Deal values Facebook at at least 15 Billion Dollars
 

Microsoft is paying $240 million for 1.6 percent of facebook.

And I thought they were nuts for turning down $800 million for the whole thing.

This valuation has to be nuts, right? Has facebook shown any ability to monetize on a scale that could make this valuation conceivable? For comparison, the total market cap of General Motors was less than $15 billion fairly recently.

Re: Deal values Facebook at at least 15 Billion Dollars
 

I don't understand how the site could possibly be worth that much money. WTF?

Re: Deal values Facebook at at least 15 Billion Dollars
 

If I owned FB I would be selling as much of it off as possible if I could get anywhere near these #s.

Re: Deal values Facebook at at least 15 Billion Dollars
 

Facebook is rapidly making its way through Sweden at the moment. Like, really really rapidly. I bet they have pretty big plans for it.

Re: Deal values Facebook at at least 15 Billion Dollars
 

that's [censored] sick. I'm opening as many accounts as possible immediately.

Re: Deal values Facebook at at least 15 Billion Dollars
 

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Facebook is rapidly making its way through Sweden at the moment. Like, really really rapidly. I bet they have pretty big plans for it.

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it's pretty ridiculous how quickly they take over new regions when they get started.

i added my first friend in finland maybe a month ago. since then i've added basically everyone i know. it went from nobody in the country having heard of facebook to everyone being on facebook in a ridiculously short time.

Re: Deal values Facebook at at least 15 Billion Dollars
 

Also realize that MSFT desperately wanted a piece of Facebook for strategic reasons and that they were in a bidding war with Google. Even if MSFT doesn't think that Facebook as a whole is worth $15bn they were willing to pay up for a 1.6% stake.

Re: Deal values Facebook at at least 15 Billion Dollars
 

the $15 billion valuation is ridiculous given that the deal also gives Microsoft the exclusive rights to sell advertising on facebook

http://www.computerworld.com/action/arti...p;intsrc=kc_top

Re: Deal values Facebook at at least 15 Billion Dollars
 

$15B sounds just terrible from what I know, which is obviously not near as much as those guys. I mean, no one has even showed FB making an operating profit yet.

Like I mentioned in a thread earlier about a $750M valuation, MySpace only made $10M on $550M revenue. And that's a site with more users and not plagued by the scalability problem facing FB where you can't have more than 5,000 friends.

It'll be interesting to see how this turns out.

Re: Deal values Facebook at at least 15 Billion Dollars
 

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$15B sounds just terrible from what I know, which is obviously not near as much as those guys. I mean, no one has even showed FB making an operating profit yet.

Like I mentioned in a thread earlier about a $750M valuation, MySpace only made $10M on $550M revenue. And that's a site with more users and not plagued by the scalability problem facing FB where you can't have more than 5,000 friends.

It'll be interesting to see how this turns out.

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Why does everyone keep mentioning that? Who the hell has more than 5,000 friends...?

Re: Deal values Facebook at at least 15 Billion Dollars
 

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$15B sounds just terrible from what I know, which is obviously not near as much as those guys. I mean, no one has even showed FB making an operating profit yet.

Like I mentioned in a thread earlier about a $750M valuation, MySpace only made $10M on $550M revenue. And that's a site with more users and not plagued by the scalability problem facing FB where you can't have more than 5,000 friends.

It'll be interesting to see how this turns out.

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Why does everyone keep mentioning that? Who the hell has more than 5,000 friends...?

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Also, facebook blows myspace out of the water.

That being said, a $15 billion valuation seems ridiculous to me as well. BUT, it could be worth it for Microsoft to pay $240 million in an attempt to drive up the asking price enough to keep competitors out while getting an exclusive ad deal with facebook.

Re: Deal values Facebook at at least 15 Billion Dollars
 

You have to ask yourself one question to judge wether this is a good investment or not for Microsoft.

For a company that has a market share of 95% in how people use computers, what is it worth to know;

- Who knows who
- What people like
- What people do

Facebooks database must for sure be the most valuable item on earth. As far as i am concerned, it`s not about how much it is actually worth, but only about who is willing to do what it takes to aquire it first. In this picture, 240 million us is nothing.

Re: Deal values Facebook at at least 15 Billion Dollars
 

Makes sense from a microeconomics point of view.

Oh, and close to everyone in this thread is under-estimating the potential profitability of online advertising.

Re: Deal values Facebook at at least 15 Billion Dollars
 

I think I heard on cnbc that it make 15 million in profits last quarter

Re: Deal values Facebook at at least 15 Billion Dollars
 

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$15B sounds just terrible from what I know, which is obviously not near as much as those guys. I mean, no one has even showed FB making an operating profit yet.

