Why Facebook Won’t Sell
With the huge ad company acquisitions happening over the past couple of weeks it seems some talk has gone back to who is going to acquire Facebook. If you have read any of the articles by Mark Zuckerberg or the VCs they don’t seem to plan on cashing out through acquisition. Instead there are continued talks of bigger things for Facebook and I believe they plan on following the Amazon and eBay plan of becoming a platform.
There comes a time where the price is simply too much for any company and with the system Facebook has in place and the people backing it (Peter Thiel of Paypal fame) I can see them opening up the system to 3rd parties to leverage the people system that is in place. In theory this seems like a cool idea, but unlike eBay or Amazon there really is no revenue stream for Facebook beyond advertising. Of course I could be thinking short-sighted here and they have a clearer vision.
Because of this you can fully expect them to go the IPO route as they will be forced to do after acquiring 500 shareholders (SEC regulations). I could imagine that a lot of companies would love access to the 1,000s of regional networks that Facebook has in place along with the trusted contacts that people have setup. That’s just my quick theory on what they have in store and why they walk away from $1B offers.
With that said there is only so much money a man needs in his life and once you hit that 9 0s mark I think it’s time to take a bow and peace. Hope it works out for them.
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Haha and look what I find after I write this entry: Facebook open its pages to companies. Now I just need to get those lottery numbers down.
By Scrivs on May 22, 2007 12:47 am
I agree, the key question for facebook is the rev stream. Without one, they will be trounced on IPO. Without their lucrative search deal, I don’t think facebook is capable of reporting healthy numbers as they do. So what’s left other than ads and eyeballs? Subscription model? Unlikely. Blings, classified ads, etc. They sure are trying but even if these measures prove to be successful, I fear slapping on these services might lead to facebook diluting their own secret sauce; the tightly knit social component that allowed them to grow.
By soxiam on May 22, 2007 9:14 am
Sh*t, do I owe you $20? Is that three posts since our bet?
By Fred on May 22, 2007 12:30 pm
Facebook will not sell out. They have way too much going for them at this point. As for revenue stream, the Virtual Gifts (icons) are just the tip of the iceberg — and they’re already making bank off of those. Facebook indeed is becoming a platform, and the value here and vastly beyond that of any of the other social networks. To even think of Facebook in the same light as MySpace at this point is stupid. They know exactly what they’re doing, and it will take far more than a multi-billion dollar acquisition offer to sway them at this point.
By Josh Williams on May 22, 2007 12:45 pm
Actually that’s 4 ;-).
By Scrivs on May 22, 2007 3:26 pm
Ha. Ok, shoot me an email and I’ll pay up.
By Fred on May 22, 2007 4:53 pm
Email sent my friend. Lesson for everyone else out there, I am not above taking friendly wagers when it comes to writing content.
By Scrivs on May 22, 2007 4:59 pm
@Josh: I completely agree with you on that one although I wasn’t sure how well the gifts were doing since I have yet to read reports on it.
By Scrivs on May 22, 2007 5:00 pm
Keep in mind the ‘advertising’ Facebook does is extremely different. Sure, there are banner ads. But, there are also the ’sponsored’ groups. They can charge a premium for a company to have their own ‘corner’ of the site and even pimp the group/product/etc. on the news feed. That’s probably going to earn them a bit more than MySpace et al’s .10 CPM.
By Devin on May 22, 2007 6:40 pm
A company doesn’t have to do an IPO after 500 shareholders! They do however have to begin making financial disclosures, perhaps that’s what you meant.
By Rick on May 23, 2007 12:11 pm
Rick you are correct, but very rarely have I heard of a company that got to the magic number and not go public simply because all your financials are public anyways.
By Scrivs on May 23, 2007 12:20 pm