Microsoft May Invest in Facebook At $10 Billion Valuation

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1. Deals and Coupons
   

   September 24th, 2007 at 12:38 pm

   Now it’s getting interesting! MS is in the social networking game after all. Watch out Google!

2. Chris
   

   September 24th, 2007 at 12:42 pm

   I have a bridge in Brooklyn for sale…

3. Anon
   

   September 24th, 2007 at 12:45 pm

   Wow, that is a lot of cash.

4. John Sjölander
   

   September 24th, 2007 at 12:45 pm

   Agreed that Facebook is worth a whole lot, but seriously. These valuations are insane. The internet crowd is like a flash mob. Loosing them is just the next fad away.

   I would seriously like to know how this is sane before the company has a viable business model. Please enlighten me.

5. The Grinch
   

   September 24th, 2007 at 12:47 pm

   LOL, can this bubble get any more bloated? Zuckerberg’s selling some pretty expensive kool aid. I mean I just don’t see why facebook is such a big deal, sure it’s valuable as is any site with huge traffic, but 10 billion!

6. The Grinch
   

   September 24th, 2007 at 12:48 pm

   Does anyone have any idea what facebook pulls in monthly? Does it turn a profit at all?

7. Balu Nayar
   

   September 24th, 2007 at 12:49 pm

   This is stupid. what does 5% bring anybody - you cant even call this an investment at this valuation!

8. Startup News
   

   September 24th, 2007 at 12:50 pm

   Shiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiit !!!!!!!!!!!!
   WHAT DA ???

   The company is barely making any money …
   For $500 million you can buy another social network and still have chage left to buy your own customers …

9. Andrew
   

   September 24th, 2007 at 12:59 pm

   I think the problem wtih social network valuations is that they think the user will be there for life. So they have no problem valuing it at $300-500 per user…because they think they’ll get that money.

   Personally I would say a user is only worth 10 bucks tops.

10. MainStreetReporter
    

    September 24th, 2007 at 1:01 pm

    Microsoft writes checks this size on a regular basis to cover anti-monopoly fines, so going to the cash well (tens of billions deep) to cozy up to Facebook probably isn’t as big of a gamble as most think. 500 million is nothing to Microsoft. Missing a potential ‘big boat’ is.

11. Al Gore
    

    September 24th, 2007 at 1:01 pm

    This is ridiculous! I would value FB at $25B *at least*. Could be $30-35B if I were on board.

12. India Business Blog
    

    September 24th, 2007 at 1:02 pm

    What is Microsoft going to get by taking 5% stake in Facebook is beyond me. however, they must have some reason, if this news is true. There are far too many of these kind of news that just come up for name sake…nothing materializes, except our imagination

13. Karl Long
    

    September 24th, 2007 at 1:03 pm

    Well good for facebook, but really, talk about kool aid, facebook is the AOL of Web2.0 and will likely suffer the same fate as the internet continues to evolve. Maybe the small investment by microsoft will enable them to more tightly integrate windows apps into facebook apps? I think that’s prolly smarter than trying to buy the whole company.

14. Hornswaggled
    

    September 24th, 2007 at 1:04 pm

    I would think MS sees Facebook as a platform and social network. They would probably know best about the value of user embraced platforms like Facebook. It will be interesting to see how the agreements work themselves out and how advertising deals will play out.

    This news must be frustrating to Yahoo on all sorts of levels.

15. ely
    

    September 24th, 2007 at 1:06 pm

    Facebook could have a higher valuation then Google in 5 years

16. mike
    

    September 24th, 2007 at 1:08 pm

    As the YouTube buyout has taught us, it’s not about how well your business model works, it’s about how well your site attracts eyeballs. Whatever company controls the most eyeballs wins.

17. Your Daddy
    

    September 24th, 2007 at 1:11 pm

    This is probably due to the fact that Google is looking to go the other way and top FB. So now MSFT wants to help FB defend itself.

18. r
    

    September 24th, 2007 at 1:13 pm

    This is just getting ridiculous.