Like I mentioned in a thread earlier about a $750M valuation, MySpace only made $10M on $550M revenue. And that's a site with more users and not plagued by the scalability problem facing FB where you can't have more than 5,000 friends.

It'll be interesting to see how this turns out.

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Why does everyone keep mentioning that? Who the hell has more than 5,000 friends...?

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The celebrities who drive traffic to myspace by using it as a blog and listing concerts, comedy shows, appearances, etc.

Re: Deal values Facebook at at least 15 Billion Dollars
 

i read a great article in the economist about this. they were of the opinion that it is very much overvalued at 10billion.

the main issue comes from the different kind of network externality. in a typical network (like a software or mobil phone platform), the more people who use it, the more valuable it is.

but with friendster, the individual accounts don't get more valuable after they have a certain # of friends. in fact, they can get LESS valuable since the extra information isn't worth nearly as much or whatever.

im quoting from memory so sorry if i get the logic wrong (not a network guy myself).

the bottom line is that facebook doesn't offer a new product...it just offers fantastic features...

Barron

Re: Deal values Facebook at at least 15 Billion Dollars
 

Froth, froth, froth.

Facebook must have Scott Boras negotiating for them.

We've been down this road before.

Re: Deal values Facebook at at least 15 Billion Dollars
 

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$15B sounds just terrible from what I know, which is obviously not near as much as those guys. I mean, no one has even showed FB making an operating profit yet.

Like I mentioned in a thread earlier about a $750M valuation, MySpace only made $10M on $550M revenue. And that's a site with more users and not plagued by the scalability problem facing FB where you can't have more than 5,000 friends.

It'll be interesting to see how this turns out.

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Nobody knew how much money Google was making until it went public in 2004.

There are a lot of factors at play here that are hidden to the public eye.

Re: Deal values Facebook at at least 15 Billion Dollars
 

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i read a great article in the economist about this. they were of the opinion that it is very much overvalued at 10billion.

the main issue comes from the different kind of network externality. in a typical network (like a software or mobil phone platform), the more people who use it, the more valuable it is.

but with friendster, the individual accounts don't get more valuable after they have a certain # of friends. in fact, they can get LESS valuable since the extra information isn't worth nearly as much or whatever.

im quoting from memory so sorry if i get the logic wrong (not a network guy myself).

the bottom line is that facebook doesn't offer a new product...it just offers fantastic features...

Barron

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Great post, pretty much sums up a lot of what I am thinking but not able to put into words very well [img]/images/graemlins/wink.gif[/img]

Do you know which issue of the economist this was in? I must have missed that one.

One thing to add, is that while myspace/facebook are extremely popular right now, they have yet to prove they are able to stick around long-term. They are definitely more susceptible to being a "fad" site where a majority of the user base can easily migrate to whatever happens to become the next fad. (By no means am I suggesting this site will disappear overnight -- just eventually its coolness factor is going to wear off and/or if a "better" social networking site is created it won't take long for that to become immensely popular and steal a lot of facebooks users).

I'm not sure if I am wording that correctly, and am by no means suggesting facebook is going to go away anytime soon. But sites like these have very low barrier to entry and if they catch on, grow like absolute wildfire. That being said, I think facebook is a great improvement over myspace, but there is still a lot that could be improved upon.

Also I can't imagine they are making anywhere near enough money to be valued at $15 billion. I think Microsoft is just willing to overpay in attempt to prevent the competition from getting even farther ahead of them in this area.

Re: Deal values Facebook at at least 15 Billion Dollars
 

it was in last weeks or the week before's issue. i think it was either the headline business article or a briefing.

Barron

Re: Deal values Facebook at at least 15 Billion Dollars
 

I would imagine that microsoft is getting access to a huge amount of facebooks stored information by buying such a small percent and thus deriving a valuation from that purchase is prolly irrelevant. Correct me if my logic is wrong.

The article in the economist is in this weeks issue. They go on to talk about how "graphing social patterns" can be very valuable and this is why some perceive them even to be the next google. However, the article went on to say that the information that face book collects is much less useful then the information that google collects for targeting it's advertising. The ads that google provides are useful to searchers, whereas the ads facebook are an annoyance. This statement makes sense to me because the main function of facebook is to foster social interaction, and not buying things etc, so advertising simply can't be as effective.

I think whenever something is such a stunning success, even if not in terms of revenue/profits, but in terms of sheer number in increase in users there is bound to be huge amounts of hype about it and thus crazy valuations are going to be thrown out there.

