10 Billion for Facebook

Social Networking sites are the 'in thing' and facebook is the pin up boy for all wannabe social networker creators... I know it is for me.

There's a fairly simple explanation for why Facebook Inc. is not for sale and won't likely be acquired anytime soon — there is a big gap between what the company and what potential buyers think the social-networking Web site is worth.

That's the view of Peter Thiel, a Facebook director who invested $500,000 in the Palo Alto, Calif.-based company's first funding round in 2004 and an undisclosed amount in its third round last year. In an interview, Thiel said despite having serious talks with Sunnyvale, Calif.-based Yahoo! Inc. about an acquisition during the past year, the company has better things to do than listen to low offers from potential acquirers.

'We're so far apart with what we think it's worth and what other people do it doesn't make sense for us to have conversations,' Thiel said. 'Either they're underestimating it or we're overestimating it, but given that disconnect, it would be a complete waste of time for the company to be talking with people.'

Facebook has been a popular subject of takeover speculation, but Friday, July 20, it made a move that seems to support the notion that it might stay independent, at least for the time being, when it announced its first acquisition. The company said it would buy Parakey Inc., which develops software that ties information from a user's computer to the Web, for undisclosed terms.

If Facebook were to be acquired, Thiel, who is president of hedge fund Clarium Capital Management LLC and managing partner of VC firm Founders Fund Management LLC, estimates it would command a price tag between $7 billion and $10 billion. The market, on the other hand, values the company closer to $3 billion, he said. The estimate is derived from the valuation of New York-based Viacom Inc.'s MTV music television network, which has similar demographics to Facebook, he said. Facebook was founded in 2004 as a social-networking site to connect college students, then added high school students in 2005 before opening its virtual doors to all users last September.

The company has spent the past three years focusing on growth, and its 28 million-strong user base is set to double within the next year, he said. While its users are among the most devoted on the Internet — according to comScore Inc., an average visitor spent 186 minutes on the site during May — Thiel said the 'intensity of usage is not something that's been appreciated by a lot of the people early on.'

Thiel said the company is on track to post $150 million in revenues in 2007, though roughly half of that comes from a partnership it has with Microsoft Corp., which provides banner advertising and sponsored links on Facebook.

The company is set to roll out 'a slew of revenue initiatives' over the next few months, with more targeted advertising, including behavioral advertising that monitors viewing habits of users and targets ads based on their interests. It also will offer more local advertising and a classified marketplace. The company's current team is the best qualified to develop its revenue model, Thiel added.

'We have an extremely rich amount of data about our users, so we believe there will be some way to monetize it better than what people have done in the past,' he said.

In light of the fact that any potential buyer would have to take a leap of faith in determining what the company's future revenues will be, Thiel acknowledged this is not the best time for seeking out a buyer.

'If we have a fully developed revenue model, it would be much easier to value, and we would see if it made sense as a standalone business or with something larger,' he said. 'But we're very, very far from that point.'

Facebook also is not ready to consider a public offering, for many of the same reasons it is not considering a sale.

Thiel said the 'earliest' Facebook would go public is 2009, 'and hopefully not until significantly after that.' One route could be to emulate Mountain View, Calif.-based Google Inc. and go to the public markets after its business is well established.

'There are a lot of things Google did extremely well, and one of those was deferring the IPO decision until very late,' he said. 'It helped them build out the company team in ways they otherwise might not have fully done.'

Facebook does not need to raise a significant amount of money; its investors are patient, and it isn't close to triggering Securities and Exchange Commission rules that require companies to go public once they reach a certain size, said Thiel, who is also a co-founder of PayPal Inc., the online payment provider acquired by eBay Inc. in 2002. Observers have 'read too much' into a recent job listing on Facebook's site for a stock administration manager to manage its options program, he said, adding that this did not signal the company was on track to go public.

'I think the preference we have would to do neither — to neither take the company public or sell it,' he said.

If it were to consider a sale, it would take a large number to get the company's attention, Thiel said.

'If we got an offer from someone for $10 billion, we probably would listen to them,' he said. 'I don't think we're going to get that offer, and we're not going to solicit it.'

First You Tube/CNN Citizens-Driven Debate

This blog is extremely relevant when considering the Australian government has finally caught onto the expanding world of social networks and video streaming (mainly youtube). The American presidential candidates have been utilizing these technologies for some time. Kudos to John Howard and Kevin Rudd for finally catching on.

CNN AND YOUTUBE TONIGHT ARE scheduled to hold the first of two Presidential debates driven entirely by questions submitted through the video-sharing site.

