Yahoo’s “Project Fraternity” Docs Leaked

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1. Joe Ropkins
   

   December 12th, 2006 at 3:25 am

   Facebook should have grabbed that $1.62bn and ran. Ah well, I suppose they didn’t know better at that time. Although robust growth lies ahead for the company, I can’t help but wonder what deals they’re pegging their price expectations on. YouTube? Perhaps they’re looking too far out… Although Facebook still stands to capture a large share of the college userbase, ultimately, it’s community will be restricted to those from a certain limited age group. This is very unlike other portals like MySpace which have no definite age restriction. Facebook needs to prove its worth (and justify its decision to reject Yahoo’s earlier acquisition offers) by more aggressively expanding into overseas markets, besides leveraging its existing widespread-acceptance amongst US students. FaceBook China could be a start.

2. RBA
   

   December 12th, 2006 at 3:38 am

   Me thinks that with 1.6b Yahoo can make several sound and safe acquisitions rather than the 1 card unproven deal that Facebook is. Unless the deal has more to do with the “face” than with the “book”.

3. carl rahn griffith
   

   December 12th, 2006 at 3:50 am

   if yahoo does go ahead with this based on this kind of valuation i will have to accept that yahoo simply aspires to be a me-too clone and utterly lost its roots.

   come on, yahoo - remember your heritage - get 360 working first and foremost!

4. Rajeev Vashisht
   

   December 12th, 2006 at 3:51 am

   Agressive growth can only be achieved through Inorganic growth. Getting established business model saves a lot of heat and sweat of developing business from scratch. Good luck to Yahoo for Future Gains and Facebook for current dividends.

   http://www.tekno-world.blogspot.com

5. SearcH EngineS WeB
   

   December 12th, 2006 at 4:02 am

   You ever noticed that regardless of the complexity or the amount of money involved in the project analysis …….. All reports appear to have that same, prototypical Excel Spreadsheet look about them ( duh )

6. jon
   

   December 12th, 2006 at 4:16 am

   Too bad facebook already sabotaged their growth by opening it up to everyone.

7. Sean
   

   December 12th, 2006 at 4:24 am

   I think Zuck is too much of a wild card to know if there’s any offer he’ll accept. It’s interesting to see the CPM rates listed.
   http://www.iRegift.com

8. Yaser Anwar
   

   December 12th, 2006 at 4:37 am

   Nice post! I’m going to save it for my i-banking gig.

9. Anita
   

   December 12th, 2006 at 5:00 am

   The problem with Yahoo’s business case is that they assume that the Facebook model would continue to thrive under Yahoo control. I doubt that Yahoo would be able to keep a hands-off approach to Facebook, meaning it would become ever more commercialized and less focused on it’s primary demographic - college and high school kids.

10. Darren
    

    December 12th, 2006 at 5:05 am

    yahoo are mad and facebook are either greedy or don’t want to sell.

    why don’t yahoo just make thier own. They have the in house talent and maybe spin it out of the flickr brand.

11. RqTect
    

    December 12th, 2006 at 5:18 am

    no rumor put a fork in it its done!

12. Notsure
    

    December 12th, 2006 at 5:28 am

    Yahoo need Facebook for their new publisher network. They would get massive strategic information out of a move like that and put pressure on Google serving ads through MySpace.

    If Yahoo get their shit together with a Facebook acquisition and ad serving, and expand the network to outside the US with more multi-language support. They could really hammer home their new system and perhaps even be in a better position to rebid on MySpace and Ebay in the future.

    My 2 cents…..;)

13. Anif™
    

    December 12th, 2006 at 5:33 am

    If Facebook is mad enough to not want to sell for $1B…then I think I better head back to the lack and whip up a Facebook clone that Yahoo will want to buy.

14. Anif™
    

    December 12th, 2006 at 5:34 am

    *head back to the lab!

