No rumor: Facebook made failed bid for Twitter

After months of rumors and blogosphere speculation, Twitter Inc. co-founder Biz Stone confirmed that Facebook Inc. had looked to buy his company last fall.

Stone's confirmation comes after Peter Thiel, an early investor in Facebook and a member of its board of directors, told BusinessWeek magazine of the company's failed attempt to buy to buy Twitter, a microblogging site that has taken social networking and the Internet as a whole by storm.

In an e-mail to Computerworld, Stone said that Facebook is looking to remain independent. “We're big fans of [Facebook CEO] Mark [Zuckerberg] and his team, but we feel very strongly that Twitter is just getting started. We're planning on building a strong, independent Twitter Inc.,” he said.

Meanwhile Thiel told BusinessWeek that Facebook is still on the prowl for acquisitions. “We're still focusing on growing as much as possible,” Thiel told the magazine.

Larry Yu, a spokesman for Facebook, confirmed Thiel's comments, but declined to provide any details about last fall's negotiations. He also wouldn't say whether the company is still interested in buying the much-hyped Twitter.

Thiel told BusinessWeek that the parties disagreed over price and structure, adding that the deal would have been at least partly based on Facebook stock and there was difficulty in figuring out what the stock is worth.

Caroline Dangson, an analyst at IDC, said there would have to be great debate over Facebook's stock price, since it's a highly popular but private company that hasn't yet shown whether it can generate significant revenue.

“People are just fascinated that companies like Facebook and Twitter have done so much to transform Web 2.0, yet they haven't made the revenue to transform their success,” she added. “There's a lot of debate about value in these sites. They're doing so much but not generating the revenue people expect.”

Dangson said she's glad that Facebook confirmed the buyout bid, since his confirmation will likely quell some of the Internet speculation about the topic.

She also said there's a lot more to the story. And part of that may be that Facebook is still interested in buying Twitter at some point down the road. She also pointed to speculation that Google Inc. has thrown its hat — its much more robust financial hat — into the Twitter ring.

“If Google came along with a lot of cash, that could be a different story,” said Dangson. “I think [Facebook] has realized their stock isn't enough bait. It would have to be a cleaner transaction. But I think if they work with Twitter, there's value for both of them.”

In an interview with Computerworld last month, Stone did say that he was interested in working more closely with Facebook.

“We really like what they're doing over there,” said Stone of Facebook. “Some of the more obvious stuff is to take advantage of Facebook Connect and put that into Twitter. You could be on Twitter and see who on Twitter is also on Facebook, so you could follow people that you're friends with on Facebook. We're working on it now, but I don't actually have a timeline for when it will be launched.”

Dangson said she doesn't see Twitter as desperate for a buyout — from either Facebook or Google. And that, she added, means the company can be fairly choosy about what offers it seriously considers.