> Zuckerberg turned down $1Billion from Yahoo, and at least on paper is worth an order of magnitude more now.
Just because you won the lottery doesn't mean it wasn't stupid to not take the cash. Zuck should have took the billion as a first time entrepreneur. It was the better bet. Playing against the odds might be exciting, and you might even win, but it's still not smart.
Depends whether or not you believe Zuckerberg genuinely wanted to build a world-changing business. If that's his main goal (and the more I hear him talk, the more I start to believe it), and he genuinely believes he can do it, then taking the money isn't necessarily what's most important to him. I read a lot about entrepreneurs getting shit on for not swinging for the fences, but then they get shit if they turn down a billion dollar offer when they only see that as a triple.
It remains to see how this all plays out, but when you turn down a billion dollars, I think there's a good chance you're doing it for more than the money.
Still doesn't matter. Your first shot out of the gate, you take the money because it enables you get money out of the way. Everyone needs money. You swing for the fences the second time out, after you've got cash in the bank and don't need the money. That's the smart thing to do, play the odds. Zuck went against the odds, that wasn't smart, it was immature; he seems to have beat the odds so it worked out, but it was much more likely to go the other way, and it still could. Something could wipe out Facebook just like Facebook wiped out MySpace.
I have a feeling Zuckerberg is not going to have to worry about money no matter what happens. Even in 2007 he was clearly headed for multimillionaire status.
I don't know him personally but at the time he reputedly lived on a mattress in an empty room in Palo Alto. Maybe he's the kind of guy that values winning more than the accoutrements of success.
If facebook hadn't taken off, I doubt anyone here would know who Zuckerberg was. He rode a fad to fame and capitalized on it and made many a blunder along the way. He's no different than Kevin Rose and Digg. Facebook's popularity will wane, people will abandon it; many people already are in the sense that they don't check it much anymore. Something else will come along and the crowd will have a new toy.
Platform, lol. The site was better before the platform enabled apps. The entire platform is faddish, it's popular because it's popular and everyone else is doing it; until they aren't, then you stop. There are billion dollar industries that are entirely based on fads, movies, music, games, or fashion for example. The amount of money has no bearing on whether something is faddish. For most, facebook is entertainment, the entertainment industry in all its forms is all about fads and popularity.
Every company is around until it isn't. Blockbuster just declared bankruptcy -- does that make Blockbuster a fad?
Facebook is six years old. 500MM people use it every month. They are profitable and do over $1Bn in revenue. They have a platform, on top of which there is at least one $1Bn company (Zynga).
Groupon, also a $1Bn company, owes its success in large part to Facebook's ad platform.
Facebook is now moving into location and online payments. They will compete with PayPal, another $1Bn company (before being acquired by eBay).
Zynga is PayPal's second largest merchant, after eBay itself. Through Facebook credits, Facebook will be taking 30% of each of those transactions. They are building a database of credit card numbers to do it.
Tencent QQ, a Chinese social network with gaming elements -- most of the popular genres on Facebook were taken from popular Chinese social games, e.g., the farming genre -- is 15 years old and did over $1Bn in revenue last year.
Tencent's IM product has 610MM monthly active users and 63.2MM people with subscription accounts.
Sure, fine, there's some universe in which Facebook vanishes tomorrow. The demand is still there. Social networking is here to stay.
The only way Facebook will fall behind is if they slow down and let someone else pass them, but given their history of aggressive and forward-thinking innovation, that seems unlikely for at least the next 5 years and/or until Zuckerberg stops caring.
And "it's popular because everyone else is doing it" -- you just described every business built on top of network effects. Craigslist is popular because everyone is using it. Does that make Craigslist a fad? eBay? VRBO? Etsy? YouTube? HN?
Pet rocks were a fad. Slap bracelets were a fad. Snuggies are a fad. http://fmylife.com is a fad.
Do you really think Facebook is that? Really?
I also notice that you didn't cite a single piece of data. Do you have any to support your argument, or is it just your "intuition?"
