Twitter Rejects $500 Million Takeover Offer From Facebook*
UPDATE: TheDeal.com hears that $100 million of the $500 million offer was cash.
EARLIER: Facebook offered to buy Twitter for $500 million of overvalued Facebook stock, Kara Swisher says. Twitter rejected the offer for several reasons:
- At Facebook's real valuation, $5 billion or so, the offer only amounted to $150 million (not bad for two-year old company with no revenue, but a far cry from the billion-dollar dream)
- Twitter has high hopes for its own secret revenue model which will be announced next year.
- Twitter's investors aren't stupid: They wanted cash. Facebook presumably doesn't have that much cash to spare.
The $500 million offered was in an all-stock form, said sources on both sides, at the $15 billion valuation that came from the Microsoft investment in the company last October.
The Twitter side felt that figure was inflated and the shares should be valued at the lower figures that have also been reported for Facebook’s true valuation, more in the $5 billion range.
That would have given the deal a $150 million price tag, which was seen as too low, especially since it was in Facebook stock and not cash.
In fact, Twitter wanted cash, which was not possible for Facebook, or Facebook stock at an even lower valuation that $5 billion.
But, said several sources close to Twitter, the primary reason for not selling was because its board simply did not want to yet or perhaps ever.
Said one source: “The question is, is it really a good idea to sell on the first chance you get?”...
“It’s more about timing,” said one person familiar with Twitter’s motivations. “There is a strong feeling that there is still an opportunity–even with the economic downturn–to blow this thing out.”
Photo: BusinessWeek
See Also: Twitter: We'll Announce Our Secret Business Model Early Next Year
Twitter raised their last round at a $100 million valuation. Getting $150 million of non-liquid FB stock (a more believable valuation of FB) is not a great return on investment.
Do the members that give each service value have any say in this ?
What happens to members of Facebook and twitter that do not want to use the services if this acquisition happens ? Members and Communities have given both companies there value. Members should have a voice and if not they should be able take the code and create and extend the services that they have given value.
At adelph.us We always knew that micro blogging should have a revenue model and should be integrated into a social network. T
What are you talking about? Does your local Dairy Queen need to ask your permission if McDonalds wants to buy them out?
$500 million in Facebook stock. In this economic environment, that could equate to $20 million a month from now.
I'm not sure if you're trolling with "or future revenue prospects", but I certainly hope all my competitors in the future are as naive as you are.
Why do you think a company that shows no revenue keeps getting so much funding.
I bet that business plan that they have shows no brainer ways to make massive amounts of money, but it's probably only going to work or make sense, or pay out 10 times more, once their user base reaches a certain point, which is probably expected sometime during 09.
There's sick money to be made on twitter data analysis only my friend.
The valuation seems absurd to me, much like Yahoo's valuation...a service I have also used for years, yet have never paid a dime, and they are somehow a $13B company. My opinion is the whole online ad & eyes = profits mantra is still way overvalued. Personally, I can see value in a company like AMZN, where I spend thousands of $'s every year buying quality products at cheaper levels than I can at any local stores. But if FB ever charged even $10/month I would delete my acct instantly.
So where does the future value come from? I don't buy the advertising slant for a second. Can anyone refute this? Am i completely in the dark, or are there still enough venture tech freaks out there simply over-bidding/valuing these companies?
@Gubatron - Twitter hasn't gotten any funding post credit crunch. The game changed. They won't be getting future rounds, and if they're operating as if the money spigot hasn't turned off they're in a world of trouble. They'd been getting funding rounds because they were the hot and popular company at the top of a bubble. Why do you think Pets.com and Buildnet were able to raise $100M+ during the last bubble? They didn't have a secret revenue plan either, just a lot of hype. When the funding rounds stopped, they went under as soon as the burn ran out.
If there's a no brainer way of making massive amounts of money, then where is it? The twitter stream is open to anybody, so if there's money to be made in data analysis people would be doing it. Heck, Google probably has a better handle on twitter's data than they do.
A lot of very smart people around the net have been trying to come up with ways to monetize twitter, and nobody has come up with a solution that justifies the amount of capital that has already gone in.
How much of their secret monetization plan will survive intact post crunch?
This deal didn't happen because the investors needed cash, not stock in Facebook. It says nothing about the future of twitter.
I read the speculation about a Twitter business model since the company arised on the horizon. Yes, Twitter could be the next SMS the new mobile killer application. But it is only such famous due to its possibility to use it for free. So an advertisment based model is possbile but in times of economics recession the ad revenues will decrease.
The interesting question is: If Facebook would be able to offer cash - would the Twitter guys agree? I think yes. Also they would agree $150 mio because most of these "we still have a secret business model aka no business model" companies.
But I understand the Twitter guys not to agree on a exchange of company shares. As reported on Techcrunch 2weeks ago Facebook is running out of money and needs some hundred million. The all have the same problem: How to run a company based on banner ads? Well, there also could be something else...
Anyway, the first time they start spamming people with lameo SMS ads, the rats will all jump ship to the 500 other free SMS reflector look-alikes.
If FB really likes Twitter, they should rip it off and copy it without paying Twitter a dime. Mobile FB pretty much covers this feature anyway...
Twitter is a fad like fat shoe laces, parachute pants, and pokemon. Once you graduate to an iPhone, there's no need to use twitter.
