Early Facebook investor Peter Thiel's interview with BusinessWeek make it sound like while the talks were serious, they simply didn't go that far: "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." Twitter, according to an anonymous source, was told that the social network's valuation was in the range of $8 billion or $9 billion but was aware that employees were privately trading stock at a valuation that was, at most, half that.
So the deal didn't happen.
Controversy over the true value of the privately owned company also came into play earlier last year when the settlement of the ConnectU vs. Facebook lawsuit was being negotiated. Court documents were redacted to keep the true valuation under wraps, and media outlets, including CNET News, petitioned to have the documents made public. The founders of small social-network ConnectU, who had sued Facebook because they claimed founder Mark Zuckerberg stole their code and business plan, contested the original settlement when they said they had been misled as to Facebook's true valuation.
Way back in October 2007, Microsoft invested $240 million in Facebook at a $15 billion valuation. The company's actual valuation was never really that high, and with the recession, it's currently somewhere south of $4 billion.
But valuations aside, would Twitter really have been a smart buy for Facebook? The "status update" feature on Facebook is very Twitter-like, but integrating the two services would've involved all kinds of complications. For one, Facebook's content is still hidden behind a log-in wall, whereas Twitter's "tweets" proliferate all over the Web. And while Facebook's profitability woes have been well-documented, Twitter beats it in that department: the buzzworthy start-up hasn't yet made public a business model of any kind.
In his interview with BusinessWeek, Thiel, one of the founders of PayPal, didn't discount the possibility that Facebook could make other acquisitions in the future. But as the interview also points out, that could be difficult as long as Facebook's valuation remains as volatile as it has been in recent months.