As more details emerge about the MySpace-iLike acquisition, all sorts of interesting observations and questions pop up. A few thoughts:
The Facebook Angle
This is by far the most interesting angle to the deal. iLike is the most popular music application on Facebook, and is the de facto Facebook Music app. That company will shortly be owned by MySpace, Facebook’s primary competitor. That puts Facebook in a lose-lose situation. They can let iLike continue to dominate the music scene on Facebook and let MySpace own all that. Or they can ban iLike and lose all credibility with their platform – everyone would know iLike was banned because of the acquisition by MySpace. And it doesn’t have to be an outright ban. Facebook has plenty of subtle ways of trainwrecking an application they don’t like. Keep an eye on this.
Why didn’t Facebook just buy iLike? A matching or slightly better offer than the $20 million MySpace is paying would likely have gotten the deal done. And it may have saved Facebook from an embarrassing situation.
If I were MySpace, I’d focus on getting their free streaming music into the iLike Facebook application as soon as possible. Advertisers will love it.
This deal also shows what a top Facebook app is worth. Most of iLike’s activity comes through Facebook. They have 10 million monthly active users, and 31 million total Facebook installations (iLike has a total of over 50 million registered users). MySpace has valued that and the rest of iLike at $20 million, but has to factor in the possibility that Facebook will derail the application, subtly or overtly. If that risk wasn’t there, my guess is iLike would be worth 2-3x as much.
Why is MySpace and not MySpace Music buying iLike?
We’re hearing two reasons.The first is that MySpace Music, a joint venture with the music labels, isn’t going too well. The venture will lose at least $20 million this year on the back of massive royalty payments to the labels, and when the Google search deal ends next year the financial prospects of MySpace Music may get much, much worse. The last thing MySpace wants to do is put good money after bad and throw more assets into MySpace Music. Plus, the deal would likely have required notice to, if not the approval of, the label partners who own equity in the joint venture.
There’s another reason being talked about by our sources as well, though. iLike isn’t just about music and music recommendations. The platform they’ve built to facilitate artist-to-user publishing and user-to-user recommendations can be used for content beyond music, such as videos and games. Our guess is MySpace intends to integrate iLike’s technology into more than artist pages. So having the assets at MySpace makes sense.
MySpace Now Has Its Own Music Download Deals With Labels.
iLike launched its music download store last week. MySpace Music has streaming rights to music but not download sales rights. Today Amazon powers MySpace Music downloads. I’m sure MySpace is now considering (or already decided to) moving to a direct sales approach via iLike’s deals and software.
So is the $20m confirmed? Seems a very low price, why on earth didn’t facebook buy it, there must be something bad about this deal.
$20 million isn’t cheap at all when you consider iLike is a very simple music streaming application. The price basically reflects their large user base and popularity and not the application itself.
So they had $16.5m of funding for a shitty application that is only worth $20m when it has 50m users? Uh, so the VCs made a massive mistake?
iLike’s infrastructure wasn’t cheap to build and maintain for the past 3+ years.
$20 million isn’t much considering the time, resources and total investment.
iLike’s brand is worth more than $20 million, and it is a definite lose/lose for Facebook with the success of the internal app on the FB Platform.
I never said it was shitty, it’s not anything that isn’t already out there. There are tons of music streaming applications and websites out there. iLike was the first to the scene with their Facebook app and quickly became popular and widely used. The product itself is not unique. The number of users they have using it is unique and what that price tag reflects.
Depending on iLike’s curent financial position 20mil is reasonably cheap considering they have received over 16mil in funding. Not a home run ROI for investors tbh.
@Arrington… If you think iLike is worth 2-3x the 20million if it wasn’t for the risk of facebooks reaction not being great then what is their motivation for selling? Facebook only have reason to react badly if Myspace (or a few other competitive entities) is the acquiring party… Why sell at such a large discount to myspace when your are worth a lot more to others?
