Why Facebook Failed To Takeover Twitter

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Why Facebook Failed To Takeover Twitter

During a recent interview with Business Week, Facebook’s Director and one of its largest investors, Peter Thiel, publicly confirmed for the first time that Facebook and Twitter had been in serious talks with each other but the deal failed over disagreements regarding price and structure.

Facebook plans to grow as much as possible, in spite of the financial crisis. While most companies are cutting costs and laying off staff, Facebook has increased its employee headcount from 800 to almost 1,000 since the beginning of 2009. They are also not desperate to raise capital as they have about $500 million in reserve, which is quite enough for now. Hence they can afford not to be too focused on monetisation through ads.

Twitter has also grown significantly – from 800,000 unique users last year to over 6 million at present. The micro-blogging platform, though, does not generate any revenue, making it difficult to peg a real, meaningful value on it.

The plans to acquire Twitter fit in well with Facebook’s strategy of laying more stress on user growth and product innovation over profits.

When Facebook suggested a sum of $500 million to buy Twitter, it was obvious that they would have to pay in Facebook stock. The point in question was how much Facebook stock was worth. Since Facebook is a private company, its shares are not listed on the stock market.

In 2007, values ranged between $3.7 billion to $15 billion. With the current financial meltdown, though, the stocks of several companies have fallen.

According to sources, while Facebook claimed that their stock was worth between $8 billion and $9 billion, Twitter claimed that Facebook was worth only $2-4 billion. This was the main reason why the discussions fell apart.

Peter Thiel maintains that Facebook stock “is worth more than people think it is”. They also remain open to the possibility of acquiring other companies.

Facebook and Twitter still continue to have talks with each other but there are no serious acquisition considerations at present.