15. Joe Ropkins
    

    December 12th, 2006 at 5:50 am

    Jon: Actually, I don’t think Facebook hurt its growth by opening itself up to non-college users. In many ways, privacy and exclusivity has been retained. I’d certainly agree that it wasn’t the smartest business decision, and that Facebook would have been better off without opening itself up. But with all said and done, the cons have struck out the pros. You hardly see people rushing to sign up for Facebook, as it has already developed an exclusive reputation for itself. As long as organic growth continues, Facebook will be just fine.

16. Kevin Fischer
    

    December 12th, 2006 at 5:59 am

    1 billion in annual profit by 2015? I can understand why Zuckerburg doesn’t want to sell.

17. Greg
    

    December 12th, 2006 at 6:21 am

    Is it just me, or are Yahoo!’s growth predictions for Facebook completely ridiculous? Are they seriously thinking that 60% (!) of the college/highschool crowd is going to be registered? I mean, they have Facebook increasing by like 40% EVERY YEAR for the better part of a decade. Personally, I’m nore inclined to think that Facebook is past it’s prime, or has filled out it’s niche, and if Yahoo! spends $1.6 billion on it, it’s going to be an eBay-Skype level disaster.

18. Notsure
    

    December 12th, 2006 at 6:26 am

    @Anif - clones never beat the original. even if yahoo did clone it, would take them better part of a decade to get anywhere near facebook.

    @Greg - Nah I dont think so. Facebook is huge, and if they play their cards right and integrate more shit into their pages - why would you want to sell. Youtube went for 1.7bil and didnt have anywhere near the users that Facebook does.

    Plus Zucker wants to be in the billionaire club - aparently get better service than if you have $999,999,999.99

19. Hugh
    

    December 12th, 2006 at 6:26 am

    60% market penetration - yeah right! Teenagers are now using MySpace way before their college-time, so it’s really a wild guess to think they will suddenly stay with Facebook.

    I just love to see how the revenues are growing in there… If Yahoo biz-guys are so smart, why don’t they use the same models for the mothership!?!?!

    And then, if Facebook’s penetration is only 8%, I’d think that it would be much cheaper than 1 billion to gain a significant share in the remaining 92%. But hey, who are we kidding, we are talking about Yahoo here: they can’t even dream of developing something that cool themselves…

20. Adrian Keys
    

    December 12th, 2006 at 6:30 am

    “Agressive growth can only be achieved through Inorganic growth. Getting established business model saves a lot of heat and sweat of developing business from scratch. Good luck to Yahoo for Future Gains and Facebook for current dividends.” - Rajeev

    Totally agreed Rajeev. Why reinvent the wheel especially if you have the cash. Also with Google surging ahead and other competitors taking market share Yahoo needs big deals…really big deals.

    I am of the opinion that organic growth is reserved for the “Kings of the Hill” and for mature markets. Go get them Yahoo?

    http://www.revafinancial.squarespace.com

21. David
    

    December 12th, 2006 at 6:37 am

    I can’t believe they are using discount rates to figure this value. Who has any idea what the appropriate rate is for this kind of acquisition. New-school technology and old-timer financials.

22. mac
    

    December 12th, 2006 at 6:39 am

    You know, all these facebook kids may reach a certain point where they realize, hmm… maybe I don’t want all of my personal info and pics on the web for all (my 400 friends, 300 of whom I barely know) to see. There is a reason that most of the 30 to 50 crowd hasn’t flocked to a social network and it has a lot to do with PRIVACY.

23. Sean
    

    December 12th, 2006 at 6:40 am

    Making income predictions for a social networking site for 2015 of $1B is ridiculous. This is such a fickle market, I’d be wary of paying more than $1B for Facebook. YouTube makes sense, video is the future of not only “intertainment” (internet + entertainment) but advertising on the internet as well. Facebook however is run by a 23 year old who has occasionally stepped on the toes of his users. I’m not being critical, it’s an honest observation. Every great site (company) makes mistakes, but social networking is one area where you have to be more careful. Myspace is even feeling some backlash. Users have left because the site is so slow and buggy. Someone’s going to have a hit soon and make a major dent in their marketshare. Maybe that’s why Rupert might have it on the block and also explain the internal restructuring. Zuck should take any offer of $1B or greater. And if it really isn’t about the money, say so.
    http://www.iRegift.com

24. Steve Poland
    

    December 12th, 2006 at 6:43 am

    Great leak!

