boy “Tom” over at the competition by now.

  16. Patricia

    ^ LOL.

  17. Steve Poland

    This posts begs the obvious next question — if Yahoo buys Facebook (likely in a move to get Facebook users to utilize more of Yahoo, and to get Yahoo ads in front of these kids)…. what happens to Microsoft (whom just signed a deal with to display ads on Facebook.com through 2009)… or rather, will Yahoo own Facebook.com, but have to live with Microsoft ads all over the website through 2009?

  18. Terry Xu

    Is it real? O man, I hope my AssBook would sell at 1 billion too.

  19. BlogReader

    BO I think that’s what we call whipped

    Are you applying this term to Yahoo and Microsoft?

  20. Brooke

    Sounds to me like Zuckerberg is just a wee overconfident. It would almost be funny to see him dump this company well below current value because he was acting like an infantile git.

    Then again, for some, money isn’t as important as it is to others.

  21. Bill

    He better move before the market crashes :) dont make the mistakes hundreads of companies made in the 90’s, take your money and RUNNNNNNNNNN.

  22. Victor Hanna

    This is merely the deployment of history repeating itself.

    For those who don’t know the tragic story of Gary Kildall, it is here for your reading pleasure (and hopefully Zuckerberg’s):

    http://www.businessweek.com/ma....._mz063.htm

  23. Kaiser

    Given that Yahoo did just come out yesterday with news that dropped their overall market cap by $4-$5 billion, why not throw a cool $1 bil at Facebook? From the recent reports, their revenue “was weaker then expected for a 2-4 week period…..” in the automotive and finance side of things.

    Hell, if you lose $4 bil in market cap because you have a slow month in ad sales, you might as well put that money into something that can give your traffic a boost. More importantly, this would likely be great PR and push that market cap right back up to $40bil.

  24. nicole

    I am confused, the article says that facebook’s revenue is going to top 100 million, don’t companies usually get valued at 10 x their earnings? If so, that would seem to completely justify a 1 billion dollar acquisition.

  25. Larry Chiang

    It’d be interesting to do an ROI analysis from a lead gen point of view but $1B buys a LOT of college eyeballs, college attention and college trust. What do I know, I run a doughnut shop

  26. Aidan

    Yeah i find it hard to get out of bed for less that $2bn in the mornings as well!

  27. rockwell

    @nicole - revenues are not the same thing as earnings.

  28. j

    if you listen closely you can hear the air’s hiss in the distance….psssssssss….

  29. J. Tenassian

    I think it was a very smart move. On both accounts. MS is known for playing hardball in negotiations. Zuckerberg was gaining control of it. It’s a classic tactic: when someone sets a deadline, the first thing you do is break it.

    Don’t forget, MS tried to buy Hotmail for $10 million, before they finally came back and bought it well over $100 million… They acted all outraged at that first meeting, too.

  30. Nathan C

    I generally think speculative articles about takeovers are worth nothing. But reading about a fledging mogul with a $1b product brush off meetings because of scheduling conflicts with sleep and then his girlfriend is priceless.

  31. Robert Dewey

    Regardless of their revenue, can they sustain this for many years to come (10-15 years)? If the answer is no, then I don’t see why someone would put down $1B on a company with REVENUE of $100M (not profit) - even if the profit WAS $100M, you’re still talking 10 years to make a return. Perhaps Yahoo! wants to extend their userbased, but I am fairly confident that users of Facebook already use their favorite search engine and won’t be persuaded otherwise.

    Instead of wasting money on a fad, maybe they should be investing elsewhere or looking for companies that are sustainable.

  32. Eric

    Mark Zuckerberg is my new hero. He seems the only person in the whole damn world with his priorities straight: Family, life, *then* work. It takes someone with balls to show that to these corporate execubots that, and I respect that.

    I don’t care if he does wind up with hundreds of millions dollars; I’d like to buy this guy a drink one day.

  33. Bill

    this is not about balls, he can make the deal, and never have to worry about anything again for his entire life.

  34. franck

    To 29. J. Tenassian

    Microsoft bought hotmail from Sabeer Bhatia for $400 million in 1997.

  35. Amanie Ismail

    I think people are losing a little bit of perspective on a lot of hype. Let’s be honest, do you really think Zuckerberg is the only one calling the shots here? You don’t think he has about 10 people sitting around him going - we can get more, we should hold out? Props to him for starting the business, but to think he’s the only one running it at this point is more ridiculous than believing he blew off a meeting to hang out with his girlfriend.

