Who Will Buy Facebook?

I get the feeling that facebook is looking for a 2008 IPO. Lots of ego at that company and I don’t believe an acquisition is going to cut it for them.

Why would Mark be crazy if hed closed his door if Sergy Brin & Larry Page come knocking? I guess Larry and Sergey were crazy too when others came knocking at their door? No, I don’t think it would be crazy.

Michael
agree on the ego aspect but I just cant see them waiting until 2008, it’s too big of a risk, the money is in the market now, the return on the original investment with a $3-6billion acqusition would be huge.

If they wait 12 months the boom could end and the money might not be there in the way it is now. Ultimately it’s a call for the investors to make, and I’m sure they wouldn’t be as strident in wanting to keep Facebook independent in the same way Facebook management is.

Peter Thiel prefers IPO

It would be cool if Google buys Facebook. They already have orkut and will make some sort of bridge between the two

@Duncan

If anyone believed that the boom would end in 12 months why would they hand over $6 billion to Facebook? An IPO is their best option. Even if there is a bust by the time the average investors realize it everyone at the company will have walked away with millions.

I can see Google buying Facebook. Orkut has done terribly almost everywhere but Brazil. Google has many amazing products such as search, Gmail, Docs and Spreadsheets, etc… But is yet to build a real community around themselves. Facebook could be this missing link.

I’ll place my bet on Microsoft; they’ll pay more then anybody else. They need the wins right now. Over all it might even come down to something as simple as it’s cheaper to buy it then to let the competitors have the edge. Think of all the college students that Microsoft will have access to. Those college students get jobs, those college students buy software.

Facebook is not going to get bought. If a deal was going to get done it would have a year ago.

I’m with Michael all the way here. I think IPO in 2008.

For a while I was sure Yahoo would end up getting them after the shake-up a few months ago for significantly more then the $1.62 billion - but seeing what they’ve done the past few months I don’t think they have any intention of selling. They’re doing some very cool and innovative things on their own without any outside help. The fears of a Friendster repeat seem to be put to rest.

Unless maybe Google comes at them with an insane price and let them remain completely in control I just don’t see them selling to anyone - and I don’t think they would sell to Microsoft period.

I sincerely hope Mark doesn’t sell facebook. I love to think there are still entrepreneurs out there who truly want to build something great rather than sell out.

It makes sense for them to IPO in 2008. All of the dust needs to settle, so that their IPO isn’t viewed as “the new tech IPO bubble”. With every thing leveled out, they’ll be able to make it as a real public company. Microsoft is definitely in the running MG Siegler. Facebook took 200 million for the ad deal (or so), they’ll definitely take upto 30x that. If MSFT is really looking to crush google, they’ll need more pageviews and Facebook is the way to go for that. This is a random thought, but anyone feel GE/NBC would be a good fit? Throw Ross Levinsohn at the head of the interactive media side/CEO of facebbok, and you have things in order. Just my two cents.

PS- if yahoo buys bebo, msft buys facebook, and then msft buys yahoo wtf happens then?

Microsoft is the most desperate shark in the water.

Will the shark get fed?

That depends on whether Facebook gets a good enough offer, right? How about $8 billion? Will Facebook pull more than that in an IPO? Maybe. But Microsoft needs a better audience than it currently has. That’s why its advertising revenues are flat. It’s audiences aren’t influential and aren’t interesting to advertisers. Facebook’s are.

And, while we’re at it, what if Microsoft bought both Facebook and LinkedIn? Hmmm. Wouldn’t that change the landscape and stop the “Google will take over the ad world” hype?

@MG Sieler, I’m with Michael as well, and I think they wouldn’t sell the company even for an insane price coming from Google or Microsoft or whatever. Facebook has a big potential, one simple example is there is no better hub that can build a behavioral advertising network - so this, alone, is enough to justify “Facebook is the next Google” argument. Would you sell it if you were the CEO?

YouTube sold because of the legal hassles, and now we see what a good decision it was.

It would be Google and it would be the largest Internet acquisition ever..

“Anything that is worth buying is being bought.”

Not if it’s not for sale. Not everything is, afterall.

