It was reported earlier this week that Yahoo was prepared to shell out up to $1.62 billion to buy Facebook, based on the inflated expectation that it could generate a billion-dollar profit by 2015. Apparently Yahoo's offer of $1 billion to Facebook got rejected, and the company never got another chance to bid. While most rational people would have taken the money and ran, Facebook now says it's no longer for sale, with a board member saying they want to build the company up. We'd like to again take this opportunity to point Facebook to the history of Friendster, which is the classic example of not knowing when to sell out -- the company was being shopped around for $5 million earlier this year, after Google had offered to buy it for $30 million worth of pre-IPO stock in late 2003, and a price of $200 million was mentioned for it in 2005. But, true to form, Facebook is following the Skype billion-dollar buyout plan (most recently enlisted by YouTube): a board member says that the company isn't for sale... but that it's worth $8 billion -- as much as that fly-by-night youth-oriented business MTV. Clearly the Skype blowout buyout business model is seeing the effects of inflation (otherwise known as a bubble), which is mildly amusing given talk that Skype is having some trouble meeting the targets to trigger the $1.5 billion earnout that was on top of the $2.6 billion eBay paid for it in cash and stock. Getting the cash up front, then running as far and as fast as you can, really seems like the best play for these companies.
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