The motivation for selling is that no one is going to continue to sink money into iLike and at some point they either need to stand on their own as a sustainable business or they needed to be acquired.
Yeah i understand that… what i should have asked is what is their motivation to sell to Myspace… If they are worth 2-3x to others, why not try wait it out a little… Interest from Myspace may well pique interest from other potential suitors.
I suppose FB didn’t buy them because they don’t have any licenses with major labels and would have to spend $50+ million to do so. MySpace is one of the few with ad-supported streaming licenses with all majors and the indies, in addition to the more standard licenses that allow you to sell downloads and subscriptions. Whether you love them or hate them, MySpace has the best shot at changing the music industry b/c they have the necessary licenses and bankroll to take a seat at the table.
As a side, I suppose a major detraction from iLike’s valuation was their lack of pageviews. As great as their technology is, it is very hard to monetize in the stream of social networks and having no web presence. Just my 2 cents…
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Cash for clunky apps.
Great questions. Why didnt they buy this? Good for myspace. While facebook has moved on to take on google, Van Natta earns a paycheck by sticking it to facebook anyway he can
Is the deal complete? Maybe Facebook will outbid Myspace or maybe the having even started executing their music business plan.
This is not a lose-lose situation for facebook.
It they would have balls of steel, they would ban the iLike app after their no.1 competitor owns it, plain and simple.
But facebook is a U.S. company, and not an Asian one (Chinese, for example, would do so in a heartbeat), so that ain’t gonna happen.
I think FB is actually okay with this. Google has a FB page, YouTube has a FB page, why shouldn’t Myspace have a FB page and/or application? It just continues to cement FB as -the- web platform
Agreed. If MySpace wants to be a music site, then Facebook will have no problem hosting their content. Facebook is the identity platform for real people to share content with people they know – MySpace has drifted so far from this that they have to try to find their niche as a music site, and I for one am happy to see companies taking steps to improve free, streaming audio.
HAHAH on your comment. Post any video or other MySpacee reference on FB and watch..in few mins, your post will be gone….
I’m looking forward to watching how Facebook responds. I can’t see FB supporting a competitor’s app for very long.
Slide and RockYou’s investors likely wont be pleased with iLike establishing valuation terms for the industry.
Good point, Jonathan. I think the iLike Facebook app is significantly more valuable than any app ever done by RockYou or Slide. But with about 1/25th of the valuation.
FB should buy MySpace…All will be good.
So what?
Facebook shouldn’t care about any of this. Who cares? Myspace and Twitter are small player who will sooner or later die out.
Facebook should worry about making profits not about some stupid music app that makes no difference to them whatsoever since their user growth is still explosive no matter what.
The Lite version and iPhone app is the way to go. Now Beacon 2.0 or something and make money.
No need to waste time on useless crap. Others will lose anyway
+1
Where are you getting 10M active users from? There is no data to support that statement. Their install ratio was linked directly to the number of iTunes CMSs that were scanned initially, couple with the Facebook app but doesn’t reflect an active user base after that. What is more reflective is the price they not only are offered but are willing to take.
http://cache0.t.../08/fbilike.jpg
took that screenshot from facebook yesterday.
“active” and “actively using” can take on different connotations inside a platform. I would have to think 10M active users on their own would be valued at more than they were willing to accept.
The loser is iLike, which will be strapped to the anchor that is MySpace. The deFacto music app on Facebook is YouTube. What song can’t you get on it now? All Facebook has to do is allow those vidoes more prescence on their page, then iLike goes away.
If I was iLike I would not sign for 20 million. If I have over 50 million users, and 1/8 of them buy a song, I’ll make more then that in 4-5 years.
Not nearly 1/8 of them will buy a song though. From my experience, the “buy this song on itunes/amazon” brings in very little money.
So the VC’s got a 22% return on their investment? From all the TechCrunch stories I read this is an extremely ROI.
