: [Staci D. Kramer] When I first heard last December from a reliable source that Viacom had made a $20 million offer for Friendster, I held back from reporting it because I couldn’t confirm enough details. At first, it seemed like a done deal but as time went on, it became clear that it was anything but. Now after multiple interviews with people familiar with the situation, I can safely say Friendster got past first base with Viacom but couldn’t come close to hitting the home run the company wants and needs.
Viacom, which could use social networking tools to flesh out its online/mobile offerings, was intrigued enough to get the management presentation, especially when it was told another media company (possibly Disney) was very interested. (Also, Viacom recently acquired iFilm, which also was represented by investment banker Montgomery & Co) Led by Taek Kwon, president and CEO, Friendster shines at that part in the process. Because of the other, unidentified company’s serious interest, Viacom made a non-binding offer to get to the next step — due diligence. That offer was at or about $20 million — already a deep discount from the $50-100 million being tossed about late last year, which was already a deep discount from the $200 million ballpark that cropped up in early 2005. (Friendster is an ad-supported site; users opting to upgrade blog functionality pay monthly fees.)
Soon after due diligence began, though, Viacom decided than the company sounded better than it actually looked and decided to pass. I have been told by multiple sources that later Viacom was offered the chance to acquire Friendster for $5 million — less than the $11 million to $15 million we estimated last year so far had been invested in the company. The word Viacom got was that Friendster’s VCs no longer wanted to fund the company. (Friendster’s lead backers are Kleiner Perkins Caufield & Byers, Battery Ventures and Benchmark Capital, each of which has seats on the board.) When I asked one person familiar with the situation why not just buy it for that price, the response was it costs more than that a year to operate.
From one perspective, FIM’s megabucks MySpace buy should have made social networks like Friendster more attractive. But the people I’ve heard from suggest it only played up the differences between the rising star and a fading one. Friendster cropped up more often as a cautionary tale about what happens when fads fade then as a coveted acquisition on its own.
Friendster’s press contact told me “no comment” as soon as I called, then complained to me that reporters constantly get information wrong about the company. He asked me for detailed information about the story, suggesting that was needed for a response, then, then failed to reply to the e-mail until pushed. Again, the response was “no comment.” He eventually agreed to provide metrics, some of which differ from those being promoted on the site. For instance, Friendster’s info page says “more than 21 million members”; Friendster now says it has “over 24 million members.” The number of unique monthly visitors also has been updated to 9-plus million from 8-plus million.
Given the vagaries of this marketplace — I know of deals that turned 360 degrees in hours — some company could snap up Friendster today. The company has social networking tools, a user base and, despite some of the comments I’ve head and seen, a brand that could be a start. You’d think that might be worth something. Then again, as far as I know, Friendster is still for sale.
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