By Jemima Kiss: So Facebook did indeed try to buy Twitter, we learn today. Investor Peter Thiel told Business Week the two sides could not agree on price or the structure of the company when they discussed a deal in the autumn.
That price issue was down to the value being paid in Facebook stock, and that meant agreeing on what Facebook was worth; Microsoft's proposal just over one year might have valued the firm at $15bn, but Facebook's own internal valuation was $3.7bn. Thiel said: "It became pretty clear it wasn't going to happen. The deal would have to be done with Facebook stock. And then you have to figure out how much the stock is worth."
The Twitter deal was reported at $500m. They also offered $100m in cash and the rest in stock - but based on Facebook's own valuation of $8-9bn. No wonder Twitter backed off. One source at Twitter said Facebook was obviously interested but "didn't have much conviction".
Could it still happen? Thiel said he thinks Twitter is worth more than people think, and the company itself are adamant that it has a long way to go before it reaches its full potential. And the two still talk, though without any serious discussions.
And while Twitter's money-making potential has been under closer scrutiny, Facebook too is focused on 'improving its product' rather than 'doing a MySpace' and flooding the site with ads. If it did that, Thiel said, it could make as much as $1bn a year from advertising if it "turned on all the dials".