Some time ago, when Facebook’s paper value hovered in the $5-10B value, I wrote that Facebook’s real competition was not MySpace, but Google.
In turn, Google was only half interested in acquiring Facebook, because unlike YouTube’s massive video collection and community, Google was already a social network when you consider that things such as search, email, maps, etc., account for what a social network really is all about. I did mention that Google has not written off acquiring Facebook, but only MSFT really could pull that off from a financial perspective.
Anyway, I won’t comment on Google’s gangbang attempt of Facebook this week… but it does suggest that Google is indeed quite smart. I doubt (I’m not alone) they were ever serious in buying Facebook last week, or matching MSFT’s $240M for 1.6% stake investment… what I think they might have sought to do, in fact, was to show interest to get MSFT to balk at pouring in $500M or $750M in Facebook (which would have given it a considerable warchest) due to the heightened valuation and only invest$240M… which, while pretty considerable, is really too little to take on Google. After all, Google will take in $16B in revenue this year compared to Facebook’s $150M.
Think about it, had Facebook not found any takers above $10B and MSFT was the only one showing up, maybe Redmond would have paid $500M for 5%… but with Google supposedly interested too, then Facebook pushed a $15B price tag, and MSFT went for $240M, expecting someone else (a hedge fund) to pinch in $260M to pool the $500M Facebook was looking for. Yet, guess what, where’s the $260M from the hedge fund… and which hedge fund was that?
Worse of all, for Facebook, is that MSFT does not invest $240M today, it will invest $240M at Facebook’s next financing…
Yes, Google is arrogant, cocky and confident, (sort of like MSFT); Facebook is too, but when you think about it, eyeballs don’t pay the balls… they just get gouged out.
This week, Google poked Facebook… in the eye.
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