It’s not the first time we’ve heard rumors about Facebook looking to acquire Twitter or about an impending deal breaking down. But this time, Kara Swisher over at BoomTown offers a bit of insight about the actual deal size. According to Kara (and her sources), Facebook was offering $500 million of its stock at the infamous (and ridiculous) $15 billion valuation to acquire Twitter up until 3 weeks ago.
Update: while Twitter CEO Evan Williams declined to comment on the rumors, we’re hearing that 20 percent of the offer that was made was in fact cash (which would mean $100 million in cash and $400 million in stock).
Apparently talks, which were reportedly initiated by privately-held Facebook, broke down because of doubts on behalf of Twitter investors and executives about the stock’s actual worth, the usual concerns that arise when acquisitions are made (like integration, duration, costs, etc.), and a strong belief that Twitter will ultimately be able to weather the economic downturn on its own. Also noted is Facebook’s concern over Twitter’s current burn rate and future revenue potential.
At the recent Web 2.0 Summit, moderator John Battelle asked Mark Zuckerberg on stage if Facebook would be interested in buying Twitter. The young Facebook CEO’s response was: “we’re really impressed by what they’ve done”, and that they have “a very elegant model”.
We’re trying to get more out of the companies and will update this post if there’s anything else to add.
For comparison: Facebook has raised $516 million in funding to date, while Twitter is backed by $20 million in investment. Twitter boasts 6 million active users, while Facebook reports more than 120 million.
Noteworthy caveat: serial entrepreneur and angel investor Marc Andreessen is sitting on both sides of the fence, being both an early investor in Twitter and a member of Facebook’s Board of Directors.
Am I the only one who really does not want this to happen? I’m a user of both services and think that Twitter’s lightweight, simple, and friendly feel would just not be the same with the power-hungry facebookians behind it.
(I’m talking from a user standpoint, not a business standpoint)
NO, you’re definately not the only one!
I also think that this would be a pretty bad deal for Twitter (besides the ridicolous 500 mill in shares offer). I guess Facebook is in deep trouble to make any revenue, thus not acquiring Twitter for some nice cash. Now they try to make this move with their ridicolous stocks worth 15 bill.
Nice try.
Make your own thing Twitter!
I agree with you. I would not be too keen having FB control Twitter. I like that they are apart, even though I use both.
No thanks.
I also agree that the value of Facebook is completely wrong. $15bil for what? I would understand if it was a bit older, but I really feel that that is a bit over valued.
I agree with you too… 15 Billion. Come on!
I am still trying to figure out how Facebook is worth $15 billion? Ford (before the collapse) was like $16 billion.
Note: I think Facebook is worth at least $5 billion (probably more) but I have serious doubts that anyone aside from Microsoft would be interested in acquiring them.
Me neither!
I am Using both – and SMS ( Short Message Services ) was the only Killer Aplication on Mobiles in the Nineties! – SO there is huge business potential for Twitter
$500M in stock… Take it you idiots.
2008-2009 >> and we are back to crazy pre-dot-com crash valuations, business without real revenue models and all of this in a time of recession >> something is wrong …
A match made in close source heaven. A joining together of web 2.0 content share croppers.
Do the members that give each service value have any say in this ?
What happens to members of Facebook and twitter that do not want to use the services if this acquisition happens ? Members and Communities have given both companies there value. Members should have a voice and if not they should be able take the code and create and extend the services that they have given value.
Dumbest comment ever!
agree
so much money for so few users? morons.
I wonder when Twitter will come up with a working business model. Actually I wouldn’t be surprised if Verizon would be interested in acquiring it at a point…
If Verizon acquires Twitter, I’m leaving. They already “nickel and dime” you to death on everything (you have to pay for incoming calls when everyone else is free) and I would probably end up charging users for the service.
I hope Twitter remains independent, as even a Google acquisition could slow it down (if you doubt me on this, just take a look at Jaiku–utter sadness).
