Peter Kafka

Recent Posts by Peter Kafka

Facebook Won't Spend Much Bread on Hot Potato

Another “buy them instead of hiring them” deal: Facebook is about to pick up Hot Potato, a start-up that specializes in organizing chats about “real time” events.

The transaction hasn’t closed yet, but the social network is set to pay something in the $10 million to $15 million range for the company, people familiar with the deal tell me. That will mean a modest return for the investor consortium that put $1.4 million into the firm last year, but it will still be a return.

Facebook, meanwhile, will presumably get the services of Hot Potato’s small team, led by CEO Justin Shaffer, a longtime veteran of pro baseball’s well-regarded site. The most logical place for them to end up would be working on the social network’s mobile products.

Shaffer declined to comment; I have yet to hear back from Facebook PR. TechCrunch first reported on the pending deal.

Hot Potato launched last fall with a well-known team of backers, led by RRE Ventures, Betaworks and Ron Conway, and the plan didn’t call for an exit this soon, at this price. But the service never got significant traction, despite a push at the South by Southwest conference in March.

And given that the problem the Hot Potato crew was trying to solve–how to curate a stream of chatter/commentary for events as they happen–was something that Facebook itself should be tackling, it makes perfect sense for them to end up at the social network.

Here’s an interview I conducted with Shaffer in November, as his service was starting up, followed by a shorter chat with Kara Swisher in May at an event hosted by General Catalyst Partners, and Hot Potato’s own description of what it’s trying to do.

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Just as the atom bomb was the weapon that was supposed to render war obsolete, the Internet seems like capitalism’s ultimate feat of self-destructive genius, an economic doomsday device rendering it impossible for anyone to ever make a profit off anything again. It’s especially hopeless for those whose work is easily digitized and accessed free of charge.

— Author Tim Kreider on not getting paid for one’s work