The debate, to be broadcast live on CNN, will feature massive video projectors streaming queries submitted during the past few weeks by voters through YouTube. Plugging YouTube's parent company, video queries will be preceded by Google Earth maps showing the questioner's geographical location.

CNN anticipated that some 2,000 questions would come in before submissions closed Sunday. Leading up to the debate, CNN has been promoting the event by airing YouTube clips of real citizens and their questions.

The economy and health care were dominant topics among the video questions highlighted by YouTube on Sunday night. They included: What will you do to stop predatory lending practices in poor neighborhoods? What will you do to make sure veterans get better health care? How are you going to make health care affordable? How do each of you plan to address chronic disease? What are you going to do about the value of a dollar?

YouTube earlier this year launched its You Choose '08 Web page, which brings together the individual video channels created by U.S. presidential hopefuls--including Barack Obama, Hillary Clinton, Rudy Giuliani and John McCain.

Candidates can post videos addressing particular issues, while users can submit videos and written comments for possible posting.

Google Offers Site-Specific Search for Businesses

Google Inc., the world's top provider of Web search and online advertising, said on Monday it is offering small business Web sites a service that lets visitors search for information within their sites.

The Mountain View, California-based company said Google Custom Search Business Edition, as the new service is known, is a service hosted on Google computers that starts at $100 per year and does not require businesses to run Google ads.

"If you have a Web site, we already crawl your Web site," Nitin Mangtani, a product manager in Google's Enterprise division, said in a telephone interview. "Now we are saying you don't have to manage search within your site."

The new service marks a middle option between Google's existing Custom Search Engine, a free, ad-supported service, and Google Appliance, a hardware device selling for prices starting around $2,000 which customers manages on themselves.

The free, ad-supported service lets visitors search for information inside a particular Web site but cannot be customized.

The Google Appliance lets companies using the device offer their customers the ability to search both publicly available data and secure data the company wants to remain on its own site but to which it wants to grant its customers access.

Google Custom Search Business Edition requires a three-step sign-up process that takes about 10 minutes and requires the business to embed a bit of code on their home page. Potential customers include millions of small business sites.

For $100 a year, the Google service lets customers within a specific site search up to 5,000 pages within a specific Web site. For $500, it searches 50,000 pages.

Google will host Web sites of any size on a sliding scale. Justia.com, a Web site that allows the public to look up court documents in U.S. state and federal cases, is paying $15,000 a year to search roughly 1 million documents on its site, Mangtani said.

The service runs on the same computers Google uses to run its public search services. In effect, Google is simply serving up a sliver of the data is has already crawled of the publicly available information across the Web.

Shop Online, Spend Offline.

Consumers who shop online for digital cameras and TVs spend 10% more on in-store purchases than consumers who do not search online, according to survey sponsored by Yahoo! Search Marketing and conducted by ChannelForce.

Online digital camera shoppers who made their purchases in stores spent an average of $31 more than those who did not use search. Those who shopped for TVs online spent on average of $139 more when they got to the store than those who had not used search.

Cross channel-shopping behaviour of US Online Shoppers, 2006
- 60%: receive a coupon, and then buy in store.
- 37%: Browse a Web site, and then buy in store.
- 36%: Receive a catalogue and buy online.
- 34%: View a newspaper circular online, then buy in store
- 25%: receive a catalogue and buy in store.
- 19%: Go to the store, then buy online
- 15%: Receive an email, then buy online
- 15% Read a newspaper circular, then buy online

Widgets Revamp Advertising On Social Networks

It's not surprising to hear that the social-networking generation prefers to choose their own marketing messages rather than receive random banner ads from marketers. A study of more than 1,200 kids ages 9 to 17 and about 1,000 parents across America, finds that many consumers enjoy playing with ad-related features of their choosing on their personal profile pages (on social networks). 

These findings are “likely to fuel a push by digital ad agencies to get marketers to experiment with new ways to advertise on social-networking sites, such as Facebook and MySpace.” So-called "widgets", downloadable software programs that can display anything from animated graphics, videos, photo, sharing, music or live chats, could become the ad wave of the future.

Indeed, if consumers have to accept advertising in exchange for free Web content, why not let them choose their advertiser? The phenomenon could usher in a whole new era of interactive, performance-based advertising, letting consumers "digg" their favorite ads by either voting on them or posting ad widgets to their social-networking profiles. This also fits several well document studies in America and Europe that suggests today's consumers do not want random advertising on their profile pages.