My Thoughts on the Friendfeed Acquisition by Facebook

Facebook, the leading global social network, dropped a bomb on the sociosphere on Monday by announcing they had bought the very innovative social streaming service called Friendfeed. I gave an interview to Marketing Magazine (Canada’s Advertising Age) explaining the rationale behind the acquisition. Here are the highlights:

  • First and foremost, Facebook bought a great engineering team and excellent technology assets. The 12 Friendfeed employees and co-founders were innovating at a breakneck speed. Two of the co-founders, Bret Taylor and Paul Buchheit, used to work at Google where they respectively created Google Maps and Gmail.
  • It’s all about the search war. Google vs. Facebook. Algorithmic search vs. real-time search. Machines vs. humans. Facebook had pretty much been beaten by Twitter on the real-time activity and real-time search front. Rumor has it that when Twitter turned down a rich offer from Facebook to buy them, Facebook decided to take a better look at Friendfeed.
  • The transaction has been estimated at close to $50 million by the Wall Street Journal. According to the newspaper, “The company paid roughly $15 million in cash, with the rest in Facebook stock that vests over several years and would be worth roughly $32.5 million based on the $6.5 billion common valuation an investor recently placed on the company.”
  • Such an exit for Friendfeed is very good given that their traffic had plateau-ed at 1 million users per month, they didn’t have any revenues and they never managed to become popular outside of the Silicon Valley digerati. They created amazing and innovative technology though.
  • The founders did not sell because they wanted to cash out. They already did that with their Google options (Buchheit was employee #23 at the Mountain View search engine). They must have felt integrating Facebook was the right move at the right time.
  • The Friendfeed team will pretty much become Facebook’s R&D department.

What it means: Smart move by Facebook. Very good move for Friendfeed. Working inside Facebook will give the Friendfeed team more resources to execute on their innovative ideas. It gives Facebook great technology, amazing people and faster execution.

I’ve seen similar moves happen in the Local Media industry in the last few months. For example,

  • Truvo, a directory publisher in 6 European countries, acquired yelloyello, a startup from the Netherlands, in December 2008. Truvo transformed yelloyello into Truvo Labs to leverage social media technologies within the Truvo network.
  • AOL, who recently restructured to put “local” as one of their corporate strategic pillars, bought Patch, a US citizen journalism startup, and Going.com, a US local event portal in June 2009.
  • Herold, the Austrian Yellow Pages owned by European Directories, made a strategic investment in Tupalo, a social Yellow Pages site from Austria, in June 2009.
  • Canpages, a Canadian directory publisher, acquired ZipLocal, a social Yellow Pages destination site in June 2009.

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