by Brian Solis (for a deeper discussion on the subject, please visit PR 2.0)

Mark Zuckerberg

Kara Swisher FTW – again!

During the Web 2.0 Summit, John Batelle interviewed Facebook Founder Mark Zuckerberg and if you listened closely enough, it was clear that Batelle was prodding Zuckerberg to validate the rumors that Facebook was exploring the possibility of acquiring Twitter.

With a teasing smile, Zuckerberg described Twitter an “elegant model” and professed that he was “ impressed by what they’ve done.”

Following the session, attendees poured into the hallways dissecting the dialogue to support or discount the prospect of such a bold acquisition.

Kara Swisher has confirmed the rumors, however, an acquisition is not imminent – at least not yet.

Twitter has grown by over 600% in one year. From a business perspective, I can understand why Facebook would consider engaging in negotiations. Twitter is currently reporting six million registered users and last month, the micro community experienced its greatest traffic to date – no doubt bolstered by the 2008 Election.

The deal was close to finalization, but (thankfully) fell apart for very valid reasons.

According to Kara Swisher’s post, Facebook was attempting to acquire Twitter for $500 million in a pure stock deal based on Facebook’s disputed $15 billion valuation. Analysts peg the true estimate of Facebook’s market value closer to $5 billion, which would have positioned Twitter’s sale price at roughly $150 million – a number that investors, the board, and the company’s founders believe is far too low.

Twitter wanted cash and that’s understandable in this market. And there’s a pervasive sentiment that the company might just have a run at generating revenue while continuing to grow the community and how its users communicate with each other in the process.

From Facebook’s perspective, the stock offer was reflective of a conservative approach that reflects the reality that Twitter is not only generating $0 revenue, but its basically a substantial cost center at the moment. At the moment, Twitter pays for SMS fees associated with each text-based update. Facebook estimates that this could cost the company upwards of $75 million annually.

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About the Author:

Brian Solis

Brian Solis is principal at Altimeter Group, a research-based advisory firm. Solis is globally recognized as one of the most prominent thought leaders and published authors in new media. A digital analyst, sociologist, and futurist, Solis has studied and influenced the effects of emerging media on business, marketing, publishing, and culture. His current book, Engage, is regarded as the industry reference guide for businesses to build and measure success in the social web.

Visit Brian's page at http://www.briansolis.com

Discussion

    no imageMark Evans (Who am I?)24 November 2008 12:38 pm

    I guess it’s only a matter of time now before Twitter is acquired given it’s now officially in play. The question is who’s going to buy it.

    Mark

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    3.1
    no imagetweetalot (Who am I?)24 November 2008 2:13 pm