Good news for Facebook this week. Microsoft is rumored to be interested in buying a stake in the company at a valuation of up to $15 billion. On top of that, the press is preparing for the inevitable passing of the traffic torch between MySpace and Facebook. And, indeed, if you look at the Alexa rankings for the two companies, you can see that it is only a matter of time before Facebook is the social media king.
So does this mean that Mark Zuckerberg was right to reject Yahoo’s $900 million offer? Are the 20-somethings at Facebook HQ the future leaders of Silicon Valley? Should we start counting the days until Facebook surpasses Google?
To quote ESPN’s Lee Corso, “not so fast, my friend.” Yes, hindsight has shown that that $900 million offer was too low, and yes, Facebook will soon be the #1 social media site and one of the top Web sites in the world. But things may not be as rosy as they seem.
For starters, the mere fact that Facebook has so rapidly eclipsed the once-dominant MySpace goes to show how fickle Web users are when it comes to social media. Indeed, it almost seems like every generation develops an affinity to their own social media site, making yesterday’s site old news.
Consider what happened to Friendster (now for the 35+ crowd) when MySpace arrived, and what happened to MySpace (now for the 25+ crowd) when Facebook arrived. New sites – targeted to younger generations – such as Hi5 (now for the under 16 crowd) are popping up. What’s to prevent these upstarts from upstaging Facebook?
It’s also worth repeating the apparently-forgotten adage to never look at gift horse in the mouth. Frankly, despite the fact that $900 million has turned out to be a low ball offer, I still think that any start-up that turns down $900 million has a lot more hubris than it does intelligence.
Indeed, I once worked for a company that was (allegedly) offered something north of $450 million from an acquirer, turned that down, and (again, allegedly) is now being sold for something south of $50 million. Hindsight is indeed 20-20. Did we think we were going to be worth a billion? Of course. I remember fantasizing that we could be worth $10 billion.
How many times have you heard this story: A guy walks into a casino in Vegas, throws a few quarters into a slot machine and wins $1500. He immediately walks out of the casino and spends the rest of his vacation sitting near the hotel pool. Have you tallied your count?
OK, now count how frequently you’ve heard this version. A guy walks into a casino in Vegas, throws a few quarters into a slot machine and wins $1500. Over the rest of the weekend, he spends $2000 on slots hoping for that next big strike. He leaves town wondering where his money went.
Humans are hopeful animals. We almost always look the gift horse in the mouth and opt for the two birds in the bush. Young humans – say 23 year old CEOs – are especially hopeful. Some may go so far as to even say naive. They assume that what goes up can only go more up, and they presume that their predecessor’s failures were due to their incompetence and nothing else.
Sometimes, these CEOs get pretty lucky and seem to prove naysayers like me wrong. Most times, they don’t.