Wednesday, January 16, 2008

Facebook Feels Out Plaxo Acquisition in Search of Professionals

The buzz is increasing on a potential acquisition of the Plaxo contacts-oriented social networking service by Facebook, as noted by VentureBeat and others, and there are good reasons to think that this would be a good marriage if one can overlook the personality conflicts in the potential deal. Plaxo's new Pulse social networking service is going strong and helping to extend the value of its core contacts synchronization service, but ultimately Pulse is yet another social media login to maintain with features and functionality not terribly different from Facebook itself. At the same time Facebook is becoming an increasingly popular spot for professionals to congregate for networking of both a personal and professional nature, but it lacks gravitas for people trying to keep abreast of changes in people's professional profiles. Backing in Plaxo data and desktop synchronization capabilities into Facebook's infrastructure may offer an interesting marriage of capabilities that may give Facebook a more competitive posture with professionals as LinkedIn continues to gain mojo as a "social inbox" for the professional set.

Rumor squashers are quick to point out historical conflicts between management in these two companies that might squelch such a deal before it's out of the blocks. But with investors from Sequoia who have fingers in both LinkedIn and Plaxo perhaps there's reason to think that there's a priority being placed on getting Plaxo's potential up to speed as soon as possible in comparison to other assets in their portfolio. With reasonably healthy growth there's not an immediate need for Plaxo to pull the string on a deal just yet, but knowing that venture capital may be harder to come by for subsequent funding rounds in 2008 this might be a good point for Plaxo to exit into the hands of a player such as Facebook as it continues to attract professionals rapidly into its multi-faceted social networking portal. Expect an increasing round of high-profile deals for companies such as Plaxo as social media plays begin to consolidate to grow more effectively in a market that is scrambling for revenue-generating capabilities in a softening economy.
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