I guess there is really power in eyeballs again as both sites don’t have much in the way of unique technology, just a whole lot of eyeballs using their services. One side of me says they’re worth it as it looks like News Corp got a bargain in buying Myspace for $580 million.
However, the other side of me would be very scared about spending that much money on either company. Facebook has a strong grip on the college market, but there isn’t much of a defensible moat to their business. College students are fickle and if Facebook becomes uncool, that uncoolness can spread just as fast as their coolness did in the first place. Also, if they piss off their audience like they did recently by changing the way users can see information, they could see large groups of users leaving. There are also some interesting stories about Facebook founder Mark Zuckerberg and how he has been handling the talks as highlighted in this Techcrunch post, it sounds like he might be a little full of himself and Facebook’s place in the world.
YouTube also has problems in not having much of a defensible moat, and they also face some serious problems with copyright that could be a big legal mess for whoever would acquire them. Imagine if someone had spent $1 billion to buy Napster a few years back, how would that investment look now?
It used to be that to be acquired for numbers like this you’d need to have world-beating technology. Do Facebook and YouTube really have something here that can’t be ripped away from them quickly? I’m not so sure.