I didn't say Facebook was going away, or that it wasn't big business, nor did I say Facebook is a fad. I said he rode a fad to fame, that means it was a fad and then it became something tons of people use as it fleshed itself out over the years. If you don't agree, then don't, I don't care; don't get all bent out of shape about it like I insulted your mother or something. I don't need to quote sources to state my opinion.
Facebook's as much as a fad as photo-sharing, sending people messages and joining a discussion forum. Zuck originally said he wanted the relationships on it to reflect real life. The only thing faddish about it, is people's willingness to share their lives on it, and that's what Zuck wants to change, he wants sharing and exposing oneself to be normal, after all, for him it's all lulz. It's the over-exposing that is a fad as people start to want privacy.
When it first came out, I thought this is just like a friggin Xoops installation customized for college students (but custom built, and carefully sold to the right people). Also, a lot of Web 2.0 ideas were just like Xoops CMS modules (or WP plugins) but scaled out and adapted for mass website usage. The Facebook platform is just like Xoops module deployment that users can customize for themselves rather than the webmaster.
Theoretically, the only thing that could take out Facebook or come close, would be some type of cross-language, cross-server middleware layer, that webmasters could use that would simplify and improve web development, and give broad social, ecommerce, presence and whatever other features are, or will start to be in common. FB is in the best position to do that, and that's what I expect to see going forward: it'll have to create standards and protocols (an open source FB server?) and release those into the community.
Of course it matters, and the only person it matters to is Zuckerberg. I don't understand why anyone should tell an entrepreneur when they should sell and where the threshold is. Off the top of my head, I can't think of any huge, super-successful companies that sold early and became huge after the fact. I'm sure there are, but I can only think of the Googles, Microsofts, IBMs, Apples, etc. I'm sure there are examples, but when I think of super-huge companies, the founders didn't sell out early.
We're not talking about super huge successful companies, we're talking about the rational thing for a first time entrepreneur to do, and that's take the billion dollars and run. Zuck followed his heart, not his head. That's perfectly fine to do, but he played against the odds. While it worked out, it's akin to winning the lottery.
No one's telling Zuck what to do, so I don't know what it is you don't understand. We're just analyzing the logic of what he did after the fact. You're too hung up on the winners like Google, Microsoft, and Apple, but you're forgetting about the thousands and thousands of never-weres who were sunk because of exactly this kind of rash decision making against the odds. What Zuck did was not good business, it was luck; that attitude is not something to emulate. Had any of his competitors delivered Facebook could have easily gone down in flames and they'd all have been wishing they took the billion.
Ask yourself this, would it be wise for the typical startup founder in his early 20's on his first startup to turn down a billion dollar acquisition? I submit the answer is a most definite no. If you disagree, please do explain your rationale.
I'm very skeptical when people tell me that their motivation is to 'change the world'. Even more so when they are very dead set to make sure that THEY are the ones who change it vs. their competitors. Facebook is a twist on existing services to share photos, text messages, emails and games. It's not like he's out fighting poverty, political corruption and disease or something.
Zuckerberg had the Facebook platform in his pocket during all those negotiations. It seems like a great bet to me. If Facebook is worth a billion just for audience share of relatively traditional social networking, it should be a billion plus with the release of the platform and a marketplace.
I can't stand FB, but I have to say that was the right move.
I think the best move by FB was buying FriendFeed in Aug '09 a few years after knocking back Yahoo and making Bret Taylor CTO and having Paul Bucheit cultivate an engineering culture. I was surprised by this, because Taylor originally stated he wanted FF to grow into a self-sustaining company. If FB didn't have the pockets to do this, FB wouldn't be nearly as successful as it is today. Today FB is impressively fast, were Tornado + HipHop the keys for this to happen?
If Twitter fixed its UI and fail whales a few years ago, it'd be much bigger today. PG a year or two ago spoke of Twitter as a protocol: yet still I think this hasn't manifested as it's still only used at the presentation layer. It should have or should still look into this path.
