A cautionary tale from Silicon Valley

MISSED OPPORTUNITY: Friendster was ideally placed to cash in on online networking, but it all went wrong after its founder spurned an enticing offer from Google

NY TIMES NEWS SERVICE, NEW YORK
Sunday, Oct 15, 2006, Page 11

Danah Boyd, 25, a graduate student at the University of California at Berkeley, studied Friendster during its heyday, hovering above the fray with a Web log called Connected Selves and interviewing Friendster users.
PHOTO: NY TIMES NEWS SERVICE

Jonathan Abrams was in a spot. He could take the safe bet and accept the US$30 million that Google was offering him for Friendster, the social networking Web start-up he began only a year earlier, in 2002.

Saying yes to Google would provide a quick and stunning payout for relatively little work and instantly place the Friendster Web site in front of hundreds of millions of users across the globe.

But at the same time, some of the biggest names in Silicon Valley were lobbying Abrams, a computer programmer, to reject Google's offer. America Online had offered the two founders of Yahoo a few million dollars each in the mid-1990s for their Web site -- and both became billionaires because they said no.

Sell us a stake in your company for US$13 million, the advisers told Abrams, and we will help build Friendster into an online powerhouse worth hundreds of millions, if not billions, of dollars.

Abrams spurned Google's advances and charted his own course. In retrospect, he should have taken the US$30 million. If Google had paid him in stock, Abrams would easily be worth US$1 billion today, one person close to Google said.

Friendster essentially created the social networking sector three years ago by offering users a site where they could browse profiles posted by friends and the friends of friends in search of dates and playmates. But so badly did Friendster fumble its early lead that, as of last month, it ranked 14th among social networking sites tracked by comScore Media Metrix.

Why and how Friendster missed the mark is a salutary Silicon Valley tale so instructive that Mikolaj Jan Piskorski, an assistant professor at the Harvard Business School, uses the company's inglorious fall as a case study in his strategy classes.

Read the full article http://www.nytimes.com/2006/10/15/bu...38e355&ei=5070