    Facebook offers no value that can’t be found elsewhere. Period. Most readers here are too technological-oriented to see that Myspace is still kicking Facebook’s ass.

    Facebook doesn’t have any technology that’s hard to replicate, unlike Google, nor do they have significant technical expertise … in … well… anything. The only thing of value for Facebook is their network, and that’s not worth a $10bil valuation.

    Being a recent college grad, I’m seeing usage of my casual Facebook friends dropping. If anything, it’s been really amusing to see my non-technical friends adopt facebook long before my technologically-oriented friends. The adoption curve in reverse?

    Facebook is a great site, and it has some innovative ideas that appeals to people who would read TC, but… really.. .a $10 billion market cap? Please.

19. Jeremy
    

    September 24th, 2007 at 1:14 pm

    That’s a very impressive number. Considering the fibrillation of everybody in the tech / news / web space about Facebook these days…it makes sense.

    However, as we’ve seen with other start ups, if they do something that makes them “uncool” then that buzz goes away.

20. The Grinch
    

    September 24th, 2007 at 1:17 pm

    ely - Not it could not. Google is a hugely profitable company, facebook is not.

21. The Grinch
    

    September 24th, 2007 at 1:20 pm

    mike - Had Google (or some other huge company) not bought Youtube it would have collapsed under the weight of it running costs and litigation. Even now it is a minefield for google, and is serving up millions of copyrighted videos everyday. A class action against youtube could well sink it and google too.

22. Shane
    

    September 24th, 2007 at 1:21 pm

    http://www.scribd.com/doc/2217.....l-Networks
    Read up, and then try and claim that facebook isn’t “viable” or “profitable”…I’d posit valuations of 15-25 bil coming in by election time next year

23. The Grinch
    

    September 24th, 2007 at 1:25 pm

    Shane - As of right now it is not profitable.

24. Anon
    

    September 24th, 2007 at 1:28 pm

    Yeah I’m waiting for the 35 billion dollar valuation before I announce that I actually invented Facebook.

25. ZiZi
    

    September 24th, 2007 at 1:28 pm

    why not start a new site for 500 million and pay users to migrate from facekrook and myspam.
    for 20 buks a head they can get 25 million users, and go from there.
    25 million will bring at least 5-50 friends.. you do the math.

26. ZiZi
    

    September 24th, 2007 at 1:29 pm

    5-50 friends (each).. sorry.

27. Iain Hall
    

    September 24th, 2007 at 1:29 pm

    Facebook has the potential to leave Myspace behind, just as Myspace did to LiveJournal. The opening of application developments to augment functionality is an amazing step in the right direction.

28. Jack
    

    September 24th, 2007 at 1:34 pm

    Live and don’t learn… It’s good to see that we learned nothing from the first bubble… Valuations based on a property’s audience, not revenue or profits… excellent work! Seriously, Zuckerman has a chance to be Mark Cuban 2.0 if he dumps this when he has the chance.

29. Pandu
    

    September 24th, 2007 at 1:54 pm

    FB is certainly going thru the hype phase and it too will eventually go thru the backlash phase. MS already invested a tiny amount in FB in the beginning stages. What matters now is that there be a counterweight to Google. Google is becoming too powerful, controlling too many pieces of the internet pie. Dont know that even an MS + FB combo will be good enough.

    - Pandu
    @ http://www.fewtureweb.com

30. NotOrkut
    

    September 24th, 2007 at 2:06 pm

    I tell you, my little entrepreneur, if you redesign the whole orkut site with an open API to create mashups and weblets, google would be number one in the social arena.

    Facewhat? people goes with the best, and that, my friend, is google.

    Oh, btw, change that absurd and stupid name from orkut to google mash.