Just because the received that funding… that would not have been for 100% ownership as such the investors would be realizing a far lower ROI than 21%.
Just had a read on crunchbase… Example, Ticket master bought 25% of iLike for $13.3m…. meaning that for their 25% they will be receiving $5mil (obviously depending on the terms of their investment, they could be getting more/less, but as a basic guide) That would translate to a loss of 8.3mil… correct me if im wrong.
Gordy – Almost all investments into private companies are in the form of preferred shares. One of the top characteristics of the preferred is something called a liquidation preference. This means that TicketMaster gets the $13.3 million first as do all of the other investors before sharing the remainder of the proceeds on a pro rata basis. Only after the preferred shareholders get all of their initial investment amounts (plus accrued yields) is there any money left over for common shareholders.
iLike your thinking here
Strange for Facebook to pass this one up. Monetizing a popular music service just makes sense..unless they know something better is coming along. Yes, I’m pushing it here but what if the rumoured iTunes 9 / Fbook integration goes beyond just sharing what song you’re playing. iTunes on Facebook is the best way to get “quietly” get rid of iLike.
Looks like MySpace just dealt themselves back into the hand of social media relevance.
In a way, this is good for Facebook.
As a musician and friend of many musicians, I’m kind of intrigued. For all of its clout in connecting people, Facebook has been utterly mediocre in the music space – unlike Myspace, virtually nobody uses their Facebook as almost a secondary homepage – and part of that has probably been out of deference to the app developer partners who filled in the niche before Facebook did anything with music.
Here’s hoping Facebook uses this an excuse to make something mildly compelling for musicians, something far more standard (1 of my 400 friends uses iLike!) and integrated into the Facebook experience than a 3rd party app is capable of. Artists want more customization for their page and much greater prominence for the actual music player, which Facebook astoundingly buries. iLike wasn’t doing much for Facebook’s importance to the music industry – isn’t it possible that they were in the way?
WOW! A crappy site just bought another crappy site.
Seriously
Water flows in to fill the vacant space. It will take someone a nano-second to fill in any “void” that might temporarily exist if iLike somehow hobbled its Facebook experience. People need to chill out. New MySpace management aren’t idiots. It would be a huge win for them if they can use iLike to begin the long process of re-introducing the concept of complementary, not competitive MySpace use to now-FB-using people.
Hey Facebook: Why not just create your own music app and let iLike phase itself out?
Sounds like simple business strategy… why outsource what you can build easily in-house?
What’s the problem with MySpace owning iLike? Are they going to use some voodoo magic shit to put a hex on Facebook or something?
This is a great move by MySpace I would be interested in following any updates to see how Facebook deal with this situation.
I wonder if I can compare it to my situation I recently submitted a very simple app to Apples App Store about say 2 months ago and it has just been rejected!
Apple REFUSE to send me an email stating why they rejected the app! I have tried several times with Apple but they have refused to say in writing why the App has been rejected!
Can anyone guess why they would reject this app???
Here is the video demo I created a while back of the app http://www.yout...re=channel_page
Do Apple see me as some kind of threat??? Do they not value the help and support I provide to the iPhone developers???
$20M for a $16+M funded startup seems like a poor deal. Given the Facebook angle Michael cites, iLike should have played the FB-bogey to the hilt to extract a better deal from MySpace.
I too was quite surprised on the price tag I value iLike at more than $20 million. Why are they selling???? Every company has an exit plan but this doesnt seem right!
If I were Facebook I wouldn’t worry about it.
Facebook has many other areas of expansion that they should be concerned about. There will be plenty of companies, including last.fm, willing to replace iLike should it become a problem.
Can someone please confirm that a company that raised more than $30M is agreeing to sell their business for ~$20M?
Are things that bad that founders / investors need to take this shit cake of a deal?
I actually see this as a positive for Facebook, just shows that MySpace knows they are the under dog and need to tap into Facebook to bring them back to life.
