Ages ago, I wrote “What is Plaxo’s Revenue Potential” - as usual, it was a long analysis breaking down the potential revenue Plaxo could generate. The number was staggering, but hypothetical.
According to my math, based on some of Plaxo’s internal numbers, the “king of spam” could generate $162M per year:
Bear in mind it is reported that Facebook does $150M. So for the record, I don’t think Plaxo makes anywhere near this amount, I just think with the right sales strategy they can… In fact, according to Tech Crunch, Plaxo’s revenues are far smaller:
Plaxo reportedly did around $5 million in 2006 revenue, doubling that to $10-$12 million in 2007. 2008 projections are $20-$25 million.
If they did anything near my numbers, its history would not be so bloody and tumultuous. But, despite what some of the haters are saying, demand for digital assets are greater than ever. In other words, it’s not unbelievable to think that someone would eventually buy Plaxo (or LinkedIn, etc.), but who?
Venture Beat is now reporting that Facebook is mulling (their words are “100% certain”) a bid for Plaxo.
While I doubt it, it is certainly plausible, too.
NO DEAL?
Venture Beat itself notes that Facebook’s backers (Sean Parker, Peter Thiel) dislike Plaxo’s main investors (Sequoia’s Mike Moritz). In a nutshell: Moritz kicked out Parker from Plaxo, and he encouraged Thiel to merge his Confinity.com with X.com to form Paypal. Yes, the result was a smashing success, but at a dilution cost that Thiel regrets, according to Valleywag.
But rumor-mongering aside, and more importantly, the deal does not make sense because Plaxo is looking to fetch upwards of $100M, maybe $200M. The problem is Facebook has raised $340M to date… in a cash deal, would Facebook really part with 33-66% of that on Plaxo?
No. But what about a stock deal? Facebook got a valuation of $15B in its latest funding, in a stock deal, would Plaxo really be happy with 0.6% to 1.3% of Facebook ($100M or $200 divided by $15B)?
No.
Moreover, the main reason why Plaxo would not really be a fit is because Facebook and Plaxo have a lot of mindshare in the Valley. But Facebook has more mindshare than anyone else… so if Facebook makes a move in an M&A, it would be for a more mainstream play… why double down on Silicon Valley fanboys?
DEAL?
Of course, this isn’t about 0.6% or 1.3%, for Plaxo’s management team probably has no say in the matter and the founding team is all but gone.
In other words, “size does not matter” as this is perhaps the only way Mike Moritz and Sequoia would get to ride the Facebook express. Moritz has backed Yahoo!, Google and YouTube, adding Facebook to the list of companies he’s backed - even if in a post-dated manner - would be a crowning achievement, for sure.
And call me crazy, but I think Peter Thiel and Sean Parker might be all for this deal. Nothing spells revenge like their holdings towering over Moritz’ in Silicon Valley’s most sought after privately held company.
But more importantly, email is the killer app in social networking, and since:
- Plaxo is all about email and contact list management,
- managed to sync emails from various platforms,
Then conceptually they are one step ahead of the “how can we mesh numerous social networks” problem. In this context, I think Facebook fears that Plaxo would fall in the hands of Google or Yahoo! - so when the dust settles, this might be more of a marriage of convenience than an actual case of love at first sight.
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