That's the view of Peter Thiel, a Facebook director who invested $500,000 in the Palo Alto, Calif.-based company's first funding round in 2004 and an undisclosed amount in its third round last year. In an interview, Thiel said despite having serious talks with Sunnyvale, Calif.-based Yahoo! Inc. about an acquisition during the past year, the company has better things to do than listen to low offers from potential acquirers.
'We're so far apart with what we think it's worth and what other people do it doesn't make sense for us to have conversations,' Thiel said. 'Either they're underestimating it or we're overestimating it, but given that disconnect, it would be a complete waste of time for the company to be talking with people.'
Facebook has been a popular subject of takeover speculation, but Friday, July 20, it made a move that seems to support the notion that it might stay independent, at least for the time being, when it announced its first acquisition. The company said it would buy Parakey Inc., which develops software that ties information from a user's computer to the Web, for undisclosed terms.
If Facebook were to be acquired, Thiel, who is president of hedge fund Clarium Capital Management LLC and managing partner of VC firm Founders Fund Management LLC, estimates it would command a price tag between $7 billion and $10 billion. The market, on the other hand, values the company closer to $3 billion, he said. The estimate is derived from the valuation of New York-based Viacom Inc.'s MTV music television network, which has similar demographics to Facebook, he said. Facebook was founded in 2004 as a social-networking site to connect college students, then added high school students in 2005 before opening its virtual doors to all users last September.
The company has spent the past three years focusing on growth, and its 28 million-strong user base is set to double within the next year, he said. While its users are among the most devoted on the Internet — according to comScore Inc., an average visitor spent 186 minutes on the site during May — Thiel said the 'intensity of usage is not something that's been appreciated by a lot of the people early on.'
Thiel said the company is on track to post $150 million in revenues in 2007, though roughly half of that comes from a partnership it has with Microsoft Corp., which provides banner advertising and sponsored links on Facebook.
The company is set to roll out 'a slew of revenue initiatives' over the next few months, with more targeted advertising, including behavioral advertising that monitors viewing habits of users and targets ads based on their interests. It also will offer more local advertising and a classified marketplace. The company's current team is the best qualified to develop its revenue model, Thiel added.
'We have an extremely rich amount of data about our users, so we believe there will be some way to monetize it better than what people have done in the past,' he said.
In light of the fact that any potential buyer would have to take a leap of faith in determining what the company's future revenues will be, Thiel acknowledged this is not the best time for seeking out a buyer.
'If we have a fully developed revenue model, it would be much easier to value, and we would see if it made sense as a standalone business or with something larger,' he said. 'But we're very, very far from that point.'
Facebook also is not ready to consider a public offering, for many of the same reasons it is not considering a sale.
Thiel said the 'earliest' Facebook would go public is 2009, 'and hopefully not until significantly after that.' One route could be to emulate Mountain View, Calif.-based Google Inc. and go to the public markets after its business is well established.
'There are a lot of things Google did extremely well, and one of those was deferring the IPO decision until very late,' he said. 'It helped them build out the company team in ways they otherwise might not have fully done.'
Facebook does not need to raise a significant amount of money; its investors are patient, and it isn't close to triggering Securities and Exchange Commission rules that require companies to go public once they reach a certain size, said Thiel, who is also a co-founder of PayPal Inc., the online payment provider acquired by eBay Inc. in 2002. Observers have 'read too much' into a recent job listing on Facebook's site for a stock administration manager to manage its options program, he said, adding that this did not signal the company was on track to go public.
'I think the preference we have would to do neither — to neither take the company public or sell it,' he said.
If it were to consider a sale, it would take a large number to get the company's attention, Thiel said.
'If we got an offer from someone for $10 billion, we probably would listen to them,' he said. 'I don't think we're going to get that offer, and we're not going to solicit it.'
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