Increasingly I'm seeing outcomes determined by the smarts of the CEO who end up having to think for themselves, because eventually they get surrounded by Yes-people. I see a deficit at Google with Eric Schmidt, although I can't say I've met him, Google needs a Jobs at this point. FB just need to put in a search engine (Bing?,) to stop losing users to Google.
If I may continue, the FF acquisition basically allowed FB to compete with Twitter (and not lose users to it.) It was Twitter that undermined Digg, because sharing with people you know is more fun than with sharing people you don't know.
The lessons in strategy here with Digg, Facebook, (and also Yahoo's non-acquisition by MS) is that if a potential acquirer comes to you having in mind that your business be acquired to spearhead or enable massive growth of their own, you say no. Or rather, if they're more (or even less) excited about your business than you are, sell unless you can obtain that excitement somehow, perhaps by acquiring yourself.
It would have been the right move for a more experienced entrepreneur who was gambling with play money; it's the wrong move for a first timer who'd have been wiped out had it failed. He rolled the dice and won, but the odds were not in his favor; it was not smart.
Starting a company is never a safe bet. Every step along the way as you build a successful company, you have opportunities to sell. By your logic, you would sell at the first opportunity in the low millions.
Clearly, that wouldn't have been the right move, but it would have been the safe move.
The right way to think about selling a company depends on what your goals are. People are motivated by different things. Some entrepreneurs are motivated mostly by money, some mostly by recognition, and others by being influential/changing the world.
If you go with the money because you're a first time entrepreneur, there's a great chance that Facebook would be your one significant company in life, and you would have bailed out without seeing it to its conclusion. At the end of the day, depending on your personal goals, that might be a failure for you, personally.
Comments
> Zuckerberg turned down $1Billion from Yahoo, and at least on paper is worth an order of magnitude more now.
Just because you won the lottery doesn't mean it wasn't stupid to not take the cash. Zuck should have took the billion as a first time entrepreneur. It was the better bet. Playing against the odds might be exciting, and you might even win, but it's still not smart.
Depends whether or not you believe Zuckerberg genuinely wanted to build a world-changing business. If that's his main goal (and the more I hear him talk, the more I start to believe it), and he genuinely believes he can do it, then taking the money isn't necessarily what's most important to him. I read a lot about entrepreneurs getting shit on for not swinging for the fences, but then they get shit if they turn down a billion dollar offer when they only see that as a triple.
It remains to see how this all plays out, but when you turn down a billion dollars, I think there's a good chance you're doing it for more than the money.
Still doesn't matter. Your first shot out of the gate, you take the money because it enables you get money out of the way. Everyone needs money. You swing for the fences the second time out, after you've got cash in the bank and don't need the money. That's the smart thing to do, play the odds. Zuck went against the odds, that wasn't smart, it was immature; he seems to have beat the odds so it worked out, but it was much more likely to go the other way, and it still could. Something could wipe out Facebook just like Facebook wiped out MySpace.
I have a feeling Zuckerberg is not going to have to worry about money no matter what happens. Even in 2007 he was clearly headed for multimillionaire status.
I don't know him personally but at the time he reputedly lived on a mattress in an empty room in Palo Alto. Maybe he's the kind of guy that values winning more than the accoutrements of success.
If facebook hadn't taken off, I doubt anyone here would know who Zuckerberg was. He rode a fad to fame and capitalized on it and made many a blunder along the way. He's no different than Kevin Rose and Digg. Facebook's popularity will wane, people will abandon it; many people already are in the sense that they don't check it much anymore. Something else will come along and the crowd will have a new toy.
In what universe is Facebook a fad? There are billion-dollar companies built on their platform, ferchrissakes!
Platform, lol. The site was better before the platform enabled apps. The entire platform is faddish, it's popular because it's popular and everyone else is doing it; until they aren't, then you stop. There are billion dollar industries that are entirely based on fads, movies, music, games, or fashion for example. The amount of money has no bearing on whether something is faddish. For most, facebook is entertainment, the entertainment industry in all its forms is all about fads and popularity.
