Mega-media deals usually number in the millions and sometimes billions of dollars. But mega-media deals involving social networks?
Start with the reported numbers.
There’s the $800 million acquisition offer from Yahoo that Facebook
reportedly rejected, the $2 billion Facebook wants and the $25
million in venture capital Facebook got from Greylock Partners in April.
Rupert Murdoch’s News Corp. bought MySpace for $580 million. At the
time, many laughed. Now RBC Capital markets analyst Jordan Rohan said
MySpace might be worth $15 billion in three years.
The numbers give rise to a series of inevitable questions. Starting
with: “Huh?”
Social networks are where young people poke each other or post
videos of Mentos and Diet Coke combinations. They aren’t oil companies or pharmaceutical firms.
We’re only talking about banner ads with social networks. Sometimes a movie studio will setup a profile page for an upcoming release.
So how could Facebook possibly be worth so much money?
If Facebook is really only nearing $100 million in annual advertising
revenues, as it has been reported, it doesn’t take an investment
banker to figure out that a $2 billion valuation might involve a good
deal of speculation.
Many industry watchers want to know what these people are thinking
when they throw out such high valuation figures.
Peter Pezaris, CEO of Multiply.com, has an idea. Multiply is a
steadily growing social network that just passed the 3 million
member mark.
But Pezaris has a history on the Internet from before he ran a social-networking site for grown-ups.
During the late nineties, Pezaris and the same group of engineers who
now run Multiply started a fantasy sports site called
Commissioner.com.
In December 1999, the group sold the start-up to CBS
Sportsline for $46 million.
“At the time, we thought we were robbing a bank,” Pezaris told internetnews.com.
But now he feels differently.
“Looking back on that transaction, Sportsline got us on the cheap,”
he said.
Forty-six million dollars may have been a lot for a stand-alone
fantasy sports site, but that’s not what Pezaris and his friends
sold, the Multiply CEO said.
What they actually sold, he said, was an integral part of what would
become CBS’s Internet strategy.
In hindsight, Pezaris thinks Commissioner.com would have been worth at least a few hundred million to CBS.
By Pervaris’s logic, when Facebook set its acquisition price at $2
billion, it wasn’t because that’s how much Facebook CEO Mark
Zuckerberg thinks his company is actually worth.
It’s because Zuckerburg and the venture capitalists have what
Pervaris called the “business evaluation and investment banking
savvy” to only sell to large media companies as if they were selling
a piece of that media company’s business back to them.
In other words, $2 billion, if that’s truly Facebook’s asking price, is how
much Zuckberg thinks Facebook would be worth if it were a division of
a large media company and not a stand-alone social-networking site
where young people play their e-games.
So what in the world kind of logic turns a popular social-networking
site for 9 million college kids into a $2 billion giant?
It’s 20/20 hindsight come early, which is known to some as speculation.
