Message Font: Serif | Sans-Serif
No. of Recommendations: 0
Will Viacom Remain a Wallflower?

Let's say you're Sumner Redstone. Your top people at Viacom (VIA) let that other billionaire media mogul, Rupert Murdoch at News Corp. (NWS), scoop up the social networking upstart MySpace last year for $580 million. What would your next move be?

Well, you might spend a year or so on the sidelines, watching how the MySpace deal shapes up and taking some comfort in all the chatter about the risk involved in that transaction. But after a year, MySpace is still growing strong. And then it signs a landmark $900 million deal with Google (GOOG), boosting its credibility and nearly doubling its money on the acquisition. What now?

Well, you'd probably think about acquiring one of the social networking sites that compete with MySpace. There has been speculation in recent days that Viacom has been in talks with social-networking site Bebo, which is based in San Francisco but has the bulk of its audience in Britain and Ireland.


Such aspirations put potential buyers such as Viacom in a tough spot. It refused to match the $580 million News Corp. paid last year for MySpace. Does it really want to pay several times that amount for Facebook or Bebo, which are smaller? MySpace had 54.5 million unique monthly visitors in July, while FaceBook had 14.3 million and Bebo had 2 million, according to market researcher comScore Media Metrix.

And despite its size, MySpace is expanding its community at a rate of 157% on a year-over-year basis. Facebook is growing at a rate of 117% and Bebo at 85%, suggesting that neither site is on track to overtake MySpace when it comes to scale.

The market may soon find out whether up-and-coming sites such as Bebo and Facebook will command a price in the billion-dollar range. Some analysts think it's possible. "I wouldn't be surprised if they got something in that range. Part of it is hype, and part of it is what appears to be the power of social networking on the Internet," says Internet analyst Greg Sterling of Sterling Market Intelligence in Oakland, Calif. He thinks there's a good chance Bebo or Facebook or both will sell over the next few quarters.


He believes that both Facebook and Bebo have the potential to generate millions of dollars in profit over the next few years, and that they might one day deserve a valuation in the billion-dollar range. "But they won't get that much now because the risk that they won't grow into those valuations is too high," Marlin says.
Print the post  


What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.