25. Richard Bowles
    

    December 12th, 2006 at 6:44 am

    I can’t believe - in a ever changing world - Yahoo! is willing to bet; a 10 year in advance bet on a company that isn’t proven. Personally - I think the whole social network thing is a big part of web bubble 2.0

    - People with real lives and real friends get bored with myspace in about 2 yrs if that - people with real lives and real friends get bored with face book in about 2 yrs if that -

    - Also to get 60% of any market is almost impossible. - Rbowles

    Yahoo! should just invest the 1.62 bln in their own contender (not 360) that sucks!

26. KeVroN
    

    December 12th, 2006 at 7:30 am

    Sean and Richard are on the right argument. This is a social site, which in their short life have proven to be more fickle than pets.com
    10 year time horizon??? Please.

27. BlogReader
    

    December 12th, 2006 at 7:44 am

    By 2015 Yahoo projects that Facebook would generate nearly $1 billion in annual profit.

    And 30 years from now Facebook could generate 100 trillion dollars in profit.

    Sheesh who is making predictions at Yahoo? This area’s going to mature and more players are going to get into the game. There is no way that Facebook could generate $1B in profit in a year — what’s their profits right now? What division at Yahoo is making $1B in profit right now?

28. Rex Dixon
    

    December 12th, 2006 at 7:53 am

    He should have stuck it out, played it smart, and not wore the open toed cheap Adidas sandals. Yup, he could have had it, but will he get the $1.62 Billion now? Doubtful.

    Rex

29. CalDevil
    

    December 12th, 2006 at 8:03 am

    Have fun guys. But Yahoo is just not going to buy Facebook.

    Other than as an ad distribution platform, it has very little value to Yahoo - and as has been previously stated Y can continue to build out social networking platform from wildly successful Flickr. Also, what value FB provides, it is woefully insufficient to merit that price.

    I think you’ll see Y continue to make the smaller acquisitions that it has been doing the last couple years. They don’t need to be desperate, especially as Panama platform will make them significantly more competitive with Google on search monetization. That will enable them to build out the partner distribution network w/o resorting to “buying the distribution”.

    I think that if Yahoo executes well (not as big an if as it was months ago when Panama was repeatedly delayed), the company will be well poised in 07 and beyond for very strong growth in US, as well as international where growth rates in both web penetration and revenues will continue to outpace US for forseeable future.

30. Drama 2.0
    

    December 12th, 2006 at 8:19 am

    Greg, Hugh, Sean, Richard Bowles, BlogRead: You hit the nail on the head. These projections are utterly unbelievable. Doesn’t mean they couldn’t happen, but Yahoo would be better off taking $1 billion to Vegas and putting it all on black. The huge jumps they’re projecting in CPM and other ad revenues next year don’t seem to be justified. While I’ve never personally advertised on any social network, including Facebook, I’ve seen comments from people that have and the results are typically unimpressive. This is not surprising to me, since most people use social networks to socialize, not click on ads. Your ad rates hit a physical limit when the cost of the ads goes beyond the point at which they can be profitable. I doubt a 72 cent CPM could be profitable for most advertisers on a social network.

    For Yahoo to make such a bet on numbers probably put together by some MBA-type would likely be a disaster. Broadcast.com 2.0 anyone? Not only are these projections unrealistic, but there’s a lot of talk and data indicating that Facebook, MySpace et. al. have hit some sort of plateau. There’s no doubt that to some extent there’s a fad and novelty factor here and while these sites aren’t going away anytime soon, they’re going to face competition as social networking features become a part of more and more major websites and applications. And it would be foolish to think that the “next big thing” isn’t being worked on right now.

31. MistOne
    

    December 12th, 2006 at 8:26 am

    I generally agree that Facebook is not quite as valuable as they think they are and they seem a bit greedy. Fbook is a massively popular service, in a ultra important demographic, so it is undoubtedly worth a lot of money, and after the YouTube deal went to Google, Yahoo is eager to place a big bet in the social space, so maybe they are just playing the market really well.

