Facebook Picked Up Friendster's Patents For More Than It Cost To Buy Friendster
from the patent-valuation dept
A few years back, there was quite an uproar over the discovery that Friendster had received a patent on the basic concepts of "social networks." The company, which was already becoming an also-ran in the social networking space made a lot of noise about enforcing the patents against competitors, but not much came of it. However, the company did keep collecting patents. We were actually wondering about those patents a couple months ago when Amazon popped up with a patent on some basic social networking concepts. Turns out that just a month earlier Facebook had quietly bought Friendster's 7 patents and 11 patent applications for an astounding $40 million. Of course, it wasn't $40 million entirely in cash, but a mixture of cash, advertising and "payments for virtual goods" (don't ask).What's impressive here is that the entire company Friendster had been sold just a few months earlier for... $39.5 million. So the buyer has effectively recouped the purchase price in less than a year. Impressive. As for why Facebook just wasted so much money (even if not all of it is "real") on a bunch of patents? As Liz Gannes postulates, it's probably just to keep the patents from getting in the way of an upcoming IPO. For a company currently valued at such insane levels, $40 million to clear an obstacle to an IPO is nothing major -- especially when a portion of the deal is via in-kind services. Hopefully Facebook knows better than to start using the patents offensively, but somehow, I get the feeling this is not the last we'll hear about these patents.
Filed Under: patents, social networks
Companies: amazon, facebook, friendster