November 28, 2008 by James Oliver
The 15 billion valuation of Facebook negotiated in their Microsoft deal last year appears inflated to many. Nevertheless, it has given the social networking site some clout financially. Enough, reportedly, to offer a buyout worth $500 million dollars worth of Facebook stocks to Twitter, the personal blogging site. A deal that Twitter have apparently rejected out of hand.
The deal would have seen the marriage of the two quintessential companies of the web 2.0 movement, with Facebook’s power and influence – not to mention its 120 million users – combining with what has become one of the most potent blogging and networking forces on the Internet.
It was not to be, though the reasons are unclear. Some analysts have speculated that the over-valuation of Facebook stock may be to blame. Many predict that the real valuation of the site should be closer to $4, maybe $5 billion, if this is true then obviously that cuts the value of the deal in real terms to about $150 million. That’s believed to be substantially more than Twitter’s most recent valuation (about $100 million) though not quite the ridiculous profit that investors may be inclined to expect from a company of this kind.
That said, Twitter is still very much pre-profit. The company is gambling on the ongoing validity of the online advertising industry – where their profit model will eventually be found – and hoping that their star continues to rise. Only time will tell whether it will, or not.
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