Message to Facebook – take the money!

Big news this week is that Microsoft is in talks to buy a minority stake in Facebook.  The rumor is that Microsoft has approached Facebook with proposals that could value the site at $10B or higher.  Of course, the other rumor is that Google has expressed a similar interest.  My advice to the Facebook folks: take the money!

The key to Facebook’s ability to survive as a social networking platform (and if my kids are any indication, it sure has the potential to stick big time) will be continual innovation.  Mark Zuckerberg and the folks at Facebook are in an incredible position right now.  They’ve already been able to get a very good advertising deal from Microsoft that could get Facebook as much as $300M by 2011 if the stars all align.  The interesting challenge has been that the current crop of Facebook users do not seem to respond very well to online ads.  That means that their ability to continue to make big time money from social networking is at risk – unless they can figure out how to continually innovate in ways that no one has thought of yet, and that’s going to be really, really hard without a lot of capital to remain viable in the process.  So, just in case you’re listening, Mark, with all the hype you are riding on right now, I say don’t be greedy and go for an IPO – take the money now and use it to focus on getting some great folks and maybe acquiring some great companies so that you can remain an independent company with the freedom to make your vision sustainable.

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