    But basing acquisition price on a ten year model seems very, very risky. Only just over the past year are some of the big boys on the Web celebrating their tenth b-days, and how many didn’t ever reach that milestone.

    Yahoo is looking at this from a lot of angles, but my single vantage point would be integration with other Y services, if they want to do the standalone thing with every buy it’s a bad bet, but if they have a clear strategy for integration it is hard not ignore the value of this coveted demographic.

    - my 3.5 cents -

32. Alaska Miller
    

    December 12th, 2006 at 8:35 am

    1.65 billion buys you a lot of friends.

    But I guess the nerds at Google and Yahoo still don’t know how to make friends.

33. alfred chew
    

    December 12th, 2006 at 9:02 am

    Some insiders must have heated up the game to jack up the Value

34. danny
    

    December 12th, 2006 at 9:04 am

    David -

    Don’t worry, models like this do not determine the asking price. For these types of crazy high-multiple deals, the argument often dictates the numbers and not the other way around (i.e. some poor associate has been asked to plug a bunch of assumptions into a spreadsheet to end up around $1-$1.5 Billion). The only reason to do the exercise is to stimulate the “are we completely crazy” discussion among the team. But comparable valuations (MySpace and YouTube) and “gut” play the larger roles.

35. Startups.in/India
    

    December 12th, 2006 at 9:05 am

    This is great post…educationally at least. Interesting to get to know how major companies such as Yahoo do analysis for potential acquisitions and I don’t think they make those predictions without a proper basis. Would it be possible for you to share the complete document, Mike?

36. Adam
    

    December 12th, 2006 at 9:19 am

    That is way too much money based on hopeful statistics. Does yahoo remember Broadcast.com? Has that ever generated the billions they paid for that? I think not. In 2015 Facebook will be lucky to have a billon in revenue let alone profit. The web 2.0 companies eyes are getting bigger and bigger with greed. Scary thing is they will probably get the money.

37. John C
    

    December 12th, 2006 at 9:41 am

    “And it would be foolish to think that the “next big thing” isn’t being worked on right now.”

    BINGO

38. Alaska Miller
    

    December 12th, 2006 at 9:44 am

    The party line has been that Broadcast.com was a strategic move for their technology and after the purchase most of their technology has been integrated into various Yahoo products like Video and Music and Radio.

    Was it worth the 5 billion? Meh, who cares, I have my AdBlocks on when I check Yahoo Mail

39. Doug K
    

    December 12th, 2006 at 9:51 am

    I am sorry, did anyone else gag a little at the idea of turning down such an offer. Perhaps M.Z. has a specific island picked out that he’d like to purchase, and doesn’t want to settle for a smaller one.

40. general tso
    

    December 12th, 2006 at 10:03 am

    I agree with 39 (Doug K). If Yahoo is crazy for making such an offer, then Facebook is even crazier for not accepting it.

    Or maybe, both parties believe that there are other revenue models possible other than just a straight CPM ad based type deal.

41. Bjorn
    

    December 12th, 2006 at 10:26 am

    this leak has to be a joke , good thing the deal didn’t happen, otherwise, it won’t just be facebook that doesn’t make it to the 10-year horizon, we won’t even see Yahoo a couple of years from now…

42. Micheal
    

    December 12th, 2006 at 10:28 am

    How is it possible for Yahoo, let alone anyone, to generate ad revenue from Facebook when they already sold their advertising rights to Microsoft.

    http://www.techcrunch.com/2006.....th-google/

    Facebook won’t sell until at least 2009, when their contract ends with Microsoft.

43. Allen Sligar
    

    December 12th, 2006 at 10:43 am

    The flaw in the outcome of this spreadsheet that everyones commentary seems to be focused on is derived from this:

    (1) Page views/users based on active users which assumes 92% of ave. registered users are active users”

    I can only assume this is a “best case scenario” projection, because with a projected penetration like that and an assumption of 92% active user base this spreadsheet really is full of……well its “interesting”.

