It probably doesn’t help that Yahoo! CEO Terry Semel is going to be in the same zip code as Bill Gates this upcoming week at a MSFT advertising shindig, but as I mentioned in our initial post on the YHOO/MSFT acquisition deal, this story has legs even though some of the timing and sources in the story are suspicious.
Today, the NY Times runs with the story now.
I can see YHOO wanting to ride it out independently and in their own universe not realizing how badly Google is beating them, even if Google’s market cap is at $146B, incidentally, half of MSFT’s $292B… but MSFT is clearly showing signs of desperation and the truth is that given its staggering valuation, it needs a hail mary to make a dent in online ads, as that NYT article reports, and we’ve written previously, in 2006:
Of every $100 spent in online advertising in the United States in 2006, Google took in $25, while Yahoo got $18 and Microsoft received less than $7, according to eMarketer, a research firm. And Google is expected to capture 32 percent of online ad dollars this year, eMarketer said.
As much as the YHOO shareholder in me wants MSFT to keep upping the offer price for YHOO, why doesn’t MSFT simply try to buy Facebook? That would be one helluva shaft to YHOO who saw its successive $1B and $1.6B offers spurned.
I know, MSFT is providing ad sales for Facebook as is, but that’s not equity that really drives a stock, now is it? MSFT and YHOO can also get back to an ad deal, but what MSFT needs is a tonic to its stock to get its $292B valuation back to the bubble peak levels of $500B… only a hail marry or two will do that.
YHOO’s problem might be that it doesn’t know it has a problem, and in all fairness, its got a great franchise but it’s stuck in neutral. In my opinion, Facebook is a major contestant for 2007’s Web company of the year (vote your pick here), following YouTube, MySpace respectively in 2005 and 2006 (see all previous winners here), so it might no longer want to sell, having priced itself out of the M&A market, perhaps.
Both Facebook founder Mark Zuckerberg and Bill Gates are Harvard dropouts to boot, and Facebook is growing by leaps and bounds and could offer MSFT a considerable shot in the arm on the Web with the next generation of Web users.
Think about it, if MSFT is willing to pay $50B (and this was a rumor) for YHOO which was at $38B before the market opened on Friday, why would it not pay $2B for Facebook? Of course, Facebook investor Peter Thiel’s come out and said Facebook is worth $8B, which is crazy and akin to Rupert Murdoch saying MySpace is now worth $6B, which actually is foolish of Murdoch because it suggests FIM is worth more separate than combined.
Last year, I’d estimated Facebook to be $2.35B by 2010 if the numbers for advertising in social networks panned out, but the fact is that Facebook is about a lot more than social networking for teenagers and young adults now, it’s where MySpace was before News Corp. bought it in my opinion… so if Thiel says Facebook is $8B (that’s salesmanship, I know) and YHOO turned down a $1.6B offer from YHOO last year, what would it take for Zuckerberg to sell to MSFT?
When it’s said and done I see Facebook doing an IPO in 2008. Of course, IGN too filed an IPO in 2005 and then a few months later sold to News Corp. for $650M… so crazy things happen. It’s a crazy time on the Web allright.
Disclaimer: own shares in YHOO.
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