FC NOW: The Fast Company Weblog
February 27, 2007
Take the Money and Run?
News Corp.'s 2005 purchase of MySpace for $580 million and Google's recent acquisition of YouTube for $1.76 billion have illustrated that established companies are willing to invest big bucks in social media. So much money is being thrown at Web 2.0 startups that the (usually young) founders of innovative Internet startups find themselves in an enviable position. Like farmers in an oil-rich region, entrepreneurs in online media, possess properties that large entities want to purchase and fully exploit.
According to a report by Thomson Financial and the National Venture Capital Asociation, in 2006 the average sale price of a VC-backed start-up was $114 million -- the highest it has been since the free-spending madness of the dot-com hey-day. Yet, while there may be gold in them thar' hills, social networking has not yet been fully monetized. Companies who buy a social networking or other Web 2.0 site are paying for what they see as the site's potential.
Web 2.0 founders can capitalize on their start-ups either by selling a larger organization on their site's potential, or by hang onto their site in the hopes of realizing that potential on their own. Mark Zuckerberg, the 22-year-old founder of Facebook finds himself at the build-or-sell crossroads again, after spurning a $1 billion offer from Yahoo last year.
Facebook, which has raised $38.5 million since Zuckerberg started the social-networking site in 2004, offers a buyer more than just potential. With 17 million registered users, who look at about 1 billion Web pages per day, Facebook is attractive to advertisers. Through a deal with Microsoft, Facebook will earn somewhere in the range of $200 million in ad revenue through 2008.
Yet, if Zuckerberg, who is believed to control one-third of Facebook's stock, could sell the company for more than a billion dollars, should he? Is that kind of money for a fledgling enterprise a sign of a second bubble? Should Zuckerberg get out while the getting's good? Or should he hang on to his brain-child and ride the Web 2.0 wave on his own?
Posted by Leslie Taylor at February 27, 2007 2:12 PM | Category: internet + web |
4 Comments
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I didnt know Yahoo offered up $1 billion to Mark. Im glad he didnt sell. I use Facebook everyday to keep in contact with the happenings of friends and events on my campus. I thinking selling it would dilute the purpose of the site because it would be bombarded with ways for Yahoo (or who ever else wants to buy it) to make money which is not the reason Mark started it. Dont sell Mark, you are already an intrinsic billionaire, plus you go to Harvard. You will more than likely make a billion dollars over your lifetime anyways (and more).
It's cool watching some arogant Harvard geek turn down a billions $$$ and probably have nothing to show for it in a couple of years when the next fad comes along and he looses all of his users.
I graduated from the University of Washington, and I really liked the exclusivity factor Facebook had. I think if it's sold, it'll be at the integrity of its users. We'll be at the mercy of an overly saturated AdSpace.
I wouldn't want to see FaceBook's communities turned into the same clutter and intellectual property grabbing arena MySpace is right now.
I'm pretty sure that YouTube sold for $1.65 billion....not $1.76...at least thats what ever other single person in the world says.