Every company is around until it isn't. Blockbuster just declared bankruptcy -- does that make Blockbuster a fad?
Facebook is six years old. 500MM people use it every month. They are profitable and do over $1Bn in revenue. They have a platform, on top of which there is at least one $1Bn company (Zynga).
Groupon, also a $1Bn company, owes its success in large part to Facebook's ad platform.
Facebook is now moving into location and online payments. They will compete with PayPal, another $1Bn company (before being acquired by eBay).
Zynga is PayPal's second largest merchant, after eBay itself. Through Facebook credits, Facebook will be taking 30% of each of those transactions. They are building a database of credit card numbers to do it.
Tencent QQ, a Chinese social network with gaming elements -- most of the popular genres on Facebook were taken from popular Chinese social games, e.g., the farming genre -- is 15 years old and did over $1Bn in revenue last year.
Tencent's IM product has 610MM monthly active users and 63.2MM people with subscription accounts.
http://www.tencent.com/en-us/content/ir/fs/attachments/inves...
When does this stuff stop becoming a fad?
Sure, fine, there's some universe in which Facebook vanishes tomorrow. The demand is still there. Social networking is here to stay.
The only way Facebook will fall behind is if they slow down and let someone else pass them, but given their history of aggressive and forward-thinking innovation, that seems unlikely for at least the next 5 years and/or until Zuckerberg stops caring.
And "it's popular because everyone else is doing it" -- you just described every business built on top of network effects. Craigslist is popular because everyone is using it. Does that make Craigslist a fad? eBay? VRBO? Etsy? YouTube? HN?
Pet rocks were a fad. Slap bracelets were a fad. Snuggies are a fad. http://fmylife.com is a fad.
Do you really think Facebook is that? Really?
I also notice that you didn't cite a single piece of data. Do you have any to support your argument, or is it just your "intuition?"
I didn't say Facebook was going away, or that it wasn't big business, nor did I say Facebook is a fad. I said he rode a fad to fame, that means it was a fad and then it became something tons of people use as it fleshed itself out over the years. If you don't agree, then don't, I don't care; don't get all bent out of shape about it like I insulted your mother or something. I don't need to quote sources to state my opinion.
Facebook's as much as a fad as photo-sharing, sending people messages and joining a discussion forum. Zuck originally said he wanted the relationships on it to reflect real life. The only thing faddish about it, is people's willingness to share their lives on it, and that's what Zuck wants to change, he wants sharing and exposing oneself to be normal, after all, for him it's all lulz. It's the over-exposing that is a fad as people start to want privacy.
When it first came out, I thought this is just like a friggin Xoops installation customized for college students (but custom built, and carefully sold to the right people). Also, a lot of Web 2.0 ideas were just like Xoops CMS modules (or WP plugins) but scaled out and adapted for mass website usage. The Facebook platform is just like Xoops module deployment that users can customize for themselves rather than the webmaster.
Theoretically, the only thing that could take out Facebook or come close, would be some type of cross-language, cross-server middleware layer, that webmasters could use that would simplify and improve web development, and give broad social, ecommerce, presence and whatever other features are, or will start to be in common. FB is in the best position to do that, and that's what I expect to see going forward: it'll have to create standards and protocols (an open source FB server?) and release those into the community.
Uh, sure, ok. Facebook "rode the fad" the same way Ford rode the car-driving fad.
You're not really saying anything at all, as far as I can tell.
I sometimes hope for this outcome, too, but I recognize that, for me, it is as jealousy that I got my project wrong in 03-04.
I certainly hope so, because I don't particularly like their vision of the internet.
Of course it matters, and the only person it matters to is Zuckerberg. I don't understand why anyone should tell an entrepreneur when they should sell and where the threshold is. Off the top of my head, I can't think of any huge, super-successful companies that sold early and became huge after the fact. I'm sure there are, but I can only think of the Googles, Microsofts, IBMs, Apples, etc. I'm sure there are examples, but when I think of super-huge companies, the founders didn't sell out early.