    Suckerberg will be sorry he didn’t sell early…

31. Steve Ballmer
    

    September 24th, 2007 at 2:07 pm

    You see all of the big exec’s know how this works (It’s called the 16 steps plan:

    1. Resist Microsoft (gain a rep)
    2. Become almost cultishly blind to the realities surrounding you.
    3. Release some cool products (declare them to be cool anyways)
    4. Lose money hand over fist every quarter for a few years.
    5. Blame Microsoft
    6. Hint at softening your stance (but deny it in public)
    7. Sneak into Redmond, beg me for help, bow before me
    8. Wait 6 months for a reply
    9. Announce a “strategic alliance” new era of cooperation and understanding
    10. Open some of your source code to us
    11. We release favorable press releases about you (your stock goes up)
    12. Once we have “absorbed” what we wanted and made simmilar apps which don’t work quite as well, we announce an end of the alliance and blame you!
    13. Your stock plummets to record lows
    14. We offer to Buy your company cheap … but CEO gets sweetheart deal.
    15. Buy, downsize, dismantle, assimilate remainder
    16. Deny your company ever existed.

    http://fakesteveballmer.blogspot.com

32. Andrew
    

    September 24th, 2007 at 2:08 pm

    I think a portion of the reason why MSFT is doing this is to screw over its competitors.

    Think about it…they get in with 5% @ 10 billion valuation. Deep down they know its not worth 10 billion. But now if Google or Yahoo decides to buy Facebook, they would have to cash out 10 billion for it. Its the old case of…if I can’t have it…noone else can have it too.

    Also another reason…with 5% they no doubt have some control in the company…which means they can pressure facebook to integrate some of their technology into facebook. Integrate some of its ads etc.

33. ChandraB
    

    September 24th, 2007 at 2:10 pm

    At this type of valuation what sort of return is Microsoft expecting (if any). Will they get a board seat?

34. Jerome
    

    September 24th, 2007 at 2:10 pm

    “They’re saying Facebook may be holding out for a $15 billion valuation. What the hell. Why not?”

    LOL classic.

    @#16 - agreed.

35. Fabian Schonholz
    

    September 24th, 2007 at 2:19 pm

    If MS does buy FB is not for the traffic only but for the operating environment. You need to understand that SaaS is a reality and MS lacks a good play on that and a good way to compete with Google. Getting FB as part of their portfolio gets them on the same footing with Google but from a different angle. Google recognizes their weakness and risk and are trying to deal with it.

    If MS owns FB, they are back in the game.

36. Alex
    

    September 24th, 2007 at 2:20 pm

    1) Desperation
    2) Just Silly

    Winners: Zuckerberg and Peter Thiel
    Loser(s): Microsoft’s Balance Sheet and Microsoft Shareholders

37. jay
    

    September 24th, 2007 at 2:25 pm

    No Board seat for Microsoft.

    FB has multiple offers in the $6-10 B price range, so this is the market price (I am aware of at least 4 offers).

38. ahhh
    

    September 24th, 2007 at 2:30 pm

    cheap. its worth more. someone will pay up and beat out msft

39. Empire strikes back
    

    September 24th, 2007 at 2:32 pm

    Mike had talked future evil empire - Mark Zackerberg. Why Microsoft need to buy Facebook?

    Here why… Bill Gates is getting old. No one will control his role stronger and powerful. Mark Zackerberg maybe the most powerful evil jedi ever know. Mark will join darkside. Bill Gates will train him with super power.

    He would kill yoda company — “Google” Mark would take care Live.com.

    Is Google guy scared?

    You bet they are. They don’t have WEBOS. Hey, Google guys… Use the force…

40. phenom
    

    September 24th, 2007 at 2:33 pm

    Thats a lot of $$$$$$$$$$$.
    http://vidsonly.blogspot.com

41. Thierry Schellenbach
    

    September 24th, 2007 at 2:40 pm

    Well… Are they making any profit/revenue at the moment?

42. Broken secret
    

    September 24th, 2007 at 2:43 pm

    You know what’s Facebook secret. The whole thing is written PHP. If facebook was written classic ASP. He could become instant billionaire.

    It’s hard to write FACEBOOK clone with Asp.

