InsideGoogle

Yahoo Buying Facebook? (Story of the day)

Today’s big story was the rumor that Yahoo was going to buy Facebook. I was busy, so I’ll just recap the coverage:

The Wall Street Journal started it off:

People familiar with the matter say the company has held separate acquisition talks with Yahoo Inc., Microsoft Corp. and Viacom Inc. over the past year. Now, say some of these people, the start-up is in serious discussions — again — to sell itself to Yahoo for an amount that could approach $1 billion.

Facebook entered discussions with Viacom, of New York, in early 2006 to be acquired for a total that could have exceeded $1 billion if Facebook reached certain targets, say people familiar with the matter. The talks broke down over valuation and other disagreements, according to those people.

Yahoo, meanwhile, continued to pursue its Facebook aspirations. The Web company has roughly 500 million users world-wide but largely missed the boom in social-networking sites.

Around March, Yahoo was weighing a roughly $1 billion offer, according to people familiar with the matter. Facebook’s Mr. Zuckerberg met with executives at Yahoo’s headquarters in late March to discuss a possible deal.

At one point in the Yahoo negotiations, the talks extended into the weekend, says a person familiar with the matter. Mr. Zuckerberg, this account continues, said he couldn’t take part because his girlfriend was in town. Others pointed out they were closing in on a billion-dollar deal. Mr. Zuckerberg said it didn’t matter: his cellphone would be off, this person says.

Microsoft soon got word that Facebook had suitors and contacted the company, says a person familiar with the matter. Microsoft Senior Vice President Hank Vigil was one of the main drivers behind starting acquisition talks. After several weeks the talks faltered, largely because Facebook told Microsoft it wanted $2 billion, according to one version of events, a number that had been touted by some investors. That was too rich for Microsoft, which was thinking of a figure in the hundreds of millions of dollars, say people familiar with the talks.

In July, Yahoo formally offered roughly $1 billion for Facebook, say people familiar with the matter. Shortly after, a new batch of traffic numbers for Facebook indicated the site wasn’t growing as quickly as Yahoo had expected. At the same time, Yahoo stock fell sharply after it announced a delay in a key corporate initiative. The company dropped its offer closer to $800 million, say people familiar with the talks, which Facebook rejected.

Facebook’s whipsawing series of talks took another turn in August when Google announced it had agreed to broker ads for MySpace and other News Corp. sites. The size of the guaranteed revenue spurred Facebook executives to put any acquisition talks aside and pursue a similar deal, first with Google, then with Microsoft. The deal with Microsoft was signed and sealed in less than a week. Microsoft has promised to deliver ads valued at a minimum of $200 million over three years, according to one person familiar with the deal.

Om notes that Facebook’s demographics actually skew older than Yahoo’s, opening up Yahoo to all sorts of new advertisers if a deal occurs. There’s plenty more elsewhere, including ReadWriteWeb, TechCrunch, Reuters. It’s still topping TechMeme, which means coverage by The New York Post, TDavid, Valleywag, VentureBeat, Thomas Hawk, Jonathan Berr, Valleywag, and PaidContent.

September 22nd, 2006 Posted by Nathan Weinberg | Yahoo, General | one comment