I wish I could short stock of Twitter and FB somewhere...
Might not seem like a good deal, but it's better than the Zero valuation twitter deserves.
The SF business times says "earlier this year" -- if it was like 3 months ago, I believe it, but 3 weeks ago, I have a hard time believing it.
Funny, I didn't start using Twitter until I got an iPhone.
They should have taken the deal. Stupid, stupid, stupid for turning it down.
Take the money your morons!!!!!
When are we going to see even the blade of supposed hockey stick revenue ramp up?
I think this is a pretty scary testament to the running of Facebook.
It seems a lot like when Yahoo realized it was becoming less relevant and then started running around gobbling up Broadcast.coms for half a billion.
We'll see I guess.
Maybe I'm a moron, but I've managed to get the impression that it wasn't.
That aside, Twitter is something of a global National Treasure, whether you get it or not. It represents a pattern of information exchage that if it didn't exist, we'd have to invent it. Twitter has become the genre-name for a whole raft of clones because (unless I'm much mistook) it was the first to gain critical mass... it's like Wikipedia in this respect. It's a cultural artifact now, whether it's monetiseable or not. I'm guessing that it is, but advertising isn't the model.
The internet is still growing at a high pace and this is not likely to stop with China, Mexico, South America, India and Latin America still have internet penetration only in the high teens!
So what if Microsoft pays $10 billion for Facebook or if Twitter is not worth $500 million today. It's all about finding the next Google, the next Wikipedia and once a revenue model is in place.. Shazam!
Do you think Google bought Youtube for their 2006 earnings? Ebay bought Skype because they made money?
Besides. With the 100s of millions of pageviews Twitter has monthly, it's just a matter of time before they start making money. And remember, at a $150 million evaluation they only need to make $10 million/year to more than carry a $200 million valuation at growth!
I suppose if you want to keep up with the next Warped tour shows and all of the porn stars new flicks via some social channel, that would be it. Otherwise, no advertiser is getting crap worth of value out of it and the same goes for Facebook.
That said, all of these sites are good for is huge sponsorship opportunities like you see when an advertiser buys all of Yahoo or MySpace, etc... At that point, it's a branding opportunity but not a huge volume direct sale advertising approach.
Back all of this out to monetization and you have a few "super bowl" type advertising opportunities per year with 80-kabillion people otherwise using the channel as a cool little communication venue, until the next one comes along to take over as flavor of the year.
XOXO
Now this is true that Twitter does not make much money from its current settings. But Twitter is large. Twitter is a minute to minute diary to people’s life. Only one year old, and it was a major part in the U.S Election statistics. It is also a very important reason for Obama’s victory. Obama was mentioned on twitter more then 2 billion times. This cannot be said of Myspace or Facebook. People don’t login in to their Myspace and Facebook account every minute of their life. Twitter is also a very essential part of business. People come to Twitter and interact with other twitter users around the world, and get to know one another and make new projects or ideas through it.
At Facebook and Myspace you actually have to find the people you are interested in, at twitter all you have to do is write about what you are doing, the world will view it, and if interested will reply to you. Soon you will find the similarities and difference and click on the follow to be a part of their life.
Twitter is simply awesome.
But one thing that can counter my explanation is that, they were getting 100 millcash, and more money was going to come from investments. Which would mean shit load of cash every month for a few years. And also we must keep in min, twitter is only 1 year old, so it wasn’t a bad deal. But to counter that, it can also be said if twitter put endorsements on their website, they can make 100 million in couple months.
granted, global Internet usage is still growing & Twitter is da bomb, fine. But how do you derive substantial revenues from such a service? Why would anyone ever pay to be Twitterific? And how could ads ever become that valuable on an over-hyped SMS service? Seems like a big fad to me, impossible to monetize into a viable & consistent revenue stream.
by the way, does anyone else look at the picture of the punk above and want to blow chunks all over his cackeyed face?!?!?
Twitter reminds me of the Segway. It looks cool, and then you realize it doesn't fit down the subway steps, or on your bike, or on a plane, and it means when you use it you are NOT walking.
Twitter is cool for people who need to know when their friend is taking a shower or watching the leaves fall, or else their life is over.
A separate question is whether they should take the deal. Given the MSFT & YHOO fun of earlier this year, they should.
They could sell their cake and eat it later. They could take the deal now, which included $100 million cash, and use only some of that cash later on down the road to buy what remains of FB+Twitter.
Myspace is a joke. Youtube has at least some
function. What we need is an real alternative
to Ebay. Be my guest and invest-I honestly
don't care about your investments. Most retail online shopping will stop overnight if
they start adding state sales tax-and it will eventually will happen. To all the fools
trying to make money off cute domains names-
good luck- you are just making a handful of companiesvery rich off you inflated ego-
I suppose if you want to keep up with the next Warped tour shows and all of the porn stars new flicks via some social channel, that would be it. Otherwise, no advertiser is getting crap worth of value out of it and the same goes for Facebook.
That said, all of these sites are good for is huge sponsorship opportunities like you see when an advertiser buys all of Yahoo or MySpace, etc... At that point, it's a branding opportunity but not a huge volume direct sale advertising approach.
Back all of this out to monetization and you have a few "super bowl" type advertising opportunities per year with 80-kabillion people otherwise using the channel as a cool little communication venue, until the next one comes along to take over as flavor of the year..