While the storyline would have been more dramatic if Facebook had spurned its current ad-serving partner Microsoft for Google, it is confirmed that Microsoft has won the deal. It will invest $240 million in Facebook and expand its existing relationship to international markets, according to the WSJ. (The previous advertising relationship was only for the U.S., now Microsoft is Facebook’s exclusive advertising partner both in the U.S. and abroad until 2011) The $240 million is a minority stake that values the company at $15 billion. So that comes out to less than a 2 percent stake for Microsoft, which is much smaller than 5 percent stake that was bandied about earlier. (Update: During the conference call, Facebook left open the possibility that more investors may be included in this round of financing, though it declined to disclose who those investors may or may not be. But that does open the door to Facebook raising more than the $240 million).
While Google would have been a closer fit in terms of it overall philosophy (more open than not), it may have just been too expensive to buy out Microsoft from its current deal to supply ads for Facebook in the U.S. Given its deep ties with Microsoft, sticking with them was always the path of least resistance. And one could argue that Google has never felt comfortable targeting ads based on private user profile data, which seems to be the great promise of Facebook, ad-wise. Microsoft doesn’t share those qualms.
We are liveblogging the conference call here.
I posted it in your board 5mn ago..tried to beat you out..
anyways..thats ridiculous..$250M ?????? I recalled people mentionned 400M and until yesterday 1.5B !!!
I wonder why kind of deal and valuation they got after the signatures..
adddddd meeeeee pleaseeeeeeeeeee
http://WWW.MYSP.../HEATPRODUCTION
Wow.
“While Google would have been a closer fit in terms of it overall philosophy (more open than not).”
So is Facebook more open than not? I’m not convinced Google is either, but I don’t think this point really says anything.
“And one could argue that Google has never felt comfortable targeting ads based on private user profile data.”
This makes no sense to me either, being a Gmail user. It seems to me they are a pioneer in targeting ads based on private user data.
facebook worth $15B??? It’s valuation gone crazy again, I think.
Between Aquantive, Xbox 360 and Facebook, Microsoft is on an impressive run. I predict Zuckerberg will be CEO of Microsoft within 10 years. They found their next bill gates.
BTW : Still waiting to hear if Silverlight adoption is part of the deal.
This brings some light to facebook value. Which choice was good, too early to predict. This definetly will give MS a boost .
http://blogkatt...r-facebook.html
Um doesn’t Google target ads based on my e-mail content? G-mail.
what a difference a year makes (Zuckerberg considered offers last year for $1B for ALL of Facebook).
http://www.face...3283&ref=mf
Amazing how the tides have turned! Who would have thought that Facebook would garner so much value.
Is there any research on what kind of ROI companies are seeing when advertising on social networks? Does the amount of money ultimately spent by consumers because of advertising really justify the kind of money being spent? It’s hard for me to imagine that it is so, so I’m wondering what kind of hard numbers are out there.
I agree with Morgan on the point of using private information to serve up ads; in fact, google seem to have less qualms, not more.
Makes Rupert’s sub $600M purchase of Myspace look all the wiser, doesn’t it?
This is insane…
kind of a bummer – microsoft has the opposite of a halo (no pun intended) effect. It’s almost as cool as Rupert Murdoch sitting on your board. At least they did not sell the whole shop.
Why would Google and Facebook be a good fit? They’re direct competitors considering Facebook’s real goal is to become an independent advertising company. Also, pretty sure Google’s been reading my email, collecting my search histories, and caching my cookies from anyone with urchin installed since day 1.
The Gmail ads are an experiment, and even those are matched to keywords in your mail, not a user profile with your age, gender, relationship status, and stated interests.
Google had the bank account to go thru with the deal. Too bad, they could have kicked MSFT out of the picture.
Anyway, 240 M$ for 1.6% of the company, good job Zuckerberg.
Unless facebook has persuaded other investors in at the same $15bn valuation, it’s not a real price tag at all.
I bet Microsoft sees the tiny sum of $240m as the price of securing what it hopes will be a lucrative ad deal, not an investment in a valuable piece of equity.