We're not talking about super huge successful companies, we're talking about the rational thing for a first time entrepreneur to do, and that's take the billion dollars and run. Zuck followed his heart, not his head. That's perfectly fine to do, but he played against the odds. While it worked out, it's akin to winning the lottery.
No one's telling Zuck what to do, so I don't know what it is you don't understand. We're just analyzing the logic of what he did after the fact. You're too hung up on the winners like Google, Microsoft, and Apple, but you're forgetting about the thousands and thousands of never-weres who were sunk because of exactly this kind of rash decision making against the odds. What Zuck did was not good business, it was luck; that attitude is not something to emulate. Had any of his competitors delivered Facebook could have easily gone down in flames and they'd all have been wishing they took the billion.
Ask yourself this, would it be wise for the typical startup founder in his early 20's on his first startup to turn down a billion dollar acquisition? I submit the answer is a most definite no. If you disagree, please do explain your rationale.
Zuck has, I'm sure, cashed out enough of his shares to be more than comfortable. If you have the ability to do that and swing for the fences, why not?
That's true now, but was it then?
I'm very skeptical when people tell me that their motivation is to 'change the world'. Even more so when they are very dead set to make sure that THEY are the ones who change it vs. their competitors. Facebook is a twist on existing services to share photos, text messages, emails and games. It's not like he's out fighting poverty, political corruption and disease or something.
Zuckerberg had the Facebook platform in his pocket during all those negotiations. It seems like a great bet to me. If Facebook is worth a billion just for audience share of relatively traditional social networking, it should be a billion plus with the release of the platform and a marketplace.
I can't stand FB, but I have to say that was the right move.
I think the best move by FB was buying FriendFeed in Aug '09 a few years after knocking back Yahoo and making Bret Taylor CTO and having Paul Bucheit cultivate an engineering culture. I was surprised by this, because Taylor originally stated he wanted FF to grow into a self-sustaining company. If FB didn't have the pockets to do this, FB wouldn't be nearly as successful as it is today. Today FB is impressively fast, were Tornado + HipHop the keys for this to happen?
If Twitter fixed its UI and fail whales a few years ago, it'd be much bigger today. PG a year or two ago spoke of Twitter as a protocol: yet still I think this hasn't manifested as it's still only used at the presentation layer. It should have or should still look into this path.
Increasingly I'm seeing outcomes determined by the smarts of the CEO who end up having to think for themselves, because eventually they get surrounded by Yes-people. I see a deficit at Google with Eric Schmidt, although I can't say I've met him, Google needs a Jobs at this point. FB just need to put in a search engine (Bing?,) to stop losing users to Google.
If I may continue, the FF acquisition basically allowed FB to compete with Twitter (and not lose users to it.) It was Twitter that undermined Digg, because sharing with people you know is more fun than with sharing people you don't know.
The lessons in strategy here with Digg, Facebook, (and also Yahoo's non-acquisition by MS) is that if a potential acquirer comes to you having in mind that your business be acquired to spearhead or enable massive growth of their own, you say no. Or rather, if they're more (or even less) excited about your business than you are, sell unless you can obtain that excitement somehow, perhaps by acquiring yourself.
It would have been the right move for a more experienced entrepreneur who was gambling with play money; it's the wrong move for a first timer who'd have been wiped out had it failed. He rolled the dice and won, but the odds were not in his favor; it was not smart.
Starting a company is never a safe bet. Every step along the way as you build a successful company, you have opportunities to sell. By your logic, you would sell at the first opportunity in the low millions.
Clearly, that wouldn't have been the right move, but it would have been the safe move.
The right way to think about selling a company depends on what your goals are. People are motivated by different things. Some entrepreneurs are motivated mostly by money, some mostly by recognition, and others by being influential/changing the world.
If you go with the money because you're a first time entrepreneur, there's a great chance that Facebook would be your one significant company in life, and you would have bailed out without seeing it to its conclusion. At the end of the day, depending on your personal goals, that might be a failure for you, personally.