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Facebook (B) : The Start-up's Strategic Dilemmas



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Code : SNW0002

Year :
2007

Industry : Internet and e-commerce

Region : US

Teaching Note: Available

Structured Assignment : Available

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Microsoft and Google – The Battle for Facebook “Some industry executives believe the Internet today is facing the sort of turning point that the computer operating system sector confronted two decades ago. Whoever controls the technology platform for buying and selling online ads could hold tremendous power over the Internet industry for years to come – much as Microsoft was able to use its Windows operating system to shape the personal computers.”5 Dollars follow eyeballs, which is why Microsoft has joined rivals Google and Yahoo! in looking to acquire a stake in Facebook.6 It announced its willingness to invest as much as $300 million–$500 million to buy up to 5%stake.7 Microsoft’s investment, however, comes at a time when its executives believe that the tech company is not moving fast in the online-advertising world and can be left behind...

Facebook’s Future Facebook has been tempted by offers for buy-out or go for an IPO. Even when Yahoo! dangled $1 billion, Zuckerberg resolved to remain independent and not to take the company down the IPO route. He even went to the extent of firing an underling who dared to suggest that the company issue an IPO, according to Noah Kagan, a product development consultant.11 Peter Thiel, a Facebook board member, believes the company “does not need to raise a significant amount of money; its investors are patient, and it isn’t close to triggering Securities and Exchange Commission (SEC) rules that require companies to go public once they reach a certain size...

Friendster’s Rise and Fall Friendster, a social networking site debuted in March 2003, tasted initial success and fizzled out later on account of technological problems. Jonathan Abrams (Abrams), founder of Friendster, turned down Google’s offer of $30 million to chart his own course. Industry experts, at that time, felt Google’s offer would have provided a quick payout for the sites’ relatively little work. Andrew L. Anker, a top executive at a blogging company, recalled Abrams’ dilemma, “Jonathan had the Google offer, but he also had these very well regarded venture capitalists saying, ‘Let’s make this thing huge.’”16 Some of these venture capitalists included John Doerr, the legendary venture capitalist at Kleiner Perkins whose investments include Google, Netscape and Amazon.com; Bob Kagle, the Benchmark Capital partner who first spotted eBay; TimothyA. Koogle, once the chief executive of Yahoo!; Peter Thiel, a co-founder of PayPal and K. Ram Shriram, one of the first investors in Google and the most sought-after angel investor in Silicon Valley...

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