If that’s the case, then Facebook has in effect set its own valuation, at a price which I’m sure does wonders for the accounts of its VC backers.
Erick, you make yet another incredibly biased, uninformed statement about Google vs. Microsoft: “And one could argue that Google has never felt comfortable targeting ads based on private user profile data…Microsoft doesn’t share those qualms.”
No company has made more progress in the targetted ad space than Google. They *defined* it with their unabashedly creepy GMail policies. And Microsoft probably trails by years behind Google in making an ad platform robust enough to support the kinds of smart targetting that Google does.
The comments on your infamous SkyDrive post of last week were, I thought, overly vitriolic, but now I’m starting to realize that all those commenters may have had a point.
“Anyway, 240 M$ for 1.6% of the company, good job Zuckerberg.”
You bet it is….!! loool
It can only happen in USA, not in Europe.
“Google has never felt comfortable targeting ads based on private user profile data”
What the crap these guys are writing huh??
as long as user feels comfartable it doesnt mater.in the consumer market users can tolerate ads.
I don’t think Mark Zuckerburg can run with the money….what the hell does that mean? It’s not like he hit the lottery, Facebook had been generating 50M in 2006 and is expected to hit 200M in 2007.
This is just an injection of cash to help expand the business faster than they can now. Because guess what, the server cost and employee salary probably costs them 180M.
Even without profiling, Google has finagled its way into being the dominant advertising provider for the Internet. If anything, “matching” keywords in my email is creepier than figuring out I’m 21 and selling me Budweisers.
Google Analytics + Google Search History + Gmail + Gcal + Google Toolbar + Google Desktop Search > Facebook
Michael,
TIME TO FIRE ERICK.
15 BILLION????
That is insane. Another over the top valuation. Skype anyone?
Mark Zuckerberg’s stake in the company is worth $3Billion as of today.
time to sell everything. thanks facebook for the sell signal.
I am going to watch this closely before I write up a parody of such a deal on productfoolery.com. But you know, a parody of this deal might not look so different…
@22, “maybe you shoul bring yourself into te 21st century before making suck stupid comments.”
Maybe I’ll do that when you learn how to spell.
Looks like MS is so desperate get a piece of the action in social networks crowd that it is throwing money out without counting
This is just stupid. Come on $15B. Who in their right mind would want to work there starting now. You want to make minimum 2-5x return on options right? 10x surely isn’t out of the question. So you think FB is going to increase 5-10x – no freaking way. Just look at the market cap of companies that would put them on par with at a 75B-150B valuation. There’s going to have to be some very creative option discounting (of the type that will probably get them in trouble later) if they’re going to attract future talent. Of course any employee there for some amount of time made bank!
Microsoft has really won.
$15 Billion, are you sleeping? Get a good calculator.
Damn, I wish I worked at Facebook.
Dan
http://www.acke...angreenberg.com
Erick – do you have any data to back up that claim that Google is uncomfortable about serving up ads based on personal information and Microsoft isn’t? That’s a pretty strong statement given that Google is the only one doing anything close to that with Gmail ads (and Microsoft has no equivalent today).
Why the anti-Microsoft spin?
Regarding comment #35, does anyone know what strike price new employees will be getting now? Will it be at the $15B valuation?
Zuckerberg for President!! And I will be the Secretary of Defense
chill on the $15B valuation… $240 million is not much for msft and its a play for a tighter relationship with FB. Imagine windows tied into FB? It could happen.
And remember the comments on the supposed $1b valuation from yahoo? People thought that was nuts. Will we look back in 5 years and laugh at thinking a $15b valuation was crazy? Who knows.
is there a bubble ? yes. is FB one of the exceptions to the bubble… yes
@38, why do you take it as anti-MSFT? Maybe they are smart to target ads that way. I am not making a judgment. The fact is that MSFT does more behavioral targeting than Google, and thus is more comfortable with it. The Gmail ads, while admittedly creepy, are based on the same keyword-based algorithms as Google’s other search ads.
