Facebook faces reality?

This morning, I received a WSJ alert in my email, stating that Facebook is in talks with Yahoo! to sell itself for $1 billion after talks with Microsoft and Viacom. WSJ needs a login, but here's a link to check out:

http://www.techcrunch.com/2006/09/21/facebook-and-yahoo-in-acquisition-talks-for-1-billion

Facebook, a prototypical Web 2.0 company, has been in the news lately. I think it was last week that stories about user backlash surfaced. Facebook had added a couple of features that did not sit well with users, one of them being a new tracking feature. This prompted the founder and 22 year-old CEO Mark Zuckerberg to post a message to users:

http://blog.facebook.com/blog.php?post=2208197130

Then, I was quite shocked to hear that Facebook has opened up its service to all, meaning that you no longer need a ".edu" to be a member. (Read Om Malik's comment on this: http://software.gigaom.com/2006/09/11/facebook-goes-for-bigger-pond). This really surprised me because Facebook's strength lay in the exclusivity that protected the site, at least to a certain extent, from undesirable individuals that seem to surface on MySpace now and again. Sure, they need growth, but they had not done too poorly so far, what with 9 million users already and steady stream of high-schoolers and college kids out there.

But now, it's starting to make sense. There have been stories about Facebook wanting to sell before. Perhaps now, Zuckerberg and Co. are adding "value" to the business, readying for a sale. Little they may care about those who got them here, let the acquiring company worry about that.

Such an acquisition may not be such a bad idea for Yahoo!, whose stock needs even more help with the 11% decline two days ago.

http://biz.yahoo.com/ap/060919/yahoo_outlook.html?.v=10

Yahoo! has tried its hand with the social networking phenomenon, namely 360 360. But despite having over 300 million unique users, it's fair to say that 360 is not all that successful. Furthermore, Yahoo! as a brand is not hip and popular in thr coveted 18-24 demographic, so buying Facebook could all of a sudden make it a stronger player in the youth market. Yahoo! has had a decent track record of stitching companies into its portfolio and leaving them be. Perhaps the best example of this is Flickr, which still exists in its original format despite the existence of Yahoo! Photos.

If there is indeed any credence to this story, then I say Zuckerberg should sell before it's too late. I'm not sure whether the current users are going to be loyal with the significant changes to the business, which could devalue the company going forward. There are worst things than having several hundred million in your pocket at age 22.