    Couple things to note:

    1. IMO from what Ive read, and looking at this spreadsheet it would appear Y would like to turn Facebook into a full blown advertising portal, like spam at the level of Myspace (and likely horrid performance as well)

    I dont think this is compatable with the culture at facebook, or from what Ive read about Zuckerberg’s distain for advertising on Facebook.

    If this is the case then props to Zuckerberg for sticking to principle and not selling out his community.

    Everyone is so focused on money and a purchase price in this comment thread, I wont pontificate but I will say that people dont always found and run start ups with thier mind entirely focused on an exit strategy, in most cases its a labor of love.

    And it takes a lot of curage and commitment and dedication to what your doing to reject offers (when you need the cash) that have bad terms, or threaten your company’s value proposition and culture. (when you dont need it, but it would be a good exit personally)

    I think if Facebook rejected an offer from Yahoo, then it was a rejection based on more than just money.

    Another point is (and especially relavent for a demographic like Facebook) is that you just CANT BUY a community, the community lives or dies based upon its user buy-in, when they opened up registration to non-students there was a backlash in the community. Selling out to a large corporation (ala Youtube, also a community backlash) turns your site from “cool hip and indie” to……well just not “cool” at all, and then to top it all off by increasing the amount of advertising (which they’d have to do to justify a growth and revenue trajectory like that based on a high purchase price) is a community killer.

    No one wants to join an advertising spam social networking site, one already exists its called Myspace.

44. Bob King Neverland III
    

    December 12th, 2006 at 10:46 am

    I agree with #42 Michael. My dumb ex-wife wouldn’t. That’s not why I dumped her, but for different reasons all together.

45. Alaska Miller
    

    December 12th, 2006 at 10:58 am

    Facebook rejected Yahoo because Marc Zuckenberg is a douche and thinks he can parlay all of this into a fast track executive spot at Yahoo at 22.

    It’s a trifecta of insanity:

    1) Yahoo willing to spend 1.65 billion for Facebook

    2) Facebook turning down that offer

    3) Marc thinking he’s the Barry Diller of young turks

46. Cleve
    

    December 12th, 2006 at 11:04 am

    Yahoo is drastically overvaluing Facebook’s userbase value. Facebook users are happy with the general service it provides but not generally with the overall experience. Many would be more than happy to jump ship to a hot new product. Some amount of traction would be necesarry for the new product, but as long as a decent percentage of any given user’s friends were on it, they wouldn’t think twice. Yahoo should keep the money and spend some of it on developing something decent for a change.

47. Drama 2.0
    

    December 12th, 2006 at 11:05 am

    Micheal: From what I understand, Facebook can pay a breakup fee to get out of that deal and it’s relatively small compared to the type of offer they’re looking for.

    If they do plan to hold out, they’re running a risk that they might not be around in the same position a year or two from now. There’s no doubt that Facebook has a great audience in the college market, but whether they can maintain that market in the face of competition that is emerging and will emerge adds a signficant risk factor. Additionally, I don’t see any signs that they are gaining significant traction outside of this market, even though they’ve opened up to other verticals, such as high school and regions. The reason seems fairly obvious: while Facebook has a nice service, it’s pretty basic and looks quite dull compared to some of the stuff that is being done elsewhere. Its basic nature certainly appeals to certain groups, but leaves a lot to be desired to others.

    Outside of college where they had first-mover advantage, they have absolutely no tangible advantage over any other new service, and some of the new services hitting the market have some sexy features. For what it’s worth, I’ve never received an invitation to join Facebook from somebody not in college, even though I receive invitations to MySpace and others.

    Allen Sligar: you make a lot of valid points, however when Mark Zuckerberg and Facebook decided to take $30+ million in venture capital money, this became more than a labor of love. It’s a business, and it seems like there’s an element of greed here. Obviously selling out the community and turning Facebook into one big advertisement would harm the value, but let’s be realistic that the increased monetization that Yahoo is projecting will require some new advertising, whatever form it takes. If Yahoo wants to make flawed assumptions about monetization and they’re offering you a huge multiple on revenues that you’re unlikely to grow that substantially without more advertising, take it. Some idealism is good, but if Facebook’s rejection of these offers is about idealism and not greed, they need to enter the real world. Extreme idealists most often lose out.

