Social Networks, Bebo And Digg Hire Financial Brokers

Posted Dec 20, 2007

The acquisitions that Yahoo!, Google, Microsoft, and eBay have made over the last year has made
things a lot more interesting. Between these 4 companies, they have acquired social networks and VoIP technologies that have banking companies swooning just like they were in the late 90’s and early 2000’s.

During Digg’s tenure as a Web 2.0 company, they have received over $10 million in funding. Kevin Rose, the founder of Digg has also been working on a couple of other start-ups, Revision3 and Pownce. Rumor has it that Digg CEO, Jay Adelson has hired Allen and Company, an investment banking firm to broker a deal worth $300 million or more in the form of an acquisition. Rumor also has is that InterActivCorp is one of the leading interested parties in an acquisition.

In my opinion, I think Digg is great property for an acquisition. But for the amount that they are looking for seems a little stretched. I think this because I feel that Digg users seem rather unstable and are constantly being tampered with. In the last couple of years, Digg has removed the listing of their top users, created a new social network that involves “Shouting Out” stories to other users (which seems more like spam to me), and even saw a major user revolt late April/early May 2007 (remember 09-f9-11-02-9d-74-e3-5b-d8-41-56-c5-63-56…. controversy?). Digg gives a lot of control to the end user which can be a strength, but can also be a major weakness. Digg users tend to be sensitive and over-express it when they feel like Kevin Rose/ Digg isn’t acting like “one of the people.”

Will Digg see an acquisition soon? So far it’s only speculation since there have been multiple opportunities for Digg to become acquired.

Social network, Bebo is also rumored to have hired a bank in order to either raise a substantial amount of funding or for an acquisition. Bebo reports that they have more than 40 million total users, of which 12 million are active in the UK and Ireland. Traffic has doubled since last year for Bebo. I picked up the rumor from VentureBeat.

Bebo is also working with Google on OpenSocial, an open-source developer platform to let third parties create applications on their own social network, similar to Facebook Applications. Bebo has reportedly seen itself being courted for an acquisition before, but none that have gauged its interest of a price-tag above $1 billion.

Social networks are a hot commodity, but with other social networks like MySpace, Friendster, Facebook, Hi5, and Orkut, the market is just becoming more saturated. Brokering such a deal through a bank will be challeging given today’s market.