+1 Facebook
Good to know I lost my job, along with close to 500 other people so that they could turn around and spend $20 million on an acquisition. Another slap to the face from the Space.
Yeah, but the idiots that are really responsible for those layoffs are ones that drove MySpace into the ground in the first place.
You should be mad at Tom and crew for their exemplary example of how to destroy a business.
I have real confidence that the new management actually can save MySpace from the brink after seeing this move. I don’t know that it will ever be great again, but it’s probably not headed for extinction if this is an indication of thinking going forward.
These guys are thinking with strategy and with fiduciary duty, not with their egos.
Bravo.
p.s. also an ex spacer.
Definitely a good move by MySpace though it will have no impact on the company’s inevitable decline into Friendsterland thanks to remarkable and historic mismanagement.
iLike should still be allowed to compete in the Facebook application market just as any other developer. I do think it opens the door to Facebook green-lighting home-grown music features that make iLike’s offering less attractive.
Looks like MySpace still has some money to burn…wonder if they will give http://www.jamWee.com a little looksie
I don’t see this being a MySpace VS Facebook issue at all. Facebook isn’t relying on music as it’s only reason keeping it afloat. Music to them has been an afterthought, they’ve always put user connectivity first (their recent purchase of FriendFeed instead of iLike says it all). MySpace is simply trying to dig their feet into an area which brings in a large portion of their income so they don’t shrivel up and die.
This is a very good move by MySpace, but iLike is not central to the FB experience. I actually don’t have any friends who regularly use the iLike facebook app.
This opens the door to other companies to become the preferred Facebook Music supplier.
I believe iLike is by default installed as a facebook app. No reason facebook can’t swap that out for another service.
Why doesn’t Facebook just buy Lala.com and integrate it?
+1 was just about to type that before I saw this comment, saved myself some embarassment
I agree with the people who doesn’t think this is a big deal to Facebook. Most Facebook users don’t use iLike. And I bet if you asked 10 users if they even know what it is, probably somewhere around 2 would know.
iLike is SO 2008.
Seriously though, I haven’t seen any iLike wall posts in a very long time. Have people stopped using it?
What we may be seeing is reality set in on these social media startups. Ridiculous valuations tumbling down to earth, a bubble bursting perhaps? Just a possible angle here.
Facebook.com , go out and acquire lala.com
You will be happy.. they are growing fast, so get it done..
why would facebook want lala? they are a social utility, not a music company.
Quick Research: Next best targets for FB if they don’t buy iLike from under MySpace (which I personally think WILL happen).
ReverbNation
Network Uniques (Quantcast): 39MM, 24MM US
Facebook Apps: MyBand, Music, Shows, ReverbNation
Apps MAU: 900,000+ (Mostly bands)
Notes: Focused on Artists w/ lots of traction inside of MySpace.
Imeem
Network Uniques (Quantcast): 62MM, 20MM US
Facebook App: Removed (but had 200,000+)
App MAU: N/A
Notes: Focused on Fans and discovery at their own site plus big traction at MySpace and Ning.
Lala
Network Uniques (Compete): 250,000+
Facebook App: Lala
App MAU: 2,500 (fans)
Note: Focused on fan experience (better than most).
Grooveshark
Network Uniques (Compete): 400,000+
Facebook App: None
App MAU: N/A
Notes: Discovery and free streams like Spotify or Playlist.com. (legal?)
Babulous
Network Uniques (Compete): 38,000+
Facebook App: Profile Song
App MAU: 650,000+ (fans)
Note: Focused on playlists uploaded by fans (legal?).
Don’t say I didn’t tell you what FB might do next….
None come close to iLike’s # of MAU’s, but they might be the next best thing for FB.