48. Ted
    

    December 12th, 2006 at 11:15 am

    what’s more interesting to me is who leaked this documents, and why?

49. ted m
    

    December 12th, 2006 at 11:31 am

    I think the biggest hole in the data is assuming 92% retention as fb’ers leave college, and eventually join the aarp.

    fred stutzman has some good analysis here:

    http://chimprawk.blogspot.com

    also, consider the mgmt in place at fb, those who weren’t removed for drugs, etc., are still pretty young and unproven, even with vc board members who have quite a few flops behind them (as well as successes).

    be sure to check out karel baloun’s great ebook “inside facebook” at http://www.fbbook.com for a great inside perspective of the young team running fb.

50. al
    

    December 12th, 2006 at 11:33 am

    Is it possible that someone just wants to run one of hottest companies on the web (independently), vs. selling out to one of the least hot companies on the web? Or, perhaps there’s a greater vision here… and this 1.62B site will be a 10B site? I think we’ve grown accustom to companies in “our” space being acquired during their crucial growth phases- long before they’ve had a chance to prove they’ll have a lasting presence on the web. And for anyone comparing Myspace v. Facebook… get an FB account to see why they’re different.

51. khoont
    

    December 12th, 2006 at 11:40 am

    Facebook rocks and so is Yahoo

    few things make some sense

    1. yes .facebook is big. may be more big. considering this is valid and verified document it certainly make sense for facebook to wait till someone with good offer than yahoo jumps in and pay more.

    2. someone said “labor of love”. Yes . its mark’s Baby and who knows better than anyone about growing and keeping facebook as his life

    3.as far as yahoo concerned, they already have mature user base. very big. but dont have teenage market presence. Facebook is the right answer to capture into it and i think for sure Yahoo’s Brad W. is thinking to introduce many product down the line with this business deal.

    4.but above all for yahoo may be thinking to give jurk to its rock steady stock with this deal to add more sense (positive or negative) to speculators and so can make some movement on stock prices.

52. Tike
    

    December 12th, 2006 at 11:57 am

    KUDOS to #43 Allen Sligar for being the first person on this page to view the situation from anything but a monetary perspective. I truly believe that one of the big reasons (not necessarily the ONLY one) why Mark Zuckerburg turned this offer down is exactly as Allen explained: Mark does not want to let his baby go. He’s nurtured it from the ground up, listened to the advice of his users, and despite any financial backing has managed to keep all (most) signs of corporate big-wiggedness (yay for new words) out of the FB system.

    Ask any FB user and he/she will tell you: there is currently nothing else out on the market that does what FB can do (I’m talking about the college/high-school tailored user experience), and definitely nothing that does it half so well. You all like to over-generalize and analyze the situation like it’s a business school case study. You have no idea what using the service is actually like. Curiosity is why I joined, but the service is why I stay. And a large part of that service is the fact that everyone and their moms are on this network. This fact cannot be overlooked.

    Yahoo, Microsoft, anyone with enough money to throw around can set up a social networking site. Some might even do it better than Facebook does. But NOBODY can do it well enough to actually convert users away from FB and into their own sites. Interface and (arguably) enhanced features cannot beat a large established user base. Not to mention that all FB has to do in retaliation is upgrade its own services to match, and users will no longer have any incentive to switch. FB has firmly entrenched itself in the college (and soon high school) niche, a niche with virtually automatic new subscriptions every academic year. As long as Zuckerburg doesn’t get lazy with the feature upgrades (I don’t see that happening), Facebook isn’t going anywhere but up.