  36. Jason

    Even if the deal closes in the millions rather than over $1 billion, I think Zuckerberg will still be okay. It seems as though business types often act as though everyone else’s lives can be put on hold simply so a deal can be finished. How many times have you had to wait until Mon-Fri 9-5 business hours in order to get your important stuff taken care of? I don’t often see people coming in on the weekends and opening up the office because I’m in a hurry. Kudos for him for taking his time and recognizing that he’s got the advantage.

  37. Bill

    35

    I agree, i bet you any money the VC is making the calls.

  38. Yahoo Shareholder

    Sold all my shares of Yahoo this morning. I’ve always thought Yahoo is a great company. Preferred them over Google simply because they have the revenue diversification that Facebook lacks. Have stuck with them despite the recent performance. But after the advertising slowdown announcement the mere thought that they would go out and spend this kind of money on something that is way overvalued is the final straw for me. I’m out!

  39. Bryan Le

    To be honest, I think Facebook is worth more then $1 billion. I further agree with #35 and #37 in that it isn’t just Zuckerberg calling the shots. Let’s face it, any 22 year old in his prime with the right screws in his head would’ve taken the deal…hell, he probably would’ve taken the $750 million deal.

    However, I do not agree with his arrogant ways. It will come back to bite him in the butt later on, and he’ll be sorry about it. I can understand if he explains that it is the majority shareholders and chairmen convincing him NOT to sell yet, but to act egotistical as he is is irresponsible and arrogant.

  40. Dimitar Vesselinov

    List of social networking websites
    http://en.wikipedia.org/wiki/L.....g_websites

  41. Matan

    Yahoo is better off creating their own version of Facebook. Facebook users are losing faith in the company and Mark will be holding 30% of ZERO pretty soon. I want to see to he has to say when his girlfriend dumps him then.

  42. Sean Percival

    “couldn’t do an 8 a.m. conference call because the company’s 22-year-old founder and chief executive, Harvard dropout Mark Zuckerberg, wouldn’t be awake”

    That is great, lets hear it for the end of the 9-5 life for smart young web execs (like myself) :P

    It’s 11am and im just waking up and I feel GREEEEEEEEEAT

  43. Dennis Eusebio

    Facebook is pretty profitable at this point. The thing is, they don’t need to be bought out for him to still make a lot of money.

    It kind of sends a message to those companies that he doesn’t need their money and it puts the advantage on his side. It makes them be the ones who need him and that will put him in a better position to negotiate stuff.

  44. mny

    @Dennis

    If they’re profitable why did they take $25 million recently? From what I’ve heard, they have decent revenues but are not profitable. When they open up the network to everybody they’re going to lose a lot of the college loyalty. They’ll just be another MySpace wannabe.

  45. Patricia

    ^ I was wondering that too.

    I dont think they should open up to everybody yet. After the 2008 elections, maybe.

  46. Startups.in/India

    “…facebook executives told their Microsoft peers they couldn’t do an 8 a.m. conference call because the company’s 22-year-old founder and chief executive, Harvard dropout Mark Zuckerberg, wouldn’t be awake…”

    “At one point in the Yahoo negotiations, the talks extended into the weekend, says a person familiar with the matter. Mr. Zuckerberg, this account continues, said he couldn’t take part because his girlfriend was in town.”

    Kids will be kids. :) But I still love this one.

  47. Steve

    Zuckerberg (most likely his VCs) are probably orchestrating these little PR tidbits about rejecting m&a meetings because of “sleep” or “girlfriend” as a way to add more lore to Zuckerberg’s persona not to mention increase Facebook’s negotiating power by sending the message that they aren’t in a hurry to sell. My guess is Facebook really does want to sell the company but doesn’t want it to appear this way. IMO, it’s dealmaking gamesmanship which isn’t a bad thing but they have to be careful not to go too far with it.

  48. kaiju

    MYSPACE, FACEBOOK, YOUTUBE HERE TODAY GONE NEXT YEAR

  49. janop

    WOW, I cannot believe he would not get up for a 8am conference call. If this is true, and I don’t believe Yahoo would buy Facebook for 1 Bil, then he is an idiot. That sounds like something I would do at 22, a kid without perspective. However, tell me any sane 28 or 29 year old would not take 1/100 of that money and be set for life!

  50. Nick P

    48 Kaiji - gone next year… and replaced with what?
    These sites are meeting human needs for a subset of the population better than anything else that’s existed before. I would say of the three Youtube is in the most precarious situation, as it’s community is the weakest.

    Maybe in 3 years we’ll see some significant changes or updates from competitors that draw people away from these sites, but otherwise, do you *really* think people will go back to emailing, IMing, and calling on their cell phones, not knowing whats up with their friends?