Re: Deal values Facebook at at least 15 Billion Dollars
 

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I would imagine that microsoft is getting access to a huge amount of facebooks stored information by buying such a small percent and thus deriving a valuation from that purchase is prolly irrelevant. Correct me if my logic is wrong.

The article in the economist is in this weeks issue. They go on to talk about how "graphing social patterns" can be very valuable and this is why some perceive them even to be the next google. However, the article went on to say that the information that face book collects is much less useful then the information that google collects for targeting it's advertising. The ads that google provides are useful to searchers, whereas the ads facebook are an annoyance. This statement makes sense to me because the main function of facebook is to foster social interaction, and not buying things etc, so advertising simply can't be as effective.

I think whenever something is such a stunning success, even if not in terms of revenue/profits, but in terms of sheer number in increase in users there is bound to be huge amounts of hype about it and thus crazy valuations are going to be thrown out there.

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I agree with your post for the most part, but just have the following things to add:

I agree that the facebook database is extremely valuable. However, I don't see how Microsoft could get much more value out of this as opposed to data-mining their msn and hotmail emails from their current database consisting of millions of users. That is, unless they are bascially paying $240 million for one big spam list of non-msn/hotmail users.

Also, I do not see how ads will ever be prevelant on a site like facebook (or youtube while we are at it). If these sites become flooded with ads, all of the current users will just flock to the next social networking site, that will remain ad-free until another major corporation purchases it and tries to add ads.

What many advertisers don't realize, is that the online ads they are making today are so intrusive, that they are not beneficial. Even if they are getting clicks, it does not mean the user clicked on their ad on purpose, the user very well might have been trying to click on that little "x" to try to close the ad that was scrolling across the screen (and moving as you put your cursor over it), while covering up the text you were trying to read. As soon as the user realizes they clicked on that ad by mistake, they close the window, yet the advertiser thinks they just had a successful click. There are countless examples of this all over the interent.

If you need to force ads down the users' throat, it is not going to be successful. The best ads are those that catch the users eye without being intruisive. Examples are google's adwords and how the banners are displayed here at 2+2.

Just about every news site is terrible at displaying intruisive ads. Instead of remaining at their site, I often close my browser in disgust because the article I am trying to read is covered by a pop-up/rollover ad that I cannot get to close. I end up going to another source to read the same news. They have this idea that their site is somehow special when in reality the news is plastered all over the internet.

Also many sports sites like cbs.sportsline and cnnsi.com are especially bad as well.

Re: Deal values Facebook at at least 15 Billion Dollars
 

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$15B sounds just terrible from what I know, which is obviously not near as much as those guys. I mean, no one has even showed FB making an operating profit yet.

Like I mentioned in a thread earlier about a $750M valuation, MySpace only made $10M on $550M revenue. And that's a site with more users and not plagued by the scalability problem facing FB where you can't have more than 5,000 friends.

It'll be interesting to see how this turns out.

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Why does everyone keep mentioning that? Who the hell has more than 5,000 friends...?

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http://www.sandiegoconcertarchive.co...ddyMercury.jpg

Re: Deal values Facebook at at least 15 Billion Dollars
 

Facebook >>>>>>>>>>>>&g t;>>>>>>>>>>>> >>>>>>>>>>>>&g t;>>> Myspace

Re: Deal values Facebook at at least 15 Billion Dollars
 

How come you can only have 5000 friends on Facebook? If they wanted, wouldn't that "big problem" be solved in about 20 minutes?

Re: Deal values Facebook at at least 15 Billion Dollars
 

I don't see facebook being a fad. Kids as young as ~high school ageish use it to meet people, "hang out" online (something that isn't going away), and to express themselves. As you get into college, it's more for just keeping in touch with people, seeing what people are up to (facebook stalking), and sharing pictures, stories, etc. Once you graduate, it's more just for networking, keeping in touch, etc.

The beauty of it for facebook is that all of the college educated people are on it. I don't have statistics, but pretty much all of my friends that went to college are on facebook, and pretty much all of my friends that didn't aren't or have just recently joined. They have a stranglehold on the best and brightest that are under the age of 25. I can't think of a better advertising demographic to basically have complete control over.

Also remember, when comparing social networking sites, that facebook still has an immense "snob appeal" effect over myspace because for 2 years facebook was only open to .edu addresses. This made sure anyone involved was college educated and it kind of gave facebook a "we're better than myspace" feel, that for some reason still exists today. This might be because the website itself is just leaps and bounds better looking (with more functionality) than myspace.

tc

Re: Deal values Facebook at at least 15 Billion Dollars
 

I'll add that literally 95%+ of my friends are on facebook and use it at least a couple times per week, many every day. It's so rare that college educated kids aren't on facebook these days that I can literally name friends off the top of my head that AREN'T on it because it's weird that they aren't.

