Tuesday, September 25, 2007

How Terry Semel Blew Yahoo's Deal For Facebook

How much is Facebook worth?  $5 billion?  $10 billion?  $15 billion?  Whatever the number, it's probably a lot more than the $1 billion Terry Semel's Yahoo could have bought it for a year ago.  As Yahoo continues its soul-searching, here's the unpleasant history of Semel's catastrophic decision, courtesy of Fred Vogelstein at Wired:

When Yahoo came calling with a bid of $1 billion in cash, the pressure became too much. [Mark Zuckerberg] relented in July [2006], verbally agreeing to sell Facebook to Yahoo. Strategically, it seemed like a good match. Yahoo had hundreds of millions of users, but its foray into social networking was struggling. Facebook had cool tools and was looking for a mass audience.

The timing, however, couldn't have been worse. In the days after Zuckerberg agreed to sell, Yahoo announced it was projecting slower sales and earnings growth, and that the launch of its new advertising platform would be delayed. Its stock price plunged 22 percent overnight. Terry Semel, Yahoo's CEO at the time, reacted by cutting his offer from $1 billion to $800 million. Zuckerberg, who had been warned about Semel's reputation for last-minute renegotiations, walked away. Two months later, Semel reissued the original $1 billion bid, but by then Zuckerberg had convinced his board and executive team that Yahoo wasn't a serious partner and that Facebook would be worth more on its own. He rejected the offer and became famous as the cocky youngster who turned down $1 billion. Wired