One of Facebook’s directors and largest investors, Peter Thiel, tells the magazine about the apparent misadventures in trying to get a deal done with the folks and Twitter. We know the outcome on this one was a “No deal!” but because all of this was happening last fall during Twitter’s meteoric rise makes it pretty interesting.
This is the first time there has been a public recognition of these talks. Facebook is still looking to expand but Thiel shapes up the attempted union with Twitter as follows
Thiel said the parties disagreed over price and structure when they seriously considered a deal last fall. “It became pretty clear it wasn’t going to happen,” Thiel says from the mid-Manhattan office of his hedge fund Clarium Capital. “The deal would have to be done with Facebook stock. And then you have to figure out how much the stock is worth.”
As noted by Thiel it’s a sticky proposition trying to value the stock of a company that has no liquid market. The valuation of Facebook at $15 billion used for the investment by Microsoft no longer applies The internal valuation found in court documents of $3.7 billion that occurred at about the same time as that deal with Microsoft shows that the Redmond company had either seen something Facebook didn’t but that’s for another story.
While the two companies still talk there appears to be no interest in any deal that involves Facebook stock because its valuation is a moving target at best. While it appears that Microsoft overpaid considerably there may not have been another one of those born in the next five minutes (sucker, anyone?).
Twitter has recognized that the stock valuation was the main sticking point in the negotiations that had a value on Twitter at the time around $500 million. Since then however, Twitter has been growing at breakneck speed and appears to be in no hurry to get involved in any deals.
Representatives of Twitter liked the sound of $500 million but balked when Facebook said its stock was worth $8 billion to $9 billion. Twitter’s team knew that Facebook was letting employees sell stock on the secondary market at company valuations ranging from $2 billion to $4 billion. “We said it’s not worth it,” the person says. “Don’t treat us like children.”
Add to that the belief from Twitter management is gaining serious momentum and not even near its full potential and it certainly makes sense that they wait for the best deal.
As for Facebook, they continue to move forward. A rumored hiring freeze has been set aside and Thiel states that the focus is on getting the product right and not on turning on the ad faucet which is what made MySpace what it is today (unusable?). With other board members like Marc Andreesen saying that Facebook could generate about $1 billion per year right now that must be hard to keep away. The question is as Facebook keeps making gaffes that get their users upset just how receptive will the community ever be to attempts to monetize the service?
This is a question that not only haunts Facebook but Twitter and many other social media vehicles. The question is as Facebook keeps making gaffes that get their users upset, how receptive will the community ever be to attempts to monetize the service? This is a question that not only haunts Facebook but Twitter and many other social media vehicles. It’s likely that during this downturn caution will be exercised but someday these folks have to turn a profit, right?