Facebook Buys Friendster Patents for $40M
Facebook bought the entire Friendster portfolio of social networking patents earlier this year. The seven patents and eleven patent applications had been transferred to MOL Global when it bought Friendster for about $39.5 million late last year.
Context & Ripple Effects
Friendster's endgame was an arbitrage: Malaysian payments firm MOL Global paid roughly $39.5 million for the company late last year, then sold its seven social networking patents and eleven applications to Facebook for $40 million — recovering nearly the entire purchase price from the intellectual property alone. What Business Week framed in 2006 as a potential Friendster comeback ended instead as a patent liquidation.
The buyer relationship matters too: weeks earlier, Facebook and MOL were reported to be nearing a significant gaming and payments partnership in Asia, so this transfer deepens an already-forming commercial tie rather than arriving cold. For Facebook, the deal lands while it dominates third-party site logins ahead of Twitter, Google and Yahoo — and as it reportedly circles check-in startup Hot Potato.
First-order effects
- MOL Global exits the patent business having effectively acquired Friendster at close to zero net cost, keeping the brand and Asian operations while Facebook takes the entire portfolio.
- Facebook adds seven granted social networking patents plus eleven pending applications covering territory its own product heavily occupies, strengthening its defensive position.
Second-order effects
- Rivals building social features — Google and Yahoo among them — now face a competitor holding some of the category's earliest filed claims, raising the cost of any patent confrontation with Facebook.
- The deal sets a market-clearing precedent that a dormant social network's residual value sits in its filings, encouraging other holders of legacy portfolios to shop theirs.
Third-order effects
- If early-mover patents keep changing hands at these prices, social networking competition shifts partly from user growth to litigation readiness — a pattern consistent with Facebook's broader push to assemble defensive IP before any public listing.
- Defunct-network patent sales could become a standard exit path, decoupling founder outcomes from whether the service itself survives.
The trend: Social networking competition is increasingly fought over accumulated patent portfolios, with failed networks' filings recycled as strategic currency by their successors.