Yahoo Lost Face Losing Facebook

When Facebook reputedly rejected Yahoo's billion-dollar buyout offer, Yahoo retreated to the sidelines. The missed opportunity may be one that did not really exist.

In brief, May thinks Yahoo guessed wrong on Facebook's growth:

Simply put, the assumptions/metrics used in this analysis have proved too conservative. For instance, the analysis assumed 22.0 million registered users in 2007 and total pageviews per active user per month of 1,061. Based on press reports and on our industry contacts, we believe Facebook recently surpassed 21 million registered users (with a 90%+ monthly active rate) and is generating 1.5 billion total pageviews per month.

That would imply 2,329 average monthly pageviews per active user - more than double Yahoo!’s reported assumption of 1,061.

Determining just where Yahoo should have placed Facebook's value is open for debate. May doesn't mention this, leaving bloggers like Barron's Eric Savitz to

In one point, Ashkan noted the $100 million in revenue Facebook is on target to generate is the magic number when companies start to think about going public. There is an important caveat to Facebook's revenue, which he also highlighted:

But if you put two and two together, you will see that MSFT accounts for the lion’s share of Facebook’s revenues, - "Facebook is on target to generate $100 million in revenues this year." - "The MSFT deal is reportedly guaranteed to deliver about $200 million in ad revenue through 2008," or roughly $50-75M per year (I guesstimated the yearly breakdown).

Through 2008, Facebook has time to build up its ad sales and create demand for its stock before going public (or possibly being acquired). The price tag could end up much higher than the one that gave Yahoo pause. If the plan all along was for Facebook to go public, Yahoo may not have really missed out on anything, even though it will feel that way.