Assuming facebook, as a whole, is wort ~300 million (which is a generous, normal evaluation considering its size and revenue), their stock offer is not really relevant.
On the other hand, Twitter will probably not even be around in 2 years, and I don’t see how anyone can extract more than 10 million per year before it disappears.
No real reason for any sort of deal from either side.
I’d be very tempted to take it if I was Twitter! That said I’d rather they didn’t as I prefer Twitter for status updating compared to Facebook.
@Brian Reavis you’re absolutely right. I like Twitter much better, and use both.
This just in …. two companies with no business model , complain about the value of eachother..
Maybe by swallowing up Twitter, Facebook has a planned revenue stream for it. Twitter by itself is a fairly simple concept and straightforward, but there has been lots of talk of the direction of where the company should go. Facebook has a lot of features that can “complement” Twitter. If Facebook, doesn’t plan to make money from buying Twitter, then I don’t see the point.
If Facebook offered half of that amount in cash I’d snap off their hand, were I holding the reigns at Twitter.
Anyway, Team Twitter are quite correct. There’s NO WAY Facebook is worth $15bn given the way the market is, and we know this because of what’s happened at Google.
As we know Google is a company listed and as such reacts to wider market trends (woes). It has lost something approaching $500 per share in the past year, down from a high of $724 to $262 in the past YEAR.
Microsoft invested in Facebook 13 months ago, when Google shares were rising about $650 to hit that high.
Sure, Facebook has grown since then, but so too has Google. And only one of those companies is making (lots of) profit. I’m becoming increasingly worried about Facebook’s failure to wake up and smell the coffee.
“For comparison: Facebook has raised $516 million in funding to date, while Twitter is backed by $20 million in investment. Twitter boasts 6 million active users, while Facebook repors more than 120 million.”
Hm, $20m got 6m and (exploding) user adoption.
I’ll take THAT bet all day.
Dangerous conclusion: Facebook is making money (whether they’re making enough is another issue) and fighting many fights at once, while Twitter as a stand-alone business has yet to find a revenue stream.
Hmmm, did someone say “crash”? It’s about time…
I’d take it just to avoid being wiped out by Facebook building the feature on its own.
You mean Facebook didn’t have a ’status update’ feature yet?
Both Facebook and Twitter have seen explosive growth, each have their merit.
I’m not going to friend and grant access to my pics, email and everything else on my FB profile to the likes of: MSNBC, NPR, Starbucks, Comcast, Dell, or any other company. I will, however, let them know when *I* sneeze, or have issues with their reporting or products semi-anonymously.
Good point
Hahah…I’ll buy Twitter for……One Billion Dollars!!!!!!
In what way is Twitter’s model ‘elegant’? It does not have one other than screaming “buy me”
A perfect match: Both services are great for users, but have no real business model. This bubble will burst soon.
If they fail to make deal at first chance, they should not go for further deal.
People, you need to understand that there is no money changing hands here. Whether Facebook values itself at 1 billion or 15 billion is irrelevant. You can argue against 15b you can also argue against 500mm for Twitter. The main ratio is Facebook valuation/Twitter valuation = (30X). If Twitter were to take this offer they would want a higher Facebook valuation because it could potentially help Facebook raise money at a higher valuation in the future.
That should be great. One company that can’t seem to make money buys another one that can’t seem to make money.
Surely it would take far too long to integrate Twitter into FB than it would just to upgrade FB’s own status updates with Twitter equivalent functionality?
I think this would make a great addition to facebook. ..
$500 Million in Facebook stock? That’s like getting offered $500 million in chilli’s gift certificates. At least I can use chili’s to fill my tummy…
That is a huge valuation for twitter. Im amazed. Twtter should take this offer. Is FB cash positive or still paying for all those servers?
It means to me that Twitter discounted FB’s valuation and FB discounted Twitter’s due to the concerns of its burn rate, business model etc. Wonderful! This is a healthy “weight loss” exercise for both parties. In my view they can just cut 90% of each other’s valuation and still strike a deal, $50M is still a lot of money without substantial revenue.