Which option maximizes the return for the VC while also minimizing their risk that market prices may fall or the IPO market goes soft?

I would say go with the acquisition.

An IPO for FaceBook.com may not be optimal. The situation is not the same as that of Google. In the search engine market, there were quite a few successful cases of IPOs, including Yahoo. Investors can ‘visualize’ the risk/return of such stock.

There has never been a social network which has gone for an IPO. Investors may not and I think will probably not be ready for it.

If they somehow do stave off the ridiculous offers I’m sure they will receive in the next year or so and actually DO go public , I think might give this ‘boom’ even more legs , assuming it sold relatively well or at least stayed flat.

Whoever buys Facebook will want a return on their investment and that means advertisements and sponsorships, which won’t be appealing to its users who have grown accustomed to the clean interface.

In the Fast Company interview linked in the post, Facebook investor and Zuckerberg’s mentor Thiel asserts, “it’s much more valuable than anybody on the outside thinks…The people who understand the power are the users. The people who wanted the company don’t understand the power and don’t want to pay enough for it. So we’re not going to sell.”

I think that the ‘ego’ at Facebook will want it sold to someone who can build on the usability, functionality and user-centeredness built on the company’s engineering culture, and this is good. Perhaps only Google as an acquirer could build on its functionality.

Yet in my view, at the moment, the best Facebook can do is sell a stake to please its VC investors but leave the firm running squarely in the hands of its founders. Something similar happened at Craigslist (where a founder sold about 25% to Ebay) and where founder-CEO Jim Buckmaster has said he has no intention on cashing out, and that being mega ‘rich’ has many downfalls, which you can hear in this podcast:

http://danbricklin.com/podcast.....6-15-48-00

@Arnold - IMO, you miss one point. Neither Google nor Facebook makes money directly by their core jobs (search and social networking respectively)… These are all internet advertising companies. Google is currently the best one, and that’s all. eBay and Amazon are outside of this scope, their business models are built directly on top of their core jobs.

Prediction time:
1. Someone from the Big Three will buy facebook for $5-6bil in the next year.

2. Microsoft’s latest 6bil acquisition is helping pave a way to the facebook acquisition.

3. Following the acquisition, there will be few hundred dozen facebook clones promising they will never sell out.

4. And finally, we’ll be able to tell good-bye to web2.0 and Mike will announce the beginning of web3.0–much to O’Reilly’s disappointment:)

I love how the new Techcrunch valuation of Facebook has become 5-6bil because of Micrsoft’s recent purchase of aQuantive. Facebook will IPO simply because, none of the Big 3 will be willing to pay more than 2bil for a site which currently makes less than $100million.

@joe

Can you say Youtube?

@Joe Marley

Doesnt matter how much they make. Look @ YouTube - was making fk all. Its about market reach and audience and FaceBook have a massive one. Its easily worth more than YouTube - so >$2 Billion is definitely the asking price.

I reckon News Corp just buy em. Then they would have 70% of the social networking market. Rupert would just love that.

Microsoft is also a very good candidate for Facebook.com. Purchasing aQuantive for $6 billion does set the standard a little higher and even though Facebook doesn’t make more than $100 mil, it has loyal user base and other best part about the site is its audience, college students - the most difficult audience to reach. I believe it will be sold within next 6 months for between $2 billion to $5 billion either by G or M.

Robert Scoble

Facebook & LinkedIn? I wouldn’t pair the two as buyout buddies, one will only cannibalise the other.

Facebook is king of repeat visits (read three to four times a day for me & my friends), LinkedIn is just a fortnightly visit for profile check-ups. Considering Facebooks’ demographic and ’stickiness’, it’ll make an ideal alternative to LinkedIn for all the soon-to-be graduates. It doesn’t matter if Zuckerberg doesn’t feel the need to gear up his service for a professional audience - recruiters are already using it to hire, and graduates will continue to use it to keep in touch - why would he need to do anything more?

Neil

“Google’s social networking site Orkut may be popular in Brazil, but it has failed in gaining headline making market share in the rest of the world.”

You forgot a tiny little country - India - A population of over 1.1 billion people which mostly favours Orkut. Google is pretty serious about it and knows the potential orkut holds. They’re said to be launching mobile versions of orkut in India soon.

