I was just at lunch with Derrick at Harry’s Bar and Grill. They just installed a new plasma TV above the bar and CNBC was doing financial news. There was a bit about Yahoo being painted into a corner and probably having to sell. When did that happen? There were commentators talking about how their execution has been unimpressive compared to Newscorp with its MySpace acquisition and Google’s YouTube deal, like any internet-based media company absolutely MUST HAVE a Social Networking strategy. Then Derrick and I were talking about their aborted Facebook acquisition attempt. I don’t know what will end up happening with Yahoo, but whatever: You wouldn’t see me on TV saying they hadn’t executed very well - that is a powerhouse company. Still, maybe there is some reason why that meme is bubbling to the surface lately. Plus, today we saw Terry Semel step out of the CEO role, with Jerry Yang stepping in and focusing on “a culture of winning.” (btw, wouldn’t you love to have Jerry’s resume? He has only had one job in his whole career. It would be a Post-It note with his name and one company on it, Yahoo, with one bullet point: “Founded and built company into internet icon.”)
So anyway, we started talking about how mobile phones are stuck at an innovation plateau, and maybe the iPhone will be so revolutionary that it will move the whole industry to a new level. Maybe. Then we were talking about how to move the whole industry to a new level.
Then I said that Apple should buy Facebook.
And we talked about it.
Think about that for a second: Facebook is very impressively reinventing itself as a broad communication platform, severing its ties to its “college social networking” roots, while still maintaining those roots and without pissing off that core user base.
I just got back to the office and searched for “Apple buying Facebook” and found that many people are already speculating about the potential value in such a deal. The top result was Howard Lindzon, who posed the concept last month. I am a pretty active tech investor, and I read Howard’s blog now and again for good insight and commentary.
If Apple used Facebook to evolve their .Mac strategy, the result would be phenomenal. Now put the whole thing in the mobile space where a server-based communication platform is tightly integrated with a highly-evolved mobile communication device. This would give users true “anytime, anywhere” access to their contacts, but also to their content that they would essentially be distributing via a series of overlapping personal networks. If the not-apparent-at-first-but-obvious-now synergy of Newscorp/MySpace makes sense, Apple/Facebook makes even more sense to me.
At the same time that Facebook is gathering new users outside of its core target market, so is Apple expanding its base of “new to Apple” users. When I picture the ven diagram where “college students who use Facebook” overlaps “college students who buy iPods” I picture a pretty large sweetspot. When I picture the intersection of “fast followers adopting Facebook now” and “fast followers buying iPods now who want an iPhone” I see a pretty large sweetspot. When I compare the social networking strategy of Newscorp with the apparent strategy of every other very large media company, I really start to wonder if the entire media executive collective has yet fully grasped that “social networking” is now synonymous with “media distribution.” I mean really – where do we think the audience is these days? Watching TV? Not.
We are watching the lines blur between Media and Sharing and Consuming and Communication and Devices and Services. Newscorp made a bold move with MySpace that looked expensive at first but that now looks like a bargain. Google made a bold move with YouTube that looked expensive at first but that now looks like a bargain. If someone is going to make a bold move with Facebook that is going to look like a bargain in the future, shouldn’t it be Apple? (Yes, or Yahoo, but it seems that ship has sailed. We talked a bit about Microsoft in all of this, but for them, I see a backend platform that provides access to all social networking providers that could be integrated into the Windows Mobile OS fitting their strategy far better than a branded destination. Sort of like a specific purpose Opera Mini.)
Now of course, if Facebook does fit the profile of a company that, if acquired, would look like a bargain later, then maybe they could be the one shining IPO example this year, surely rivaling Google in hype, splendor and true value. If the future value of Facebook as a communication platform is so high, wouldn’t investors sign up for that? I would. Paul Kedrosky has put Facebook on IPO Watch, and others are speculating that the platform strategy may be the road to such an event.
I dunno. For a lot of private companies, the perceived horror of Sarbanes-Oxley compliance alone is enough to favor an M&A exit over IPO. But that aside, it comes down to synergy. If I owned Facebook and Apple wanted to buy it for a fair price, I wouldn’t take a dime in cash – I would take it all in stock because I see the potential synergy between the two companies creating far more value than going it alone.
But what do I know?
If Apple IS buying Facebook, a fun time to announce it would be right around the iPhone launch.