Google favours Facebook partnership, but not takeover

With speculation over the future of Facebook rampant, and everything from rival tech companies to private equity allegedly weighing up bids for the company, the web's 800 pound gorilla, Google, has surprised the market by backing potential partnerships with Facebook.

Consolidation in the social networking space has been growing, with high-price deals including the takeover of MySpace and Yahoo's purchase of sports social networking site Rivals.com. Facebook is expected to join the ranks of the social networking sites sold for big money, with an estimated market value of $ 2billion (£1 billion).

Front-runner among established web businesses to buy Facebook has been Google, and co-founder Sergey Brin said his company would be happy to talk with Facebook about potential collaborative projects, but played down talk about takeover prospects for the up-and-coming social networking player.

"If they come to us, we'd certainly be open to talking," Brin said, speaking at the 25th annual Allen & Co media deal-makers conference in Idaho. "But I think they're building a great company of their own."

Facebook membership has exploded in recent weeks to more than 29 million active members from 24 million in late May. It now has more than 3.5 million users in the UK and has attracted an advertiser-friendly mix of students and 30-somethings with disposable income.

The growth in Facebook's UK user audience is surprising, given its US university origins coupled with the fact that most of that growth has come in just the last eight months. Data from comScore shows that Facebook had just 500,000 UK users in October 2006.

By comparison, rival MySpace has attracted about 60 million unique users in the US and about 90 million globally.

Last year, Yahoo was ready to pay some $900 million for Facebook but the offer was rejected as too low, according to sources familiar with the situation.

Facebook was founded in 2004 by then-undergraduate student Mark Zuckerberg as a social meeting site for fellow students at Harvard University, but it has seen its use spike since it opened up in May to anyone rather than just worldwide student groups.

Zuckerberg has said repeatedly he is committed to building an independent company. He reiterated this position in May when he announced the plans to open up the platform to other software developers, who can build applications on the site.

"I already thought Facebook should remain independent. This [announcement] just strengthens that," he said.

Sources close to the company say moves to bolster its management team and put its finances on a firmer footing through experiments with advertising sales are aimed at preparing Facebook for a potential stock market floatation, although no specific plan has been set.

Many Silicon Valley observers also consider Microsoft a potential bidder if Facebook were put up for sale, though any such deal would almost certainly be scrutinised by competition bodies in the US, Uk and Europe. Microsoft already supplies advertising services to Facebook and is hungry to expand its web portfolio.

Max Levchin, chief executive of Slide.com, the most popular maker of mini-applications known as widgets, said Facebook has borrowed many elements of Microsoft's tried-and-tested strategy of serving as a platform for third-party software makers.

"I would be amazed if [Microsoft] weren't trying to get their hands on Facebook," he said in an interview earlier this week. "The whole platform play is so obvious."

Asked if the rise of social networks has had a negative impact on Google, Brin said, "Social networks are creating lots and lots of content ... and that's more for us to search."

(Additional reporting by Eric Auchard in San Francisco)

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