Monday, November 24, 2008

Facebook to Acquire Twitter .... Almost but NO

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 Facebook stock, which also included a cash component. Those talks, sources on both sides said, are now over.

Relevant Twitter Statistics:
  • Twitter: 6 M registered Users
  • Launched: 2006
  • Funds Raised: $20 M
  • Recent Valuation: $98 M
  • Recent Offer: $500 M (in Facebook Stock)
  • Offer Status: DECLINED 
Oddly enough, I was at the Web 2.o conference where Mark Zuckerberg was (coincidentally) asked about his interest in buying Twitter. Note: This is the same conference that Steve Balmer was grilled about the rumors surrounding Microsoft's potential investment in Facebook a year earlier. 

Mark's response was basically that Twitter had an “elegant model” and that he was “really impressed by what they’ve done.” It was so clear in hindsight that there were deal discussions in the works.... I need to do a better job of reading the tea leaves next time.

Combining the world’s fastest-growing social networking site with the best known microblogging service is actually a natural fit. So why did the deal break down?

Microsoft's valuation on its Facebook investment ($15 B) has really come into question over the last few months.  Additionally, people are starting to speculate that the Facebook magic is wearing off.  

So the real issue likely boiled down to -- Was $500 million worth of Facebook stock actually worth $500 million? This combined with the feeling among Twitter investors and execs that the start-up should still take a shot at building its revenues (there are none right now) ultimately ended the discussions.  For now.

Note: there is a really good update / account of the discusions at AllthingsD.