Last week, we looked at two epic buyouts that went bust, ultimately leading to the demise of Blockbuster and Excite. Today we focus on Friendster and Facebook, battling to become the de facto social network.
If you missed last week’s post, read it here.
Google tried to buy Friendster for $30 million.
Before MySpace and Facebook, there was Friendster. Better-known today as the Ghost of Social Media Past, few of us have more than a vague recollection of Friendster in its prime.
Friendster was born out of heartbreak. It was 2002, and Jonathan Abrams had just been dumped. But instead of spending weeks on his couch crying into a carton of Chunky Monkey, Abrams took a page out of Taylor Swift’s playbook and channeled his feelings into creating the first modern social network. By 2003, the network had millions of registered users. It was the hottest thing in social networking—and Google wanted in. They offered Abrams a whopping $30 million for Friendster, but Abrams turned it down.
The reason? Friendster had the potential to be huge, and everyone knew it. Silicon Valley big-wigs were lobbying Abrams to reject Google’s offer. Venture capitalists were offering to pour millions into the startup and build it into a billion-dollar powerhouse. AOL had offered the founders of Yahoo millions in the 90s, and they’d made billions because they’d said no. Thus, Abrams was easily persuaded to forego Google’s offer.
Unfortunately, Abrams’ dreams of a bigger payout never came. Plagued by technical, engineering, and performance problems, Friendster crashed and burned.
Had Abrams accepted the offer, Friendster might have solidified its position as the frontrunner in social networking. Instead, Friendster became an iconic case of unmet potential, and a cautionary tale for entrepreneurs hoping to break into the social networking scene.
Facebook almost sold to Yahoo for $1 billion.
Facebook has always been popular with investors. As early as 4 months after its inception, investors and other companies began pressuring Mark Zuckerberg to sell. Of course, Zuckerberg turned them all down. But some came surprisingly close to closing the deal. One such company was Yahoo.
In 2006, Yahoo made a bid to buy Facebook for $1 billion. At the time, Facebook was a two-year old site with little revenue and no profits. User growth was leveling off, and it was starting to look like the startup had reached its peak. Taking the money seemed like a no-brainer.
Every person involved in Facebook was pressuring Zuckerberg to take the offer. But Zuckerberg didn’t want to sell. He didn’t want money—he wanted to build a social network. But pressure became too much. In July, he relented, and verbally agreed to the deal.
But then Yahoo announced horrible Q2 earnings. Its stock price plummeted 22% overnight, and it lowered its offer to Zuckerberg from $1 billion to $850 million.
Zuckerberg walked away. Yahoo’s faltering stock price and lower offer made it easy for him to convince Facebook’s board and investors that Yahoo wasn’t a serious partner and that Facebook would be worth more on its own.
It’s now worth over $200 billion. Zuckerberg was right.
Zuckerberg proved that no matter how much money is thrown at you, it’s important to believe in your product. At Domo, we have the fortune of working on an amazing product that’s easy to believe in. Making big data manageable for the masses might not be next summer’s blockbuster movie, but it’s what we do, and we’re sticking to it.
Watch for Part 3 of this series next week!