Know If Facebook Have An Intention To Buy Twitter

Does Facebook Have Any intentions of Buying Twitter

Mark Zuckerberg of Facebook attempted to buy Twitter not once, but twice, via official means and through co-founder Jack Dorsey. Nick Belton’s latest book Hatching Twitter: A True Story of Money, Power, Friendship, and Betrayal goes into depth on the attempts.

I’ll have a complete review of the book up shortly, but one paragraph in particular stood out to me. It was late October 2008, not long after Dorsey had been fired as CEO and demoted to the position of Chairman, with no voting shares or operational authority. Twitter co-founders Eve Williams and Biz Stone had been asked to meet with Facebook CEO Mark Zuckerberg. What is the goal? Twitter has been purchased.

Belton says that Zuckerberg had been working with Dorsey for months to attempt to negotiate a buyout. But his plans were thrown into turmoil when Dorsey was fired as CEO. At one point, an email to Jack provided a point-by-point explanation of why Facebook Twitter made sense. Among those reasons was the standard threat that Facebook could chose to ‘create things that went farther in [Twitter’s] direction,’ a technique that we’ve personally heard numerous stories of Zuckerberg using. The implication is that if you don’t sell to us, we’ll clone your product.

During the discussion, Williams and Stone proposed a $500 million value. Dorsey had previously told Zuckerberg that this was the range that would be requested, so Zuckerberg was unsurprised.

However, the sale did not go through, and the reasons for the refusal were detailed in an email from Williams to the board, which is partly cited in Belton’s book.

There seem to be three reasons to sell a business, according to Eve, in an e-mail to the board explaining why they should reject Facebook’s offer. 1. The price is adequate for or represents the worth of the business in the future. (“We’ve often said that Twitter is a billion-dollar business. “I believe it is many, many times that,” Eve wrote.) 2. A rival poses an immediate and very serious danger. (Nothing will “offer a genuine danger of bringing Twitter to zero.” 3. You have the option of going to work for someone wonderful. (“I don’t use [Facebook] at all. And I have a lot of worries about their employees and how they do business.”)

This section has a few noteworthy topics, which we have highlighted. The first is that the board of directors viewed Twitter as a billion-dollar business in 2008, whereas Williams saw it as many times that. Twitter had less than 11 million users in2008, and had yet to see the exponential growth that would occur in early 2009 as a consequence of exposure such as Ashton Kutcher’s public competition against CNN to become the first million-follower account. Twitter’s latest IPO filing values the business at about $11.9 billion. Twitter’s leadership had confidence despite a shaky infrastructure that was still swaying under the weight of the users it did have.

This belief extended to the notion that there was no rival, including Facebook, who could offer a “serious danger of bringing Twitter to zero.” Twitter’s idea and execution were so distinctive that even a firm with Facebook’s resources couldn’t replicate its behavior and success. Another story in the book about a potential $12 million Yahoo purchase, which was politely rejected very early in Twitter’s existence, reinforces this. Even with just 250k active users of what was still an Odeon side project at the time, the figure looked so low to Biz, Williams, and Dorsey that it became a running joke.

Finally, Williams was concerned about a cultural mismatch. The novel as a whole delves deeply into some very flawed, deeply human people. However, one common thread is that the primary founders of Twitter were all searching for methods to democratize human relationships. That began with Odeon and continues with the Twitter experiment. Williams believed that mixing with Facebook’s corporate culture would harm Twitter and was prepared to risk hundreds of millions of dollars that it would be better off without it.

We seem to be hearing more and more about Silicon Valley’s mercenary character — and the appeal of ‘acquisition as a business strategy’— on a daily basis. However, it turns out that individuals are still making choices based on factors other than the seven deadly sins.

Furthermore, the effect of thinly disguised threats on talks cannot be overstated. They often leave a bad taste in the mouth, and we’ve heard of more than one negotiation with Facebook that was ruined by this kind of hint-dropping. Facebook took almost three years to replicate Twitter’s basic ‘follow’ function, releasing Subscribe in 2011. It was renamed ‘Follow’ later on.

Dorsey, for one, was unsure about a Facebook purchase, stating, “If the economics are right, there’s a success story in either route.” He was fresh off his dismissal as CEO at the time, with little chance of regaining any meaningful influence in the business. That was incorrect, owing to helpful investor Peter Fenton, but it’s not unexpected that he viewed the money as a fair exchange.

However, the board agreed with Williams’ rationale and turned down the offer. Dorsey would subsequently be aggressively courted by Zuckerberg, but he would be denied a job as head of product. Dorsey never joined Facebook, and when Twitter goes public, he’ll be able to reclaim his voting shares.

Interesting side note: Williams wrote about the offer and the three reasons earlier this year but never revealed that it was from Facebook. An intriguing quote from the article:

At the time, the offer we had on the table for Twitter, although a lot of money and a tremendous victory for investors and everyone else engaged, didn’t seem to capture the potential. Even though we weren’t big, and there were still many skeptics, I felt our potential was limitless.

Wrap Up

In the case of Twitter, we had no inclination to sell. I had just been appointed CEO and was eager to get started, as was the rest of the staff. Furthermore, the business with which we were speaking did not seem to be one in which we would fit especially well or in which the team would be overjoyed.

The chapter depicts an interesting alternative scenario in which Facebook acquires Twitter, thus creating a critical monopoly on the world’s biggest and most recognized social networks. And an illustration of how the ideas of commercial acumen and moral code may still be combined.