43. Kelli
    

    September 24th, 2007 at 2:43 pm

    This is exactly what Google wants to hear. Let Microsoft blow a bunch of money on an investment that is worth 5% on a site that may or may not be profitable. Google will open Orkut up and with it having the second most popular social network in the world, it’s obviously not hard to imagine that they can boost it’s popularity in North America (yes, Canada matters!).

    This is the thing about Google. Sure its Apps and Docs aren’t knocking Office down, but they are making headway. It’s the same with Checkout, it isn’t taking Paypal down a couple of notches…yet. But when they boost the functionality to near Office and Paypal levels, popularity will increase as will adaptation. That is something Microsoft (especially) and Ebay should be fearing.

44. brian
    

    September 24th, 2007 at 2:58 pm

    i am excited about this. I really wanna know how it is going to end.

45. Shane
    

    September 24th, 2007 at 2:59 pm

    The Grinch- I’ve actually heard that internally, they claim to have cleared 30+mil in profit last year and make 1mil per month on virtual gifts alone…the bear sterns report seems to bear out this claim, no pun intended with cash on hand estimated at 26mil at the end of 2006.

46. brian
    

    September 24th, 2007 at 3:00 pm

    I think fb investor should get some cash first before all fb users kill their own accounts. I know many ppl are doing that already.

47. Word Hugger
    

    September 24th, 2007 at 3:17 pm

    As expanding as facebook is, I still would have taken the $1B offer from yahoo. That would get rid of all risk, and you would be set for life. Expecting anything more is pretty greedy, although I wouldn’t doubt he will do it.

48. ubina
    

    September 24th, 2007 at 3:19 pm

    Is this a signal of .com bubble 2.0?

49. jay
    

    September 24th, 2007 at 3:26 pm

    WordHugger–You are dumb. yahoo recently offered 6x that.

50. Chris
    

    September 24th, 2007 at 4:01 pm

    What. The. Frack.

51. Minna Van
    

    September 24th, 2007 at 4:21 pm

    Holy smokes, how is a site generating little profit valuated at $10 billion dollars? And what is Microsoft intending to do with Facebook that makes them want to dish out $10 billion for it? Scary thought.

52. Blake Brannon
    

    September 24th, 2007 at 4:25 pm

    90% of all acquisitions are over purchased! I’m sure this falls in that category. Of course M$FT has money to burn.

53. Your Daddy
    

    September 24th, 2007 at 4:33 pm

    Web2.0 just jumped the Shark.

54. jay
    

    September 24th, 2007 at 4:36 pm

    Minna Van:
    Can you spell network effects?
    Google has virtually none.

55. bulls*^$
    

    September 24th, 2007 at 4:40 pm

    Okay boneheads listen up! There was never a formal tender from YHOO to buy FB. That was speculation that turned into hesteria. There has been no talks within MSFT with FB regarding an investment beyond the initial advertising investment deal made.

    You want to know why everyone thinks FB has such high valuations? Because idiots like you are believing the crap you read and causing other to think it true. REMEMBER 1999-2000 (POP)! Just because a dumb&*^ VC investor is hyping the crap out of the company so he gets a return doesnt mean it is correct.

    FB is in the red and will continue to be based on their current business and advertising models. The end user cannot be justified at $333.00 per user on their site or any other site for that matter. Unless I missed a class or two in grad school the model for valuations does not project such ridiculous numbers.

56. @55
    

    September 24th, 2007 at 6:30 pm

    @55

    Maybe because you scare… You don’t want to make happen. All you want is Google to buy Facebook. It’s not going to happen. They don’t have same chemistry or binds. Facebook is never public friends with Google or Yahoo.

    If you read this:
    http://www.msnbc.msn.com/id/6596533/site/newsweek/

    CM: Has Bill Gates called you yet?
    MZ: No. I don’t think Bill Gates makes phone calls. I’m not sure that he’d be the one to call me if Microsoft got in touch with us, but it’d be sweet if he did.

    When he say “It”d be sweet if he did” this means. He looking forward to get phone calls from Bill Gates. I like to see what happen soo. Who knows.

    Maybe Microsoft will buy Facebook.