It would probably be just the right time for Twitter to cash in on this acquisition, while facebook still has the resources. As a fan of both Twitter and Facebook, I would be interested in seeing what would come from the acquisition.
Twitter and Facebook together would be very effective!
If you like twitter, check out this start-up’s website:
http://www.vingtalk.com/cpp
Robin,
Nice Post. While some might perceive facebooks functionality as merely a tiny functional subset of facebook’s “Status Update”, the truth is very different.
Twitter has a very streamlined user interface; which facebook has moved away from; especially with the new redesign.
The use cases for twitter are quite varied and actually in some use cases better suited for twitter than as a component of facebook. Bottom line here is we speculated about a potential purchase a while back; and I think that it does not make sense. The eco-systems are clearly behaviorally different.
If in fact they quit dancing because of valuations; it is quite an interesting story.
Rodney Rumford
Publisher: Facereviews.com
This is ver Enron-esque.
twitter very smart move to reject the paper money. facebook tried to pull a fast one and get twitter on the cheap
I think a number of you are missing the point. At the inflated FB valuation being quoted in this prospective deal the the actual value of the shares the Twitter folks would get would immediately be worth “less” the moment they sign the deal. Then add in the fact that with the recent announcement that they won’t support (or allow) an external market for currently vested shares from insiders this starts to look exactly like doing business in Vietnam.
Get paid in Vietnamese Dong – it’s great if you want to spend it in country, but most surrounding countries won’t allow you to convert the currency to anything else, and those few places that do will heavily discount the value so as to make it not economical.
If this deal gets done it will be primarily for cash (at a lower FB valuation). It’s an IQ test for the Twitter guys…
I think twitter.com should accept the proposal. The truth is that the twiter will get any profits.
I think twitter.com should accept the proposal. The truth is that twiter will never get any profits.
edit:::sorry:::
Hey kids, everyone except His Markness belives Facebook nowhere near $15b valuation. Microsoft has real money to offer Twitter. Better than Yahoo?
peter thiel feels the same as markey
Nice post!
I mean, Twitter is great and I use it a lot daily, but bottomline, loads of potential but zero revenue. 100 million is alot of cash to put on something that doesn’t still have proper revenue. Doesn’t anyone think that this could be a bad move for Facebook?
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I think it is a good deal. But $500 million is too cheap.
500 million cheap for a company without a business model and a high burn rate? lol
Ok, so I’d have taken the $100m cash + stock.
Why leave cash on the table in this economy? The executive team and investors must have serious faith in Twitter’s ability to make money somewhere down the line.
Maybe I’d have wanted $150m cash but even if the stock is only worth a fifth of the $15bn (TODAY!), that’s still a deal worth doing. Sit on the stock, maybe it will be worth $50bn in five years. Maybe it won’t, but it’s all about the cash in this market, and $100m in cash is a lot to pass up. Kahunas!
Presumably Facebook will now ‘pull a Yammer’ and clone Twitter now, for less than 0.01% of the cash it put on the table?
You get a big deal like this, you gotta take it. Twitter should go ask some yahoo folk how they feel about passing on microsoft’s offer.
Hindsight is 20/20, but with no business model you gotta have some rational foresight.
I am just waiting to see whether Facebook acquires Twitter or not..
facebook has its own wide range of users n network n running well whereas twitter is growing one lets c wht next news
I think it is a good deal. But $500 million is too less for a deal…
billions for a website …. wow …. heights of stupidity
Twitter and Facebook together would be very effective!
face book and twitter – internet marketing is in its peak
Twitter is great and I use it a lot daily, but bottomline, loads of potential but zero revenue. 100 million is alot of cash to put on something that doesn’t still have proper revenue.
As exciting as it would be to see Twitter be acquired by one of the big guns, I think it’s much more exciting to see Twitter potentially grow into one themselves. It’s really exciting the more players that are out on the field.