'Big Leap of Faith' for Buyers of Must-Have Websites

26 September 2006

NEW YORK: The addiction of US youth to the current crop of social networking and similar websites is driving media companies into paying unrealistic prices to acquire them for their stable, believes Time Warner chairman/ceo Richard H Parsons.

Such properties are objects of desire for established portals such as Yahoo, MSN and TW's own AOL, who view them as traffic-building bulwarks against the depredations of Google.

Speaking to the Financial Times, Parsons accused Google of "trying to lock down or control as many of the traffic-generating sites as they can, to freeze out Yahoo, to freeze out MSN and, to some extent, even AOL".

Parsons views Facebook and YouTube as the two most attractive traffic-building assets. "[But] it's a tough assignment," he says. "Valuations that are put on those businesses that currently make no money are astronomical and you have to have a big leap of faith."

Facebook, in particular, has been dating several Big Media beaux, among them Yahoo, Microsoft and Viacom. But none appear to be interested in going steady while Facebook's moneymen talk of a $1 billion (€781.5m; £525.9m) dowry.

Billion dollar leaps of faith are difficult to justify for those who recall the lifecycles of such youth crazes as the skateboard, the frisbee and in-line skates.

But Parsons has nothing but admiration for fellow media tycoon Rupert Murdoch whose News Corporation shelled out $580m for social networking site MySpace last year.

Not only has this rocketed NewsCorp's internet ranking to number two in the US site-owning league but it has enabled a deal with Google that guarantees income from search-word advertising of $700m over the next four years.

Says Parsons of the deal: "It appears to have been a masterstroke."

Data sourced from Financial Times Online; additional content by WARC staff