  51. habib

    If Mark wanted to sell he would of sold, he holds the majority stake in the company so what he says goes. The VCS are just along for the ride, I doubt they hold more than 50 percent of the company

  52. Sam Jackson

    Facebook isn’t worth the money, as far as I’m concerned; he might be able to sell it for a huge sticker price, but the buyer is going to be regretting that later…

  53. Eric Jackson

    Love him or hate him, this some of the funniest stuff I’ve heard since the Pets.com puppet left us.

  54. Guk

    If he sells it for $1bn, it’s not like he will get most of that anyway. There are VCs waiting for him to sell just to get what they invested back. I guess Mark owns atleast 51% of the company which means, he will take $510mln and then get into 45% tax bracket which makes him earn only around $300mln…”only..” Anyway, I wish I sold my website for just $1mln lol.

    Facebook is a great website and I believe Yahoo should really buy it to keep a big user database. As far as I know, many US people use Yahoo as a search engine and since facebook has lots of collegers that are from US colleges it is a good deal to keep the users use Yahoo and so on. Also, it is a great way to advertise their own products. Just like NewsCorp.

    Go Yahoo, go buy it!

  55. cfw

    If Z wants to seem so new age, why not compensate the 9 million who provided the personal information that makes the sale possible? Put back say $200 million and agree to share the growth with those who make it possible and then talk about how you have such a right view of the universe. Otherwise, Z looks like just another “suit” with a sleep disorder who happens to be p-whipped.

  56. Sun Tzu

    47 Steve - You’ve hit the nail on the head. This is all negotiation tactics and I think they’ve overdone it. As Sun Tzu said: “Act strong when you’re weak, and act weak when you’re strong.” Facebook’s overemphasis on making it clear that they don’t feel the need to sell indicates that they really do want to sell, especially after the recent Mini Feeds disaster. Maybe they realized that it’s better to take the money and retire on an island somewhere.

  57. Patricia

    Nick P

    September 21st, 2006 at 12:32 pm

    48 Kaiji - gone next year… and replaced with what?
    These sites are meeting human needs for a subset of the population better than anything else that’s existed before. I would say of the three Youtube is in the most precarious situation, as it’s community is the weakest.

    Maybe in 3 years we’ll see some significant changes or updates from competitors that draw people away from these sites, but otherwise, do you *really* think people will go back to emailing, IMing, and calling on their cell phones, not knowing whats up with their friends?

    ^ for me, I wouldn’t be as quick to share this mindset. I think the “social networking” buzz we’re hearing and seeing right now has more to do with a major shift in how/why the internet is used versus there previously being a lack of good outlets for communication. The early generation of users were mostly going to the Web to buy things or get information (movie times, directions, etc.) but there were plenty of platforms that connected people - chat rooms, message boards, etc. that kept very busy despite that the masses weren’t there yet. In my opinion, what we’re witnessing right now is the migration to using the Web as a form of entertainment and that additional things will grow and develop as trends change and users adopt other platforms and ideas.

    This year really marks the first that broadband speeds and video technology were up to where you can watch things without jitter, etc. - I know last year I was watching small clips from the Today show on MSNBC but I consider myself a pretty early adopter. Today, there is a greater number of users are more comfortable with it and plenty of indicators are showing that we can expect it to increase, especially as large, deep pocketed players (networks, cable companies) come to get some of their eyeballs (and potentially revenue) back. I just don’t think the changes are complete yet. It’s hard to say what will be sought after by the masses next.

    It’s not to say that Myspace or Facebook don’t have a place in it, but when the steamship came out, lots of paddle boat companies that did incredibly well and seemed untouchable went out of business. I always think of this when I think about disruption and technology business.

  58. matthew

    good for you, Mark Zuckerberg. uncompromising people are easy to admire.

  59. Mike

    I don’t think facebook is making much money - their ads are useless, we spent $100 in ads with them and got only two clicks to our site! Most of these ads (if they are pay per click) probably aren’t generating much revenue. $1B for this company is a joke, maybe if it went for sale on ebay, I could see someone paying a few million perhaps.

  60. John Galt

    Since they are planning to get rid of their most popular feature, the .edu requirement, I can’t see why people would stick around. I think the future of social networking/community sites is with niche demographics which is where sites like upoc.com, mimun2.com and dogster.com are leading the way.

  61. Vik

    I actually had an eWar with Mark’s partner on a discussion board a few months back. He basically bragged about how his company was worth $ 2 billion. I came back with my first year associate salary at a big firm– $135K. Well, I think he won that battle. Damn, why the hell did I go to law school?!? I should have become a computer geek!!!

  62. mabrro

    I completely agree with #32: “Mark Zuckerberg is my new hero. He seems the only person in the whole damn world with his priorities straight: Family, life, *then* work. It takes someone with balls to show that to these corporate execubots that, and I respect that. I don’t care if he does wind up with hundreds of millions dollars; I’d like to buy this guy a drink one day.

