Will MSFT push Yahoo to buy Facebook?

by Mathew on September 24, 2007 · 11 comments

According to the Wall Street Journal, the software behemoth known as the Beast from Redmond is looking at buying between three and five per cent of Facebook for between $300-million and $500-million. As any math whiz (of which I am not one) could tell you, that would value the company at about $10-billion, which would make Facebook backer Peter Thiel’s wish come true.

I know that there have been plenty of rumours out there about Facebook and Yahoo, Facebook and Google, Facebook and my Aunt Sally — you name it. But while the Journal may be getting a little scrappier now that it’s owned by Rupert “Get in here so I can fire you” Murdoch, it’s still the Journal and so it has to be taken seriously.

Although the WSJ talks about this sparking Google to pony up for Facebook, however, I think the more interesting question is whether it will light a fire under the new regime over at Yahoo. Presumably they got rid of Terry Semel so that they could actually get off their duffs and do something about that “peanut butter” memo and all of the valid criticisms it contained.

Making a big bet on social networking could be just the thing it needs to fire a shot across Microsoft and Google’s bows. And my friend Paul Kedrosky thinks Yahoo is a likely bidder too.

Update:

I realize — as Joe Duck points out in the comments below — that $10-billion is almost a third of Yahoo’s market capitalization. As 24/7 Wall Street puts it, that’s because “Facebook is growing and Yahoo! is not.” That doesn’t put it out of Yahoo’s reach, however, thanks to the magic of stock-and-debt offerings. Whether it would be wise or not is a different question. Kara Swisher at All Things D has a skeptical look at whether the Facebook hype is getting a little too rich.

  • http://www.webomatica.com/wordpress/ Webomatica

    Can Yahoo! afford Facebook? Seems like a very expensive acquisition.

  • Mathew

    I don’t know, Jason. I don’t think 10 billion would really be that big a deal for Yahoo. Of course, it’s easy for me to say that :-)

  • http://leighhimel.blogspot.com Leigh

    Can your Aunt Sally afford Facebook?

  • http://joeduck.wordpress.com Joe Duck

    Mathew! You’ve got big money fatigue or something – 10 billion is about 30% of Yahoo’s *total capitalization*. I’d say the chance they’ll aquire Facebook for 10 billion is very, very low.

    IMHO MS and Yahoo are foolishly looking for aquistions when they should be concentrating on doing a much better job of directing traffic to their own social properties and integrating those properties with other sites. Yahoo’s Flickr is an exception and that’s the model they should be using for such things.

  • apetrelli

    yahoo could do a multi-billion dollar acquisition, perhaps into the teens, in a stock deal.

  • Mathew

    Leigh, my Aunt Sally claims she invented Facebook.

    And Joe, I realize Yahoo’s market cap is only about $35-billion, but as apetrelli points out, using stock and/or debt I think Yahoo could easily afford a $10-billion deal.

    Whether it actually makes any sense to pay that much for a company with $50-million in revenue is another question :-)

  • http://jeremy.zawodny.com/blog/ Jeremy Zawodny

    Heh.

  • http://www.liposuctionbutt.com Lipo Man

    Sweet Jesus, what does Microsoft get in exchange, will they have control of the ads placed on facebook? Mind you I’ve never been to facebook I assume they have ads.

  • http://leighhimel.blogspot.com Leigh

    That’s so weird about your Aunt Sally bc my brother claims he created Ebay….

  • https://billy-girlardo.com BillyG

    MySpace, Twitter, and now Facebook – 3 sites I’ve never been to, but I’m only 2 eyes, so what the heck does that matter lol.

  • http://spap-oop.blogspot.com Tish Grier

    Yahoo’s had a bit of a habit of buying up stuff and then not really knowing what to do with it (MyBlogLog comes to mind first–but the list’s pretty long.) So, I have to agree with a number of Kara’s points, wile adding that there is still much, much discussion going on re the use of Facebook for business networking. Now, if YahooMash takes on for social (and if you look at it, it does seem to mimic the social aspect of FB), it *might* cause Facebook to tip as a business networking tool. Then again, if FB’s not managed well once it’s in Yahoo’s stable, who knows–the sport du jour , though, is definitley the dollars discussion. Let’s see how high it will go before it pops.

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