We heard last night that Yahoo could be on the verge of acquiring Facebook but after a round of late-night reporting decided it was too speculative to post. The purported amount seemed very high — $1.5 billion; people I spoke with thought it was possible but had no direct knowledge; the timing would seem inauspicious given recent Yahoo stock hits; and, after all, Facebook sale/talks rumors including Yahoo or others are nothing new. I would be surprised if there is a major player who hasn’t at least had a meeting with Facebook. So why write anything now? The WSJ is reporting that Facebook has been in serious discussions to sell to Yahoo for $1 billion. The Journal also reports that Facebook has held discussions with Microsoft and Viacom over the past year — nothing really new to that although more details.
What could make discussions with Yahoo different this time would be if Facebook founder Mark Zuckerburg is serious about selling. He holds roughly 30 percent of the company, according to the Journal,
Zuckerburg told the Journal: “I would never say that at no point in the future would we go public or become part of a larger company…but what I would say is, it’s not our priority. … There’s so much more to do here.” Meanwhile, Jim Breyer, a partner at Facebook investor Accel Partners, told the paper: “Clearly we have had significant strategic discussions that have covered everything from outright acquisition to major strategic partnerships” but the main focus is on turning Facebook into a “major standalone business.”
— The Journal was told by “people familiar with the matter” that Facebook is on course to soon top $100 million in annual revenue.
— Valuation may be at issue — again, no surprise given the inflated numbers that have been attached to Facebook at various times. A spring funding round of $25 million suggested a value of $500-$600 million.
— Microsoft and Facebook recently signed an exclusive multiyear post-Google-MySpace ad deal that could be worth $200 million. But the deal likely is written in such a way that would allow acquisition by Yahoo or another buyer who would want to sell the ads.
— Why Yahoo? Let’s start with why not Viacom, which has been considered a serious possibility. Post-MySpace, Chairman Sumner Redstone has said the company won’t lose another major acquisition but new CEO Philippe Dauman has told investors the focus is on early start-ups and possibly select acquisitions in the low hundred millions. Facebook would seem to be too far along and too rich even at the lower end of its estimated value; it also carries significant risk — witness the recent revolt over new features. On the other hand, if affordable, those new features and other Facebook technology could go a long way to solving social network issues at Viacom (and other companies) and revenue growth prospects are good as the site’s reach expands beyond students. Yahoo
could use that social network technology and structure and may be more willing to spend to get it. Yahoo also could be a good fit for Facebook as it expands and the company seems to have a good track record with start-up founders. Yahoo has shown a major commitment to social networking but has yet to hit on one solution that pulls it all together. Could Facebook be it? Or will we be writing months from now about talks between Facebook and yet another company? The latter is entirely possible. More to come, to be sure.
You can catch up on the Facebook saga and other social media news in our dedicated Social Media archive.
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