    It is darn refreshing to see someone with such high stakes step back and say you know what, I am not going to let this insanity affect the most important people and relationships in my life. This is so rare and admirable, especially in the bay area here where quick and high returns are the holy grail, worshipped among VCs, financiers and the like.

    I sold my company for $5M last year, having just bootstrapped it to .5M revenue. Not a billion dollar Zuckerberg production but a good return in the end. However, over the course of three years I was obsessed with product development and couldn’t sleep if there was any potential for downtime, unsatisfied customers, etc. I came within inches of losing my girlfriend because of this. Luckily we worked through it and we’re stronger because of it, thanks to her patience. Now we are married and she is the best thing that’s ever happened to me, so much more significant than acquisition money.

    I admire Marc — it was really hard for me to put aside talks for 1/1000th the money he stands to make out of this. Whether the WSJ story is exaggerating things or not, this is the kind of hero the valley needs… a successful entrepreneur with a real sense of perspective. I’d buy him a drink any day

  63. Vik

    Hey mabrrp: I called in sick yesterday because I wanted to spend time with my girl. When & where can I expect my drink?

  64. Patricia

    ay yay yay already

  65. Matan

    I thought friendster was gonna sue all these social networking sites. what happened to that?

  66. Vik

    Rubbish! Based on what theory would friendster sue?

    Trademark- no, it’s not called Facebookster or MySpaceter .

    Copyright- hmmm, did Facebook copy Friendester’s source code? If yes, then perhaps.

    Patent- hmm, hmm, did Friendster ever get a patent on this. I doubt it. Even if they had tried, I doubt that would have succeeded in securing one.

    The only theory I can think of is intentional infliction of emotional distress (IIED). I bet Friendster people are pretty pissed about what MySpace and Facebook did to their business. LOL!

  67. overcast

    mabrro - I’m sorry, but there is a SLIGHT difference between 1 billion and a pidly 5 million (in comparison). If your girlfriend can’t get over the fact that you blew her off for one day to make enough money to support everyone in your entire family and hers, then it’s time to find a new girlfriend. It’s called UNDERSTANDING.

  68. Mark Zuckerberg

    MY FATHER IS 67 HE TOLD ME HOW TO TELL LIES..

    I JUST CANT STAND THE PRESSURE ANYMORE I LIED I LIED I LIED

    WE NEVER HAD A USER BASE ONLY ABOUT A COUPLE OF THOUSAND PEOPLE SIGNED UP..

    I BROKE THE LAW SENDING SPAM MAIL TO PEOPLE AND THEY THREATEN ME TO SUE ME SO IF I SELL MY COMPANY I WILL NO LONGER BE LIABLE..

  69. TK

    Social networking websites are so lame. Who has time for these things?

    Sure, when Facebook came out, I signed-up for it and added 100+ friends. Then, I went back and forth to my friends’ pages and left comments, uploaded pictures, etc. It was only interesting in the first month or so. It’s not interesting anymore.

    I have stopped updating my Facebook pages and so have my friends. These sites are only famous for 1-2 months. I don’t even have the the time to visit my friends pages.

    You know what? Yahoo will be losing a lot of money if they buy the Facebook. College students move on. Social networking isn’t as hot as it used to be.

    Also, let’s say Yahoo buys the Facebook. The college crowd will NOT be happy with this. Yahoo! is an “uncool, unhip” company right now. I don’t think I’d be happy being affiliated with Yahoo, their unattractive ads, and overcrowded homepage.

  70. albert

    I like his attitude towards work. No, seriously I do, I want a job with those kinds of perks.

  71. Robert

    ZUCKERBERG is v.smart!:
    a) he’s waiting, until he can get a higher bid (and HE WILL!)
    b) the moment that facebook is sold, it will become a corporation, the end basta, I will get off it when that happens
    c) it is simply a management style! that’s why so many stanford guys go work there - what is the (philosophical) reason for wanting $ and more $ and more $ if you have certain behaviour and structure enforced onto you? no point.
    d) he shouldn’t sell it - he should simply keep it, get the $ (what diff. does making $50mln a year, compared to $1bln lump sum make? - not much in terms of spending unless you want to act like the king of bahrain)

    if he continues, he could do much more than just make $ and run a fun company - he can give a new management style to business! my friends in Czech Rep. have the same management style, and it works, although much smaller scale, but they make loads even for US standards :)

    Zuckerberg is brilliant, simply put, straightforward - Mark don’t let the pressure fall onto your shoulders, you’ve already achieved it all (and no financial analysts are needed, no consultants :) )