socialmedian: When Twitter Met Facebook: The Acquisition Deal That Fail-Whaled [BoomTown]

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When Twitter Met Facebook: The Acquisition Deal That Fail-Whaled [BoomTown]

Source: All Things Digital

Nov 24, 2008

Summary

About three weeks ago, Facebook and Twitter ended several weeks of serious talks, in which Facebook was offering to acquire Twitter for $500 million of its stock.

While rumors of Facebook’s interest were brought up in an interview with Facebook CEO Mark Zuckerberg at the Web 2.0 Summit a few weeks ago, some shot down the idea as silly.

Quite incorrectly, as it turns out, since top execs at both Facebook and Twitter were right then at the tail end of discussions, which were initiated by the privately-held Facebook in mid-October, about bringing the two together.

So why did the deal break down?

Well, as is usually the case, over price (was $500 million worth of Facebook stock actually worth $500 million?) and concerns about integration and costs.

More important, it seems, was a feeling among Twitter investors and execs that the start-up should still take a shot at building its revenues–there are none right now–as well as it had been building its growth.

“It’s more about timing,” said one person familiar with Twitter’s motivations. “There is a strong feeling that t

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Comments (16)

Michaelfidler,

Nov 24, 2008

@jasongoldberg @louisgray @singapore @Socialmediangal @Robdiana @louisgray @eng1ne @alpesh @Sunil @Nishith @ajay @ketan @narciss @bala @scbalazs @smantht @infodiva Thought you might like to see this!

Michaelfidler,

Nov 24, 2008

@sumantht Typed your name wrong, Sorry.

Robdiana,

Nov 24, 2008

WTF! $500 million for Twitter? Yeah, let me smoke what Zuckerberg is smoking. (Update) OK, that was an all-stock offer based on the $15 billion valuation of Facebook. Even at $150 million (the $5 billion valuation number), Twitter seems expensive given that it has no revenue yet.

Michaelfidler,

Nov 24, 2008

@thomaspower Have you seen this?

Michaelfidler,

Nov 24, 2008

@robdiana I think it's more like what have the guys at twitter been smoking. That's a big chunk of change to walk away from, at any valuation!

Robdiana,

Nov 24, 2008

@michaelfidler Well, the problem is that it is an all-stock offer. No cash means you are dependent on the company being bought or going IPO at some point in order to get the cash. I can understand the hesitation, because there may be revenue on the horizon for Twitter and that could be a better option.

Michaelfidler,

Nov 24, 2008

@robdiana At the Web 2.0 conference, Zuckerberg implied that they would not go public for two to three years, so you might be right! If twitter can bring in revenue, which they can, they would be looking at a sweeter deal. The risk they take is, if they come up short on revenue their valuation might come down also. Still, not a bad position to be in!

Nishith,

Nov 24, 2008

"But, more important, it seems, was a feeling among Twitter investors and execs that the start-up should still take a shot at building its revenues–there are none right now–as well as it had done at building its growth."

@michaelfidler @robdiana I don't think that is a good strategy. Right now without actually having tried to monetize, twitter can come up with as crazy projections as they want. But once they have tried to monetize, they can't do that any more. They have to work with the actual numbers and those might not be very pretty. I would say they should try to sell before they try to generate revenues.

Polopony,

Nov 24, 2008

Twitter is viral and this is huge. It is addicitive and simple thus could cross sell advertisiers and develop buckets of data they are very valuable. Facebook is smart to try to aquire them . I feel their ability to retail an audience is huge.

Infodiva,

Nov 24, 2008

I am glad. I prefer that they are separate.

Sarahcrisman,

Nov 25, 2008

@michaelfidler @infodiva I agree that the two should keep to remain separate entities. As amusing as it is to watch the two most disruptive platforms online barrel along sans business models &/or revenue, I don't really want them to merge (at this point).

I like that they integrate, sure, but I don't really see why Facebook needs Twitter- they have status updates that work just fine for that crowd.

I feel like if they were to come together any further, Twitter would be overrun with mainstream noise like "Susan is no longer listed as single" and "Matt just threw a sheep at you."

No thanks.

Dannytatom,

Nov 25, 2008

@sarahcrisman "I feel like if they were to come together any further, Twitter would be overrun with mainstream noise like 'Susan is no longer listed as single'"

Haha, that would surely get annoying quick. I'm glad they didn't accept. Like @infodiva said, I prefer them as separate as possible.

Thomaspower,

Nov 25, 2008

@michaelfidler yep little chance of a deal until valuations realistic.

Thomaspower,

Nov 25, 2008

Facebook is doing $10m a month in revenue best valuation is 10 times sales thus $1bn same as Linkedin.

Michaelfidler,

Nov 26, 2008

@thomaspower Agreed, Thanks Thomas!

Nishith,

Nov 26, 2008

@thomaspower facebook's estimated 2008 revenues are 300 million USD as per http://en.wikipedia.org/wiki/Facebook but then once again, those are just estimates and don't know how true they are.