    The only way Yahoo can win is to either purchase FB (or some other similar service), or as a few commenters have previously mentioned, by leveraging its existing networks (Flickr). Of the two, I think the latter has the most appeal. I for one hope that FB never gets bought out. On the other hand, if Yahoo can get its act together, it has the chance to transform its Flickr network into something totally new and different; something with more originality than the multitudes of carbon copies out there… and something that might make me actually want to use my Yahoo account -_-.

53. Dave
    

    December 12th, 2006 at 12:00 pm

    I am impressed with Mark’s ads decisions. The unobtrusive ads really make the site nice.

    The constant upgrading of the site is also cool. Just check out their blog to see new stuff roll out weekly:
    http://blog.facebook.com/

    But I put my vote in for fickle. A large group of my friends have quickly switched from myspace to facebook. And we may do so again in a year or two once there is an evey cooler one.

    But yea, props to the facebook crew for building a site that doesn’t have huge TRUE ads on every page.

54. RM
    

    December 12th, 2006 at 12:05 pm

    I’m amazed that Yahoo! has projected FB to make $1 Billion in annual profit in the year 2015. On what basis?!? I’d be amazed if social networks are even popular 10 years from now, let alone FB being that popular. Look at Friendster and all of the other social networks that have slowed. Sure, there’s plenty of room for FB to grow, but that age group (college students) is amazingly quick to jump when another “cool” social networking site pops up. This is a bad bet for Yahoo!

55. Justin
    

    December 12th, 2006 at 12:09 pm

    I’m surprised that these guys turned all of this stuff down. Honestly, those future numbers that Yahoo is projecting are pretty out there……who the heck knows how the landscape may change a few years from now? There is no guarantee that people will even be using it in a five years, let alone having it still sustain major growth. You never know how things can change these days.

56. grumpY!
    

    December 12th, 2006 at 12:10 pm

    facebook mgt should read up on friendster and further back in networking prehistory, pointcast. my guess is that in a year, yahoo will be able to make facebook a $750 million offer again. yahoo would be stupid to make a fourth increased offer.

    social networking is going to be a nightclub business, it will almost be impossible for one brand to stay hip over the long haul with such a fickle audience. that facebook and myspace have big slices now is only a testament to how immature this business is. as it matures, the market will be more segmented and it will be impossible for one network to relate to all audience members. my assumption is that in ten years, myspace and facebook will both be dead businesses. not flat, DEAD.

    comparing youtube to facebook is a false analogy. youtube represents a new technology and a new medium for advertising content. for google it makes sense to use the most popular video platform for forwarding its goals of selling ads in the medium. no such new opportunities are presented by facebook.

57. Allen Sligar
    

    December 12th, 2006 at 12:12 pm

    @Drama 2.0

    I agree with you, absolutely, especially related to idealism vs business realities. Further I’m not sure how much equity 30m+ buys but whatever amount it is I’m sure it mitigates idealism. I was just pointing our various reasons/scenarios where there might be sticking points in a negotiation and the nature of social networking communities for this demographic.

58. Fashion Industry Ceo
    

    December 12th, 2006 at 12:14 pm

    to me it seems like Facebooks owner its just being greedy and unreasonable 1billion sounds like a sound buyout if not more risk for Yahoo

59. Patricia
    

    December 12th, 2006 at 12:17 pm

    I love that you get this insight. That’s what makes TC cool.

    I would have taken the cash.

60. Dave G.
    

    December 12th, 2006 at 12:21 pm

    I have said this once before…but AOL is the original social network. Facebook, MySpace, Friendster - all are nothing but ad supported AOL clones. AOL really missed the boat on this - they could have locked this sector up a long time ago. I’m looking forward to receiving my Friendster and Facebook cd’s in the mail - 120 hours with no ads - free!

61. Michael Hoffman
    

    December 12th, 2006 at 12:23 pm

    When you believe your own hype to the point you turn down $1.6 billion, you are officially an idiot, even if in the end it works out better than that because how much better could it be? What I wonder is the dynamic between the founders and the investors. My guess, the investors want the deal, the founders are true believers.

62. Dave G.
    

    December 12th, 2006 at 12:23 pm

    ^ I wonder what Time Warners 10 year projections said.