Personally - I have a hunch Mark won’t sell out - but in case it does happen - yes, Microsoft would also be a suitor as Tejas rightly puts it! Also, I prefer Facebook over orkut, but have a bigger network on orkut which would not change loyalty or join “another social networking site!”

Can you imagine MS buying FB and then forcing Mark to “migrate” to .net? muhaha. I get kicks just thinking about it–hopefully Balmer and co. learned something from hotmail.

I wouldn’t count out eBay. While the price tag might be too rich (I’m sure they’d wait until FB was worth at least $10Billion first). But their focus on local personal networks would be invaluable platform to build an ecommerce or communication platform on.

And just what the hell is wrong with wanting to stay private, build your own business, and not sell out to the man? I’m so tired of people talking about how Facebook is stupid because they don’t want to sell to Yahoo and make billions of dollars. God forbid, some people do things because they enjoy them, and not just for money’s sake - crazy as it may seem to some of you.

Zuckerberg rules. Doesn’t get much more honest and brash than his interview above!

The above was not written by me.

“An IPO is still a possibility, but it’s a risk compared to the acquisition path. User loyalty is fickle and Facebook as a stand alone entity would be a high risk investment. Investors would be gambling on not only future growth and user loyalty, but also a risk that Google, Yahoo or even Microsoft could build or acquire a competitor that could pose a serious risk.”

Don’t all of these risks still apply to an acquisition? Instead of investors in the public markets incurring the risk, the acquirer takes on the risk that:

- The social networking fad will cool off as social networking features become ubiquitous on all popular sites.
- Users will move on to the “next big thing” when it hits.
- Facebook will not grow revenues and profits rapidly enough to justify to the acquirer’s shareholders such a huge multiple (most of the potential acquirers are publicly-traded).
- Any change in strategy (i.e. more advertising) will cause a backlash like the one that happened when MiniFeeds were released.
- Any attempted integration of Facebook with the acquirer’s other properties will backfire.

While an acquisition of the size discussed here is not out of the realm of possibility in a bubble market, I think there’s also a real possibility that Facebook has currently priced itself out of the market. The fact that Viacom and Yahoo passed at much lower prices might not stop somebody else from shelling out big bucks, but at the very least it sends a message to other potential acquirers that two companies with the funds to execute a big deal couldn’t justify it. Increasingly, some of Facebook’s potential acquirers, like Viacom, have opted to develop their own social networking services in-house. With any social network acquisition, it’s the userbase, not the technology platform, that’s being acquired, and at some point a company has to consider what strategy has the more reasonable cost of user acquisition.

An IPO would probably make the most sense for Facebook right now if its investors are looking for liquidity. I’m sure there are plenty of underwriters who would love to sell investors on the opportunity to own shares in one of the world’s most popular social networking services. Whether it truly represents a compelling investment opportunity is irrelevant - there is no shortage of fools ready to buy a story. Of course, going the IPO route means that Facebook is at the mercy of macroeconomic factors which could derail any public offering, or which might result in a poor performance. Given my personal opinion of the state of the economy, if I was a Facebook investor, I certainly wouldn’t be planning how I’m going to spend the proceeds from a 2008 IPO.

To all those people who applaud Mark Zuckerberg for not selling out to The Man, do remember that he’s taken nearly $40 million in funding from venture capitalists. If that doesn’t qualify as selling out to The Man, I don’t know what does. At some point, they’re going to want liquidity and if Zuckerberg wants to remain private perpetually, he shouldn’t have gone the equity financing route.

“Google’s social networking site Orkut may be popular in Brazil, but it has failed in gaining headline making market share in the rest of the world.”

Just wanted to point out, that similarly to Brazil, The US is a country and hardly deserves to be labeled as “the rest of the world”.

Facebook has relatively poor adoption in countries outside the US, does not offer their services in other languages than English, and only a few months back the site did not even support users from other countries; as you were forced to specify an US location for yourself on your profile, no matter where you are from.

Orkut is big in Brazil, Facebook is big in the United States, however there is a long way for Facebook to grow as big internationally that it would warrant such an outrageous valuation.