I'll admit that I am surprised that kids in my class are still using facebook as much as we do. We are 1 1/2 years out of college but still using it almost as much as we did in school.

As an aside, I thought I would always use AIM (aol instant messenger) religiously, but that has died down considerably for almost all of the people I know since we left college.

tc

Re: Deal values Facebook at at least 15 Billion Dollars
 

what will happen to the microsoft stock?

Re: Deal values Facebook at at least 15 Billion Dollars
 

btw, considering that microsoft got various perks out of this deal in addition to the part ownership, wouldn't it mean that this deal values facebook at AT MOST 15 billion dollars? i don't understand where this "at least" thing is coming from.

Re: Deal values Facebook at at least 15 Billion Dollars
 

Don't think this really should have much of an effect on MSFT. All the naysayers seem to forget that at the worst this is the equivalent of somebody spending a weeks salary on a trinket he doesn't want a rival to have.

Re: Deal values Facebook at at least 15 Billion Dollars
 

Why not buy in? Microsoft spent $250 million for access to 50 million users. $5 bucks per user. That is a sweet deal.

Some companies out there pay way more than this. Some sites even get this kind of money if you just click through to their site.

Besides, maybe this is Facebooks business model, collect the advertising fee upfront in a lump sum, with a percentage of the company given in return to guarantee success. What is to stop Facebook from selling off another 1.6% to someone else with $250 million to spend. Sell yourself off piece by piece and then sit back and collect royalties. Sweet.

Microsoft has more money than God. Either they buy stuff or give the money back to shareholders.

Re: Deal values Facebook at at least 15 Billion Dollars
 

I agree with most posts here about how FB has a stranglehold on the under 25, college educated crowd and it is a valuable audience.

To play the devil's advocate, although I haven't ran an advertising campaign on FB myself, there is at least one prominent blogger that has and reported very poor results. Although the impressions are high, the click through is very poor and mostly by accident.

To maintain this valuation, sooner or later, they need to bring in the revenue. I hope they don't start selling their data like LinkedIn to recruiters. It pissed me off to no end when I started getting cold calls from recruiters at work from the information I posted on LinkedIn.

Re: Deal values Facebook at at least 15 Billion Dollars
 

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what will happen to the microsoft stock?

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i'm not sure that a 240m investment will move the stock too much on the downside...

Re: Deal values Facebook at at least 15 Billion Dollars
 

It just hit a 52-week high today

Re: Deal values Facebook at at least 15 Billion Dollars
 

looks like yesterday would have been a good day to buy it. does anyone think it will ocntinue to go up in the next weeks

Re: Deal values Facebook at at least 15 Billion Dollars
 

I have been long MSFT for nearly two years waiting for this day. [img]/images/graemlins/smile.gif[/img] I sold my entire position tiering downwards averaged to $35.48 per share. I plan to wait for a dip below $32 and buy back in, probably back to a longer term hold position.

Jimbo

PS: Actually I think $32 may become the new resistance level so if it gets near $32 I'll buy back in.

Re: Deal values Facebook at at least 15 Billion Dollars
 

A little off subject, but FWIW, now is a definitely great time to buy short term MSFT put options. The price levels are very predictable right now based on several technical indicators.

Re: Deal values Facebook at at least 15 Billion Dollars
 

Yeah, I wouldn't get too excited about the $15 billion thing. Microsoft desperately wants to get more heavily involved with online advertising and they probably would have paid this amount with no equity share attached for the advertising rights. Facebook gives MSFT a lot more page views, demographic data, and I wouldn't be surprised if they also start powering search on facebook at some point.

Re: Deal values Facebook at at least 15 Billion Dollars
 

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It just hit a 52-week high today

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this had nothing to do w/ facebook but more to do with windows vista sales and other [censored] like enterprise sales...

anyway, the bottom line is that everyday I check my email, listen to my ipod, do at least 5 google searches, read the wallstreet journal and ny times, check espn.com, check twoplustwo, and check my facebook. seems like everyone hs and college age always checks facebook daily. I like the innocent stalking, and the ability to stay in touch with friends. i dont think its going anywhere unless they somehow alienate their user population.

Re: Deal values Facebook at at least 15 Billion Dollars
 

Out of curiosity, how many of you, especially those who log on facebook.com as a routine, have clicked on a facebook ad?