63. Allen Sligar
    

    December 12th, 2006 at 12:28 pm

    @Tike

    Thanks

    @GrumpyY

    I agree with you in principle, the market is immature because it lacks focus, also I believe the market will be segmented (long tail etc). The trick isnt to be everything to everybody. I disagree tht social networking will be going away, it appeals to much to people at a very basic level, it wont be going away because as long as people have interests and want to socialize (i.e. lifestyles) they will want to network with others who have similar interests.

64. Sean
    

    December 12th, 2006 at 12:34 pm

    What this really comes down to is this: Yahoo wants to buy an advertising platform. Facebook is the biggest kid on the block. If you were in charge of Yahoo and your stock was down 26% on the year you might not have a choice. So you buy up as many web 2.0 properties as possible. Then make a big media splash about how many new “eyeballs” we’ve got now. And oh yeah, we were already the largest property on the web but now we’re even bigger. Also we’re about to launch our new ad platform “Panama” and this should help give us Google like performance regarding those little ads we all know make Google so popular (rich). Yahoo’s P/E is 34. Google’s at 61. Revenue is $1.6B Q3 Yahoo vs. $2.7B Q3 Google. Earnings are even less spectacular, but again that ties into “Panama”. Market cap is where the sizzle is. Yahoo $37B vs. Google $150B. Now if Yahoo spends $3B in acquisitions for a variety of properties it won’t mean anything. Yahoo is betting the farm on “Panama”. If it plays out how it should they should be able to rocket (easily) their cap to somewhere north of $70B. So spending way too much for a easily dead in five years web property doesn’t mean much in the overall picture. It’s all about the stock price and getting analysts to think that Yahoo isn’t so far behind Google.
    http://www.iRegift.com

65. Mr. Cheese
    

    December 12th, 2006 at 12:48 pm

    Has everybody gone crazy? $1.62B for a social networking site.
    Does anybody know how much money it would take Yahoo to develop a competitor to FaceBook? it sure wouldn’t take $1.62B.

    Who are these executive who can’t do simple arithmetic. With $70M Yahoo can start a skunkworks project with a budget 3-7 times larger than your average startup. Have them code away from the lumbering project manager and VP laden Yahoo main campus and create a shared code base. Then spin off Y! Doglovers, Y! Edulovers, Y! Midgetlovers, whatever.

    Any person who would rather give some pompous greedy shit like FaceBook’s headhoncho upwards of $1B but would blanche at spending 5% of that on good old R&D should be executed.

66. Mr. Cheese
    

    December 12th, 2006 at 12:51 pm

    Zuckerberg’s on 10 people who don’t matter: http://money.cnn.com/2006/06/2...../index.htm

    Me hopes the greedy ass goes down in flames with his venture.

67. Eric Eldon
    

    December 12th, 2006 at 12:52 pm

    Facebook is worth more than any financial projection can show. Its core value is its lockdown on the most valuable demographic possible. Not only are current Facebook users going to be on it for life (word on the street is that facebook’s internal data looks a lot better than yahoo’s projections on that front) , but the existing service is ideal for expanding out to any other type of web property.

    Mark Zuckerberg may be a ruthless entrepreneur, but he clearly acts on the fact that making your users love your product is ALWAYS priority #1, because that’s how you continue to HAVE users.

    He’s also heard how the Flickr folks don’t like being part of Yahoo all that much. And he sees Yahoo sucking on most fronts, in general.

    He also sees his company eating away at MySpace (which IMHO will be a long, slow battle that FB will win).

    #42 Allen Sligar and #52 Tike are more right than the rest of you.

    My prediction: Facebook becomes THE social network within 5 years.

    Mark, go public and leave these schmucks to their navel-gazing. You know you want to.

68. Vik
    

    December 12th, 2006 at 12:56 pm

    Facebook, facebook, facebook! I’m sick of hearing about this website and its funny looking CEO.

    Am I jealous? You bet your butt I am

69. Sean
    

    December 12th, 2006 at 1:04 pm

    Eric Eldon,

    You look like the only navel gazer around here.