Facebook - Smart or Stupid?
As we all know, one of the biggest stories in 2006 was about a deal that never happened. Despite multiple rumors of buyout offers from various suitors, Facebook rejected them all and decided to stay independent. Now, whether that was a smart decision …
Context & Ripple Effects
Facebook spent the back half of 2006 acting like a company built to stand alone: it opened up its API — wait, wrong id — it opened its API to outside developers, launched Notes as a blogging tool, and rebuilt profiles around News Feed and Mini-Feed. Those are platform moves, not the tidy-up a company does ahead of a handover.
Against that, GigaOM weighs the 2006 rumor mill: multiple suitors reportedly offered buyouts, and Facebook rejected all of them. Neither side has confirmed the offers, so the piece is really a judgment call on whether Mark Zuckerberg's refusal was discipline or hubris.
First-order effects
- Facebook enters 2007 with no exit on the table: Zuckerberg retains full control, and the company's valuation now depends on future funding rounds and advertising revenue rather than an acquisition price.
- Whatever suitors made offers in 2006 — claims still unconfirmed publicly — must decide whether to re-bid into a rising expectation, since each public rebuff raises the bar for what independence has to prove.
Second-order effects
- If the rumored bids were real, comparable consumer-web founders gain negotiating leverage: Facebook's refusal becomes the reference point when their own suitors name a number.
- Facebook's API opening puts pressure on rival social networks to expose their own data and features or cede the developer ecosystem while attention concentrates on one independent platform.
Third-order effects
- If fast-growing consumer web companies can self-fund on audience growth instead of selling early, founder control over an extended private life becomes the default structure for the next generation of startups — with acquisition premiums repriced accordingly.
The trend: Consumer internet companies with steep user growth are increasingly declining acquisition exits, betting that scale converts into standalone value rather than a sale price.