Facebook isn’t just popular with its 1.3 billion (and counting) users.
According to “The Facebook Effect,” Fortune editor David Kirkpatrick’s brilliantly-reported book about the company’s founding, Facebook has also always been very popular with executives hungry for a merger or acquisition.
As early as four months after Facebook’s inception, investors and executives began lining up to beg Facebook co-founder and CEO Mark Zuckerberg to take their cash and sell the company. Zuckerberg turned all their offers down, but some got much closer than we ever imagined.
Here are all the times that Facebook almost sold out:
1. An unnamed NYC financier offered $US10 million
Facebook, then TheFacebook.com, went live in February 2004. Just four months later and prior to any outside investment, a 20-year-old Mark Zuckerberg fielded a $US10 million offer from an unnamed New York financier. According to Kirkpatrick, Zuckerberg never took the offer seriously.
One early bidder for Facebook was Friendster, former Friendster executive Jim Scheinman told VentureBeat in 2007.
“I found a small company out of Harvard that we came very close to acquiring,” said Scheinman. “A startup no one had heard of [at] that time, a company named The Facebook.”
The deal was dependent on Friendster raising another round of funding. Facebook blew up before that ever happened and Friendster lost its last shot at relevancy.
Zuckerberg and his Harvard dorm-mates rented a house in leafy Palo Alto, Calif., during the summer of 2004.
It wasn’t long before “a couple of Google executives came over to see if there might be a way to work with or even buy TheFacebook,” Kirkpatrick reports in “The Facebook Effect.“
The meeting didn’t go anywhere, but the issue rose again in the fall of 2007. Google’s top ad salesman, Tim Armstrong, convinced the company’s board to let him pursue a deal in which Google would serve Facebook’s international ads.
“The board even approved talks about buying [Facebook], if it made sense,” writes Kirkpatrick. Google never got the deal, but its offer to invest in Facebook at a $US15 billion valuation reshaped Mark Zuckerberg’s company forever.
During the Spring of 2005, Facebook (still TheFacebook) was talking to The Washington Post Company about an investment. Out of nowhere, Viacom offered $US75 million to buy the company. Zuckerberg would have earned $US35 million on the spot, reports Kirkpatrick.
Instead, then-Facebook president Sean Parker used the offer to haggle better terms out of the Post, which eventually got scooped on the deal by Accel Partners anyway.
Viacom refused to give up. Focus groups were telling them that MTV viewers were spending more and more time on the site. In the fall of 2005, Zuckerberg flew to New York to meet with CEO Tom Freston.
Freston pitched all kinds of synergies between MTV and Facebook. Zuckerberg wasn’t interested. “It was a no-thank-you meeting,” a source tells Kirkpatrick.
In early 2006, MTV boss Michael Wolf stopped by Facebook one last time. Zuckerberg told him he thought the company was worth $US2 billion.
A couple of weeks later, Viacom sent Facebook a $US1.5 billion offer — $US800 million in cash up front, the rest via payout later.
Facebook almost sold, according to “The Facebook Effect,” but it wanted a bigger upfront payment. Viacom’s CFO was nervous about paying so much for a company with such small revenues. The deal fell apart. Viacom never came back.
In the spring of 2005, MySpace CEO Chris DeWolfe visited Zuckerberg and his team to “put out feelers about possibly buying TheFacebook,” Kirkpatrick reports. Zuckerberg, his president Sean Parker, and adviser Matt Cohler met with DeWolfe, “but only because they thought he was an interesting guy and they were curious about MySpace.”
When the two talked, Zuckerberg asked DeWolfe if MySpace would buy Facebook for $US75 million. DeWolfe said no. When they met again later that year, Zuckerberg raised the price to $US750 million and DeWolfe again said no.
6. NewsCorp, MySpace’s new parent company
In January 2006, News Corp digital boss at the time, Ross Levinsohn, flew Mark Zuckerberg and one of his top advisers, Matt Cohler, to Los Angeles. Levinsohn wanted to buy TheFacebook, but he worried it might not keep up its growth.
“That’s the difference between a Los Angeles company and a Silicon Valley company,” Zuckerberg said in “The Facebook Effect,” “We built this to last, and these guys [at MySpace] don’t have a clue.”
Kirkpatrick doesn’t offer many details, but apparently NBC execs stopped by for a peek in 2005.
In the summer of 2006, Yahoo decided to offer Facebook $US1 billion. Facebook’s investors and many of its executives wanted to sell, but Facebook was about to launch the News Feed, and if it went well, Zuckerberg figured the company would be worth way more than $US1 billion.
After announcing horrible Q2 earnings, Yahoo lowered its offer to $US850 million. Facebook’s board took 10 minutes to reject the lowered offer, according to “The Facebook Effect.”
In the fall of 2006, Yahoo came back to Facebook and suggested it would pay $US1 billion or more, but by then, Facebook had opened the site to people beyond college and high school students.
Registrations were up from 20,000 a day to 50,000 a day, Kirkpatrick reports. Even eager-for-an-exit VC and Facebook investor Jim Breyer was OK with passing on the deal.
The one guy who wasn’t, Facebook COO Owen Van Natta, was not long for the company.
In the middle of 2006, then-AOL CEO Jonathan Miller decided he wanted to buy Facebook. He even convinced Time Inc. CEO Anne Moore to come in on the deal before he took it to AOL’s parent company, Time Warner.
His plan: AOL would sell MapQuest and Tegic. Time Inc would sell IPC. Together they’d offer $US1 billion plus.
Time Warner CEO Jeff Bewkes nixed the idea. Kirkpatrick writes, “He said if they could live without those properties they should go ahead and sell them, then turn the cash over to the parent company.”
“Why don’t we just buy you for $US15 billion?” Microsoft’s CEO asked Mark Zuckerberg in 2007.
Determined to keep Facebook away from Google, Microsoft CEO Steve Ballmer offered to buy the company. Ballmer knew Zuckerberg would never relinquish control over Facebook, so he came up with a deal based on Hoffman-LaRoche’s acquisition of Genentech.
Kirkpatrick explains, “Microsoft [would] acquire a small stake in Facebook at a $US15 billion valuation. Then, Microsoft would have the option, every six months, to buy another 5 per cent of Facebook. A complete takeover of the company would take 5 to 7 years.”
The acquisition never happened, but Microsoft did buy 1.6% of Facebook for about $US250 million. That deal, which set Facebook’s value at $US15 billion, stipulated that Facebook would have to give Microsoft notice if it ever began to take a buyout offer from Google seriously.
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