200 Million Reasons to Kick Yourself

If you're a fan of nice round milestones, you'll like this: Facebook welcomed its 200 millionth active user yesterday. Founder Mark Zuckerberg blogged about the huge number, illustrating how far the social-networking site has grown in five years.

Not everyone is celebrating and throwing confetti, though. Yahoo! (Nasdaq: YHOO  ) is probably feeling like it broke up with the girl who grew up to become a supermodel. Its supposed quest to acquire Facebook a few years ago proved fruitless.

Microsoft (Nasdaq: MSFT  ) got closer to sealing the deal, but wound up paying $240 million for only a 1.6% stake. Facebook naturally wasn't worth $15 billion at the time. Microsoft's investment was really just a cover charge. However, it too blew it by not swallowing Facebook whole.  

You won't find any Google (Nasdaq: GOOG  ) fingerprints at the scene, and that's surprising since Google has been an early bird with some of its acquisitions, such as Blogger and YouTube.

What is it with the three leading search engines and their inability to nab the social-networking sites that ultimately matter? As the Internet's traffic cops, you would think that they would be the first ones to sniff out hot website trends. Instead, history finds News Corp. (NYSE: NWS  ) buying MySpace and Time Warner (NYSE: TWX  ) bobbing for Bebo, while fast-growing Facebook remains a free agent.

Three of us Fools couldn't agree on what Facebook was worth -- it was either not much, $3 billion, or $15 billion -- back when Facebook supposedly had just a third of the audience that it watches over today.

As the voice behind the $3 billion valuation, I don't feel like tripling my price, but how stupid was Yahoo! to let Facebook get away when it could have had it for $1 billion or so? That price today would translate into just $5 for every Facebook member.

Facebook has not been an easy site to monetize, but its viral ways should leave you drooling over the possibilities of what Facebook can do in the future.

So congratulations, Facebook. My condolences to the failed suitors.

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Microsoft is a Motley Fool Inside Value selection. Google is a Motley Fool Rule Breakers recommendation. Try any of our Foolish newsletters today, free for 30 days.

Longtime Fool contributor Rick Munarriz remembers when social networks were an offline endeavor. He does not own shares in any of the companies in this story. He is also a member of the Rule Breakers analytical team, seeking out the next great growth stock early in its defiance. The Fool has a disclosure policy.


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  • Report this Comment On April 09, 2009, at 10:42 AM, pondee619 wrote:

    <So congratulations, Facebook. My condolences to the failed suitors> WHY?

    <Facebook has not been an easy site to monetize>

    Has it made any money?

    <but its viral ways should leave you drooling over the possibilities of what Facebook can do in the future>

    Again, WHY? What are the possibilities of the future? You surely give us no hint of what the future can bring. Will facebook just be another vehicle that brings ads to site users who will ignore them? What CAN Facebook do in the future that will make it profitable and a worthwhile investment?

    A man walking in Times Square with a sandwich sign has that sign read by tens of thousands each and every day. What is that sign worth? Is a display ad on Facebook, MySpace, Twitter, Google, Yahoo... really more effective?

  • Report this Comment On April 09, 2009, at 10:49 PM, TMFBreakerRick wrote:

    pondee,

    The difference between that man with the sandwich board and Facebook is that FB actually knows its viewers. The moment I tell my profile that I'm a fan of bands like Muse and Amanda Palmer, it populates my ad space with ads about those artists. It knows where I'm from. It knows what I'm a fan of. It knows my vocation. That guy in the board? He's pitching mattresses to folks that may prefer to sleep in cots. He's pitching burger specials to vegans. FB knows its users. It can connect the dots between you and your friends. When it really turns that on in a way that is socially acceptable (i.e. - not 1984-ish) is when things will really get exciting.

  • Report this Comment On April 11, 2009, at 7:27 AM, pondee619 wrote:

    Rick:

    So it ALL just ads? Targeted, like Amazon telling me what I want to read?

    How often do people:

    a) look at them;

    b) respond to them in a positive way;

    c) find them anything but annoying? Language such as: "Try any of our Foolish newsletters today, free for 30 days." which follows almost alll Fool articles gets awfully tired.

    These sites may be the best thing since sliced bread, but how do they avoid stagnation that his hit TV, Newspapers, Magazines, Radio? Is that targeting taht effective?

    Do those "targeted" ads really drive sales? Is this documented?

    How long is a society, which covets its privacy, going to give its personal information, truthfully, to complete strangers who want to do nothing but sell you something? (or worse, 1984-ish?)

    Thanks for your reply.

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