57. Craig Baker
    

    September 24th, 2007 at 6:42 pm

    I’m still struggling to see $1 billion in value and where now talking $10-15 billion.

58. jay
    

    September 24th, 2007 at 7:05 pm

    #55
    You are wrong. The investment round is 100% certain, the only question is the final identity of the investors.

59. Mark is next powerful Evil Jedi
    

    September 24th, 2007 at 7:16 pm

    After Bush Era is over… 2008 new president… New year… New disaster… New Hurricane season… New California Earthquake… New beijing 2008 games…

    Let’s hope Microsoft buys Facebook and make Mark join the darkforce.

60. Dave G
    

    September 24th, 2007 at 7:28 pm

    It is amazing to me that smart people risk so much money on businesses that are obvious candidates for the fatigue factor.

    Youtube, Facebook, AOL, etc…they are/were addictive at first, but they get old fast. In two years FaceBook will be looked down on…you know, the way all of you Facebook users now look at Myspace users.

61. Fresh Prince Of Bell-Air
    

    September 24th, 2007 at 7:34 pm

    #58

    The next round is certain, because the company now is not financially solvent and because there are always the “greater fools”. The question is whether they will have enough time to unload it in an IPO before the bubble is over. Another question is whether $500m is to be called an investment, or it’s like a private mini-IPO so that the shareholders Piter Thiel and Zuck can actually get some liquidity out of it.

62. jay
    

    September 24th, 2007 at 7:37 pm

    Dave G:
    Nobody is bored with youtube, if anything the growth and usage is accelerating. Google got a steal.

    #61
    I suspect some employees will be offered liquidity options. I doubt that Accel or Peter would want to sell their shares. In fact, I suspect that they would want to buy more.

63. AP
    

    September 24th, 2007 at 7:38 pm

    If you sign up Facebook and Myspace. You will end up get telemarketing calls almost everyday. Only lucky people never sign up Facebook and Myspace is good thing.

64. Fresh Prince Of Bell-Air
    

    September 24th, 2007 at 7:51 pm

    #62 jay

    I agree that Peter should not sell, since this is still probably insignificant for him compared to his Clarium operations.

    Zuck should sell however- chances are he will not have enough time to unload FB in an IPO before the “market correction” - look at the oil price.

    Google is not stupid, Yutube is indeed a steal, but FB is a flashmob-like fad.

65. Kevin Christner
    

    September 24th, 2007 at 8:08 pm

    Can anyone do math? $300-500MM for a 5% stake implies a valuation between $15B and $25B.

66. Tcruncher2
    

    September 24th, 2007 at 8:31 pm

    Seems to me that this valuation is not necessary all that stupid and that Microsoft knows what it is doing. REMEMBER, Microsoft is looking after the ad serving on Facebook and therefore has a huge amount of metrics on the ad serving potential.

    Since its becoming more obvious that Facebook is going to overtake Myspace as the “preferred” social network in the next 12 - 24 months, and since Google have a $1 Billion Deal with Myspace - taking 5% in the company could also mean that they have a more persuasive argument over who CONTINUES to serve ads.

    So in my thinking its a strategical move. Microsoft know that by injecting that amount of cash, they are only further promoting their ad serving technology - so its actually a core advertising business investment to an audience of possibly 100+ million in the next 24 months.

    I also think that valuing Facebook at that sort of money also indicates there is no way they will be bought out ? i.e. who could afford them ?

    

67. Fresh Prince Of Bell-Air
    

    September 24th, 2007 at 9:02 pm

    #66 this is a somewhat circular logic- will MSFT pay money upfront to later recover it via ads? It would take them 5 years to do so, by that time the fad will be over.

    The thing is, for MSFT this amount is indeed not critical- it’s like another Eolas’ patent settlement.

    The real “looser” in this is Zuck, since he will probably end up with his share in 500m (after this the company will likely become unsellable), instead of potentially unloading it for 1B+.

