[Shoe]

[ QUOTE ]
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.

[/ QUOTE ]

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.