I was at TieCon and Matt Coehler from Facebook gave an intersting talk. That the in the old days applications were done on systems, but then eventually platfrom players won out. He made is seem like they were going to open their linking network as a platfrom and let other sites sit upon/use their network. This would make startups like mine be really interested if it was simple. There were implications that the Facebook’s filtering page, the pages that lets you see what your friends are doing, willl have some features to see what other websites your friends are using or people like you in the network are using.

It was almost like Google gets you the best results by its algorithm, but Facebook would get best results based on your network and based on people like you in Facebook. If it gets traffic to other sites, there is potential.

It’ll be interesting to see what other social networkings sites do. MySpace seems too Media/LA driven to be thinking tech. Bebo, hi5 and others will need to respond in someways since they are in the valley they may have the tech focus to respond.

Just my thoughts, but I think Facebook is looking to be a platform play and then blow the other social networking sites out of the water then go IPO. Woud like to hear feedback and what you heard about his talk Mike.

This is what makes Orkut failed:

“orkut is unique, because it’s an organically growing network of trusted friends. That way we won’t grow too large, too quickly and everyone will have at least one person to vouch for them.

If you know someone who is a member of orkut, that person can invite you to join as well. If you don’t know an orkut member, wait a bit and most likely you soon will.

We look forward to having you as part of the orkut community.”

I have spoken to a number of entrepreneurs who tell me that two important concepts of running a company are:

1. Trust in your management team.

2. Organic growth catered to your target community.

From what I read in the article and the comments, I think that the underlying issue is pressure from the VCs, and Facebook needs a plan to satisfy them and maintain their creative control.

Everything is always for sale, it all comes down to a number.

I go with a Microsoft buy — they already have the search deal with them, so there’s a close tie/in there.

Why does everyone think it’s a buy, buy, buy situation? Perhaps Facebook has more options by opening up their network in a strategic alliance? The management consulting and computer systems design industries are both trending towards micro entities; companies with fewer than 10 employees, who have built strong strategic alliances.

What impresses me about Facebook, is that they cleanly offer their services for free to a diverse community, and still generate $100MM in revenues. There is plenty of room for value added to Facebook, without going the traditional “sell-out” route.

@Anu - I think you are right on the money in your predictions.

I have played around with their API and have considered building our network of business directories ShopDirectories.com on top of Facebook’s platform. It is the first time I have ever considered using a third-party system.

Those who live in Ontario, Canada, where Facebook has BLOWN UP, would recognize why I would be considering it.

Literally, with the exception of about 10 people, EVERYONE I KNOW is using Facebook.

According to media reports, Facebook has taken off faster and to a larger degree in Ontario and Canada than anywhere else in the world.

I think the reason it’s different here than down in the USA is that because the site launched without the college/high school restrictions, it has just taken off and grown based on local, social networks.

Knowing how powerful Facebook is here - and therefore how powerful it could be everywhere - I wouldn’t be surprised to see Facebook go for $10 billion.

Crazy.

@Duncan: facebook is growing like a weed, and rumor has it the revenue is doing alright.

altho good vs bad IPO markets do make a difference, great companies don’t really have to give a shit.

ex #1: PayPal went public in Feb 2002, in one of the toughest markets ever — post dot-com implosion, post 9/11, in the face of extreme skepticism. the company filed at $13, closed the first day at $18, and was bought by eBay in the fall at around $20-25 (sorry, don’t remember exactly).

ex #2: Google went public with incredible negative perception by traditional inv banker market, tweaked some noses by using an auction model (that had a few stumbles, but i did participate), and even flirted with blowing the quiet period with the playboy interview. for those of us who were happy to get in at anything under $125 / share, we were well-rewarded at $85 / share if we hung in there (alas, i exited happy as a clam @ $180… oops).

in both situations, the companies blew away the market. they might have worried a bit about timing, but at the same time htier fundamentals were so solid, the market would have been fools to ignore them.

the same goes for Facebook. the dna of the company shares a lot with Google and PayPal, and i wouldn’t expect anything different from Zuckerberg, with Peter Thiel looking over his shoulder.