What in the…are you serious with that headline? LOL if anyone thinks Myspace acquiring a craptastic service is going to save them. What are they thinking, seriously. The only reason iLike is as popular as it is right now is because of Facebook. All of the other music apps are garbage and iLike is the only thing that decently works. Are people aware Flash is here for Facebook?(which I am against since Flash implementation would muck up the clean layouts but I digress) Once music services jump onto flash, combined with Facebook cleaning up their API, services will jump on getting their apps up and iLike is going straight down the toilet where it belongs. Like you said, they don’t offer streaming. Seriously, why would a 8 second snippet entice one to purchase a track? Not to mention, if a user can actually find where to purchase on iLike. Have you seen their UI? What a clustermess. Also, what about iLike is innovative? There are TONS of services that do what they do, a trillion times better. Poor Myspace, it’s trying to stay relevant but they’re moving backwards. If they were really smart, they would’ve looked into Grooveshark, Imeem, and/or the likes. (no pun intended) *pats Myspace’s head*
Wow! These are some great valuations. FriendFeed at $50 million, mostly stock, and iLike at $20 million. It really makes you want to take a huge risk and go start a web business right now, doesn’t it? Yuk.
$20M isn‘t much for the iLike user base. But some of you are right: iLike is on the way down although I personally love the concept.
I worked with a variety of bands and spent a lot of time on social sites. I found iLike to be one of the more artist friendly and forward thinking sites of the lot (maybe not from a user perspective, but from an artist management perspective, though I watched the fan numbers swell throughout the years). Back in the day, iLike concert, news, and player apps for the Facebook homepage were fantastic, then Facebook switched formats and all those were relegated to a tab and weren’t on the front page anymore, which was a disappointment. iLike would always sneak new things in like adding a masthead that added some uniqueness to what were very simple pages.
Posting bulletins from iLike to Myspace became the norm for me and that helped bring more people to a band’s iLike page and sign up for the program. Since budgets are (obviously) down in the biz, building up sites that have decent followers is a necessity and a free/cheap way to get info to fans and iLike became a one stop shop to get info out. Most bands are embracing iLike for this reason and are adding full songs to stream and encouraging fans to go to their iLike page. I spent with a lot of other sites and many seemed useless. I always hoped iLike would get some recognition and be able to stand alone financially, but oh well. 20 mil does seem like a bargain. I think the talent at that company is worth that much and am curious how all this will go down.
Remember when AOL acquired Hi5 for $800MM+only to find out they got a social network with millions of users – all of which are in the kids and tweens demographic, with poor purchase power and a regultory nightmare to advertise to?
This feels like a similar thing. MySpace itself already seem to have fallen behind and boasts users that are either underground music fanatics or early teens from countries that cannot buy anything on iLike… and the apps, seriously; Does anyone even use Facebook and MySpace apps?
For a while, it seemed as if the long term direction of Facebook was to make itself a platform that would grow into real productivity apps, including even business, enterprise and commerce. In reality this is yet to happen. Sure, casual games from Zynga may bring a dollar-full of micro-transaction revenue, but overall, the apps lack a capable SDK, an iPhone/iTunes style promotable distribution platform and no serious contenders in the area of real life productivity or commerce – all of which leaves developers with lack of drive to create and poor choice of revenue models.
Facebook would surely survive the addition of another irrelevant app to MySpace at the great expense of Rupert Murdoch. This also marks the path difference between the two networks – MySpace stays with teen music junkies from Russia and Facebook goes business In the long run however, Facebook apps must have revenue strength and distribution a-la iPhone/iTunes.
And if not? My prediction is that the world will be shocked to see Google’s new Chrome OS taking over the social web with its own open source, very capable SDK, iPhone/iTune style distribution channel, convenient widgets, data, commerce, business and social feeds – not to mention feeding all of it seamlessly to Android handsets. Whoa
wow, here comes the return of MySpace?!
I think it is a pretty smart move for myspace. If you can’t beat em, join em.
smart move for myspace indeed. of course, today “the empire strikes back” under the guise of combating application spam:
http://www.tech...concert-alerts/
will be interesting to see how this plays out.