Well, this one we don’t buy. The latest rumour is that Facebook‘s next investor is going to be none other than… Apple. This one seems entirely based on the fact that Mark Zuckerberg and Steve Jobs had dinner a while ago. Let’s count the ways in which this doesn’t make sense:
- Facebook already has a big strategic investor: Microsoft. Microsoft’s investment includes a right to veto Google as an investor or an acquirer. Maybe their legal right is broader — but maybe they didn’t think of Apple as such a rival waaaay back in 2007 when they made the investment. But even if there’s no such legal right, the huge headache this involves is enough to dissuade Zuckerberg of doing anything. This would mean war with Microsoft, with whom things have always gone well — Steve Ballmer, probably recognising something of the young Bill Gates in Zuckerberg, was the Big Tech CEO who had the most faith in Facebook from the start, and accepted that Zuckerberg wouldn’t sell out. Zuckerberg would basically be stabbing Ballmer in the back and declaring war with him, and importing the Apple-Microsoft war inside his company.
- Facebook doesn’t need the money. Facebook’s growth in users is so impressive that people often forget that its revenue growth may be even more. The company’s been cash-flow positive for a while and is reportedly net-income profitable as well. Zuckerberg’s not very interested in profits, but is very interested in making Facebook self-sustaining so he doesn’t have to go back to investors every year and can focus on Facebook’s product. Back when Microsoft invested in Facebook, they needed the money and Microsoft were the only ones who had the guts to put it in at the valuation and the terms Facebook wanted. Now, why would Facebook bother? Facebook already has everything it wants from investors: employee liquidity is provided by its big investor DST, and as for the small talent acquisitions it has said it’s interested in, it can finance those out of cash flow.
- Apple is too disciplined, and doesn’t work that way. Apple is extremely disciplined with its cash. They don’t spend it just because it might be cool. When they spend cash, they have something very specific in mind — as with their acquisition of chip firm PA Semi or mobile ad firm Quattro Wireless. In both cases, that acquisition ended up into a significant new product line, respectively the A4 chip that powers the iPad and iAds. What’s more, you may have heard that Apple likes to control stuff. That’s why they rarely do partnerships. They either buy stuff outright or build it themselves.
- Apple and Facebook are increasingly at odds. This is even more important: Apple and Facebook are increasingly at odds. Apple built not one, but two social networks in the past couple of years, GameCenter for gaming and Ping for music. Half of Apple’s revenue is now coming from the iPhone — and Facebook is building a phone based on Android, iPhone’s biggest rival. Apple and Facebook now compete for advertisers’ dollars — not yet directly, but how long do you think that will last?
- LAST BUT NOT LEAST — There’s nothing in it for anyone. Sure, Apple would get Facebook Connect on its social properties for eternity, but if Facebook can be convinced to let them they can get that without spending X billions of dollars. Other than that, what would Apple get? Really valuable stock? Sure. Interest in a company that is threatening its new, most dangerous rival, Google? Ok, but Facebook will threaten (and potentially even disrupt) Google whether or not Apple is in it. And what would Facebook get? Getting Facebook Connect and social experiences baked into iDevices and the Mac at a deep level would be pretty awesome. But Facebook already has an investor who controls 90% of the world’s desktops and they didn’t do that. Think about it: Apple investing in Facebook is something that sounds cool, but really doesn’t make any sense for anyone involved.
Mashable, who first came out with the rumour, has retracted it. It was nice to speculate for a while.
All right, here’s the next speculation: Apple will invest $5 billion in Facebook at a $50 billion valuation and Facebook will then turn around and use that to buy Twitter for $10 billion in cash and stock. OMG!