Facebook is immensely valuable, growing rapidly, and won’t sell to anyone without a substantial premium. likely they’ll IPO whenever they’re damn well ready, and if you can get in on that action it will probably be a great long-term investment.

- dave mcclure
http://500hats.typepad.com

People looking from the outside in really dont get it. It isnt just another social networking site. Everybody I know is frighteningly addicted to it because of the utility it serves. And the false economy it has created via the networks (regional, employer, schools, colleges) will prove to be a tremendous asset.

If as the rumours are true, and Facebook opens up their data to allow 3rd parties to build from, then they are even smarter than I originally gave them credit for. The site has huge potential to be an absolute gold mine. I can envision all sorts of spin off services putting FBs network integration to maximum use, and thus keeping the site sticky.

Facebook would be better off staying independent and cutting a deal with Google or Yahoo for advertising rights, IMHO.

Facebook succeeds in large part because it’s a relatively closed network tailored to fit the needs of a specific demographic. It’s not something that’s really generalizable to fit the whole internet. Think about it - what advantage would it get from a “Try Facebook!” link on the Google homepage? Not much.

The problem is that it’s not primarily a content aggregation site the way Flickr/Youtube are - I have to imagine the vast majority of those photos are kept private, and they’re probably useless to index unless Google wants to launch a “College Party Search”. So there’s not much synergy between other properties.

I am hoping that Facebook stays independent and goes public in 2008. The train has left the station in terms of acquisition and value. They are beyond that now. I predict an IPO in 2008 and at that point their valuation will be well beyond what anyone could offer them today. Our generation needs a company like Facebook to help open up more opportunities for long term value creation.

An IPO just doesn’t make sense. They don’t need to raise any cash.

Acquisition fever is in full swing. Facebook would be silly to pass up any reasonable offer above $2 - 2.5 billion. If an acquisition doesn’t shape up in the next little bit, Facebook may fall victim to the same outcome as Friendster…. oops did I say that?

Aidan Henry
http://www.MappingTheWeb.com

I’m not sure how Facebook is a $6bn company in an IPO (vs. a buyout)

It’s $6bn in the hands of someone that can make more money from them, not from their own operations.

How is this being overlooked?

Can someone outline exactly where the 100mill/year revenue comes from?? What’s the cpm at, how many total page views (projected etc.)… I mean, I’d love to hear the hard numbers behind this 100mill rev/year thats been dropped a lot lately

Adding a bit of fun to the discussion for those who are ready to take a stance.

http://www.gottabet.com/bet/11.....i_am_bored

Michael is on “no sale/ipo in 2007″, not sure exactly where Duncan is (probably 2007, but not sure about valo). Who will take the VC funded keg of beer home?

I have always thought the power of social networking was “applications” - and there aren’t really a lot of social applications yet. And room for a ton of creativity.

As a developer, I am excited by social networking, and when launching applications it would be nice to launch within an existing social community.

As a user, I am starting to be overwhelmed by the number of social networks that are springing up. Partly irrelevant since the social networks within the applications are very contextual and viral - however - using a single social network platform is appealing. Or at the very least some means of aggregating all of social network connection points.

I still think social networks are going to connect to IM in a way. A more pervasive social experience. I am really surprised we haven’t seen a plethora of IM plugins for social network connections.

I do not believe we have seen the power of social networks yet - F8 - is the first foray to empower developers to easily build applications. (probably not true - however… true all the same)

Orkut - was my early favourite social network tool, and still like parts of it. What I like most is that it is representative of my real world social network - not the current bastardization represented on social network sites like MySpace. Facebook approaches this because it is extremely sticky and viral - that my real world network is starting to be represented.

I would to see some offline network management tools to be integrated so I can represent my social network within facebook, and then “fill in” my social network as people join facebook. I may want to do it passively rather than virally. eg I run a charity event - I would privately list EVERY individual who has ever participated in my event - when I want to do some announcements I want to engage “existing” members to exchange messaging and presence permissions.

(yes I can do this manually)
(yes I can do this with groups - although OFFLINE members are NOT tracked - so if/when they join it would be nice to prepare invitations before they join.)

what can you add to this?

http://www.collegecolosseum.co.....?topic=9.0