Is Facebook vulnerable to takeover?

In the second of his occasional series, Simon Brew questions whether Facebook is really on every major media company's shopping list...

By Simon Brew, 27 Jun 2007 at 14:37

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Countering that is the argument that its bubble might be finite, as it has been for major web names before it. Few would argue that News Corporation got a bad deal when it snapped up MySpace for $580 million (£290 million) at the end of 2005, but its investment could well have peaked already in the light of the increased, fierce competition. Perhaps that's why Rupert Murdoch is reportedly looking to use MySpace as bait to snare different fish.

If Facebook was sold now, with its potential still relatively untapped, the asking price could well be staggering. Expect at least the $2 billion that was being asked for last year, if not more. Given that it was formed by a handful of college students, that kind of money is very, very tricky to resist.

Turning the argument on its head, though, there's another possibility that's being overlooked. And that's that Facebook could itself go on the acquisition trail. Suitors are swarming around another social networking service Bebo, and the professional network LinkedIn would also be an interesting fit with the Facebook user base. Could it be that Mark Zuckerberg and his team hold their nerve and attempt to build up a formidable media giant themselves? You wouldn't rule it out, given that right now, they are the group of people negotiating from a position of almost unparalleled strength.

It's a tough one to call. Certainly there's logic in selling now, with web companies fetching healthy prices and a growing number of suitors with itchy cheque books. We're effectively in the midst of another dot com boom of sorts, albeit with Web 2.0 services right at the heart of it, and there's at least a good six months left of big prices being paid for sites making very little, if any, money.

Our guess? That at some point, Facebook will be sold, but we'd be loathed to predict when. The market is ripe for such a deal, and is likely to look favourably on the suitor whose name appears on the eventual invoice. But the sheer cost of the deal comes with the obvious, potential sting in the tail.

Given the way that aforementioned pendulum is erratically swinging where web services are concerned, buying Facebook is undoubtedly a gamble. There are some companies out there, though, who simply can't afford not to be seen at the betting table...