68. Tom
    

    September 24th, 2007 at 9:04 pm

    I love how everyone posts their opinions like they are facts. As if any of us have a clue of how this will work out and what a “steal” is or not. Google was offered $3B in 2002 by Yahoo. They refused when they had roughly $250M in revenue(see Wired ‘Yahoo blew it’ article). Not to mention the fact that it was 2002. Now google is worth $160B+. But on the opposite hand, you have the overpriced AOL purchase. You never know…

69. Steve Ballmer
    

    September 24th, 2007 at 9:57 pm

    You people are not capable of seeing the BIG plan, you’ll never understand.
    FB is a threat to our future “cloud” plans and must be “enhanced”.
    Yeah, that’s how we put it.

    http://fakesteveballmer.blogspot.com

70. bulls*^$
    

    September 24th, 2007 at 10:11 pm

    jay

    September 24th, 2007 at 7:05 pm

    #55
    You are wrong. The investment round is 100% certain, the only question is the final identity of the investors.

    JAY - ARE YOU EVEN AWARE OF THE CONVERSATION WE ARE HAVING HERE? MSFT BUYING A 5% STAKE IN FB. WAKE UP - NOT A REAL INVESTMENT DEAL BEING PONDERED - WHY WOULD WE NEED FINAL IDENTITIES IF “EVERYONE KNOWS IT IS MSFT”

    TRUST ME MSFT IS NOT MAKING SUCH AN INVESTMENT! PERIOD.

71. Fake Dave McClure
    

    September 24th, 2007 at 10:17 pm

    Hell, I’d buy Facebook for a tril, at least. Zuck, I’ll be around.

    http://www.twitter.com/fakedave

72. Jay
    

    September 24th, 2007 at 10:32 pm

    #70
    There are multiple entities who want to invest at that price, not just Microsoft.

73. Moses
    

    September 24th, 2007 at 11:07 pm

    I’m willing to bet that Facebook will ultimately elect to sell the stake to financial investors rather than either Microsoft or Google, because selling a stake to either: (1) reduces Facebook’s ability to get the best deal on its next ad sales contract, and (2) restricts the shareholders’ exit options. For a full analysis, see my blog, moseskagan.com.

74. Alexander van Elsas
    

    September 25th, 2007 at 1:18 am

    I think this is a very risky investment. While Google spreads its advertisement revenues on-line accross many different platforms, Microsoft will have to monetize their investment in Facebook by creating more advertisement pressure on Facebook members. I think this might backfire in the end. They can try, but the value ibeing used now (10 Bln) is way to high. For more see:
    http://vanelsas.wordpress.com/.....-facebook/

75. dave mcclure
    

    September 25th, 2007 at 1:26 am

    hmm. Facebook for $10B?

    think i’ll just buy Fake Dave McClure for a dollar.

76. Yuval
    

    September 25th, 2007 at 2:56 am

    As time goes by Google becomes better positioned to win the battle of Internet dominance with MS. It’s about values. Facebook’s Zuckerberg is young, he grew up in a world where MS is an aggressive and hostile brand, and Google is the Great Enabler. People like him will reject deals with MS and favor Google on general principle.

    Young people are the people who come up with disruptive innovations. Their thinking is more flexible because they grew up in a fast-changing world. Google just needs to wait for them to show up and offer them partnerships. Brand-wise, Google is God. I would say to a large extent this is justified. This is the information revolution, after all.

77. David Litsky
    

    September 25th, 2007 at 5:52 am

    What don’t you see? Facebook is to the web what Windows was to the PC. Four months ago everyone here was criticizing FB for not taking a $1Bln+ offer, now they are valued at 10x that amount by a company with no debt and a boatload of cash. I wonder how much cash Google has?

    http://bootstrapeconomist.org/.....gton-post/

    http://bootstrapeconomist.org/.....ng-medium/

    http://bootstrapeconomist.org/.....-intranet/

78. John
    

    September 26th, 2007 at 3:00 am

    Smart move mr Microsoft,

    I’d say they’re only scruple would be that FaceBook is entirely PHP + MySQL driven, but who cares.

    When you have that much cash lying around does guilt even get close to surfacing.

    Well done Microsoft!