News has been swirling around the rumored Google-Twitter hook up. Seems like it's losing steam and may eventually just become a regular business/product development deal. I'd say the later makes more sense given that Twitter doesn't need to be bought and is just dipping its toes in the world of revenue generation. Google's got the advertisers, Twitter's got the inventory so it makes more sense for Twitter to remain independent and see if it can't make some of its own dough. They can always go back to testing the sell out waters in another year or so. Given their momentum and traffic growth, they won't be losing market value by waiting. Plus if they can rope Yahoo into acquisition discussions next year (when the stock should have hopefully gone up a little more), it could only help stir up the froth. Also, let's not forget that Microsoft might be interested at that point.

I'm reading the Techcrunch post re: Twitter and it's Series C round of $35M. Congrats to them. In reading the comments, I noticed there was a fair amount of hate re: why anyone would continue to fund a company that doesn't have a revenue generating strategy in place. That's a legit stance. Still, I don't have as much pessimism about Twitter than I do about say, Facebook. For one, Twitter hasn't unveiled its revenue generating products yet. For all we know, it could hit a monster homerun. Facebook on the other hand has made several attempts at generating revenue with some success (and some failures - Beacon anyone?). Still, I'll reserve judgement until after they roll out those proposed revenue generating products.
 
One comment in particular was from a guy named Nathan:

Useless is a bit much. The service is useful to millions of people who use it multiple times every day. The issue isn't the usefulness of the service, it's the fact that it doesn't generate revenue. A big difference. Also, it seems that Nathan is a little bitter that his revenue generating start-up can't get funding. On that point, I feel for him. Fundraising is not easy. You'd be lucky to get one second meeting out of ten first meetings with investors. We've been fundraising for about a month and had to hear a lot of no's before we got to the handful of promising second/third meetings we are entering into now. Our business, like Nathan's, is not that sexy though we do generate revenue and have very strong growth projections.
 
The analogy I like to use is this. Someone comes up to you and asks for a million dollars to open a couple of Denny's franchises. The person provides solid sales numbers, tons of historical data, etc. and tells you that you'll most likely make back your money in 3-5 years and then receive a nice 10% dividend each year. Then another person comes and tells you they need a million dollars to open a new concept high-end restaurant with a new chef who has worked under the best chefs in the country. Who would you fund? My answer would be the Denny's franchise, but that's because I'm not rich and like the stability of a safe investment. For investors who already have money, the idea of a nice solid investment throwing off 10% just doesn't excite them. They need the next billion dollar payout - the next YouTube, Yahoo, or Google. Otherwise, they'd just go buy bonds and commodities.

AllThingsD is reporting that Carol Bartz (previously CEO of Autodesk) has accepted the Yahoo CEO position. Good move for her as there are only a handful of companies with iconic status in Silicon Valley (if not the country). It's interesting how CEOs tend to reflect the state of where a company is and will most likely go. When Koogle was CEO, he was basically brought in as the adult to mind the store the kids built. His tenure was marked by impressive growth but not really sure if he was the driving force behind that or more just the conductor of the train already on track to do what it was going to do. Next was Semel who was brought in because Yahoo no longer wanted to be a tech company but a mass media player with its hands in Hollywood, Madison Ave, etc. Yang's short tenure saw Yahoo try to get back to its tech roots, albeit with little or no success. What will the Bartz era bring? Probably sound management with a focus on maximizing profits and shareholder value. Whether that means trimming more fat or selling off a business unit for a pretty penny (perhaps Search to one S. Ballmer?), I'm not really sure. One thing that's certain is that Bartz is a very capable business manager, often compared to Mark Hurd over at HP. I hear he's done an ok job.
 
Of bigger concern to me is the fact that in a way, Yahoo was able to get an insider without getting an insider. In my opinion, the whole point of a new CEO was to inject new life into the company - get an outside perspective because the inside one was not working. Bartz has had a prior relationship with both Yang and Decker (sits on Cisco board with Yang, Intel board with Decker) and are good friends. Let's hope that their prior relationship doesn't prevent Bartz from doing what needs to be done.

As reported by the Wall Street Journal, Facebook has pulled its planned employee stock sale. This would have allowed the 800+ employees of Facebook to sell a portion of their stock to private investors - supposedly $900,000 worth or 10% of vested shares, whichever is less. Reasons that some outlets are stating was that Facebook couldn't find any private investors who wanted to buy the stock at a company valuation of $4 billion - a far cry from the $15 billion valuation Microsoft got for its $240 million investment.
 
I'm not really shocked that there were no takers at $4 billion. At the time of the original Microsoft investment, I thought Facebook's value was somewhere around $7 - $8 billion. Then when Techcrunch got a hold of some internal financials, I did a back of the envelope recalculation and stated that they should be valued at $4.5 - $5.25 billion which is 15 times projected 2008 revenues. Contrast that with Yahoo or Google which are valued at 2.19 and 4.13, respectively. These have gone down some recently but even if you calculate at January 2008 share prices, Yahoo and Google would still only trade at 4.44 and 10.91 times revenue, respectively. You can make the argument that these are more mature, slower growing companies but these are also PROFITABLE companies - in the case of Google, VERY PROFITABLE. Facebook, on the other hand has huge capital expenditures for servers/bandwidth ($200 million according to Techcrunch) and a hard to monetize audience. They may be GAAP profitable or break-even but most definitely not cash flow positive. Given the eventual slowdown in the online advertising market, I don't think it will get easier for them to squeeze more revenue from their users. However, the cost to support their growing legion of users is going to grow as they'll need more servers and bandwidth.
 
With that said, my new calculation of Facebook's value would only be at best 5 times revenue or $1.5 - $1.75 billion. Of course if they had allowed the employee sale to reset the value of their company, I doubt they'd raise enough through an eventual IPO to cover their growing capital expenditures. The more important question is, how much of the $516 million that they've raised is still there? My guess is that if they can't raise another $100+ million round soon, Facebook could be in for some tough times.

I'm reading the details of the Big 3 automaker's recent request for a $25 billion bailout.  Specifically, I'm referring to high salaries for executives in the midst of multi-billion dollar losses.  It's not the amount of the pay that bothers me.  CEOs and executives of multi-billion dollar companies are entitled to compensation above and beyond what normal folk should get.  What really gets my goat is that the domestic automobile industry has been lagging behind foreign players for years now yet none of these CEOs really seemed to care.  Instead of innovating, they decided to ask for a handout.  And I'm afraid that the government will give them this bailout for fear that tens of thousands of rank and file employees will lose their jobs.  The problem is that it will continue to perpetuate a philosophy of mediocrity amoung the employees of the automakers.  Do you think if Yahoo was given a bailout that Jerry Yang would have stepped aside?  It took the dramatic act of Yang leaving Yahoo for that company to finally move forward.  I doubt any of these CEOs would do the same.

On a side note, Toyota's chief makes about $1 million a year and his company generated close to $15 billion in profits last year.  I guess I should be a little upset.