Can you point to an example where Google has targeted ads based on user profile data instead of direct intent as manifested in keywords?
It’s just a difference in approach. And arguably, MSFT’s approach is more in line with where Facebook wants to go.
I smell another bubble.
Remember Broadcast.com? In April 1999, Broadcast.com was acquired by Yahoo! for $5.7 billion in stock and became ……….figure it out yourself…
Where is it today? Is this another pipe drain?
Facebook does not have a $15 billion value now, few people are saying that. However, with online ad revenue Facebook could easily be worth that and more. The majority of their new subscribers are expected to be from overseas and Facebook is expanding into foreign languages. Both Microsoft and Google (as well as Yahoo!) are drooling over those people for ad revenue. As far as this deal goes for Microsoft, good for them. Excellent call on the part of their Board of Directors http://www.news...soft-diver.html This is the kind of forward and aggresive action they need to take if they want to seriously challenge Google.
Erick – the reason we take you to task is b/c the language you use naturally incites questions about your motivations. You have yet to provide any reasons whatsoever for stating that Google has discomfort about targetted ads, but then you say that Microsoft “has no qualms” about it. You choose to use pejorative rhetoric in making a grandiose, controversial statement backed by no clear evidence, & it appears that you try to excuse it all by prefacing it with the maddeningly non-committal “One could argue.” In addition to being poor editorial writing, it just seems downright dishonest.
@43 yes you are right. The same will happen to facebook and myspace when they want to use profiles of their users for advertising targeting. Think many of them will not accept that and then delete their entrys or reduce them to the minimum. You cannot make money with communites so that an sn is 15B worth because af the user number or theit growth. That doesnt say anything about the real valuation and potential in advertisements for this target groupt. But we will see. I think that doesnt work.
Start > Run > CALC.EXE
If techcrunch earns 240k$/month (as published), we can estimate that facbook makes 10x times more at least. =~ 2.5M$/mo –> 30M$/year [at least!]
no economic module can predict how this income made facebook value 15B. what it looks to me is that MS vs GOOG had an “honor fight” between them on face book, and that zuckerberg or whatever his name is, is the winner.
to sum things up, this whole social/blogging/web2 seems like a big bubble gum ready to explode any minute now. names of bubble from the first round have already been mentioned in the talkbacks, but also worth to mention ebay’s acquire of skype which now in prespective of 1.5 years later seems like a giant flop.
Yoni,
Israel
“And one could argue that Google has never felt comfortable targeting ads based on private user profile data…”
Ha!
folks – can we drop the MS vs Google ad targeting thing. That’s so not what this story’s about.
@41 “chill on the valuation”. I love it. That’s like saying, “dude, don’t worry about the math, what about the love, the feeling in it all…” Definitely $240M is nothing for MS to pay – the point is at what cost. Unfortunately for MS – it’s a panic buy situation. They gotta get in the game and were on the wrong side of the standard rules of negotiation. I don’t disagree that they had to do it – but shame on their management for it having to come to this point.
@44 “Facebook doesn’t have a 15B valuation now” If the news is correct they most certainly and *legally* do have a $15B valuation right now. Else it would be like saying well since Google’s share price reflects X years of future growth I would like to make a bid to buy the company at 75% it’s current price/share. Uh – no.
A fundraising is a very important financial/legal/fiduciary point in time. It sets the state for a lot of things – like stock option pricing, like up rounds, down rounds, IPO pricing, director liability if was way off and causing some sort of harm in the future, etc. To me that’s why $15B is the story here.
The Broadcast.com comparison is a useful one, and proves one point, which is that the online space, in it’s entirety, is up for grabs and will remain so with the current form of the web (and that’s a good thing).
Which makes the $15 billion valuation highly speculative, to say the least.
I don’t think that MSFT expects to make money on the $250MM at a $15B valuation. Internally for them it is a $250MM investment to get an exclusive advertisement deal over the next 4 years. The 2% stake is only icing on the cake. Had they announced that they have given $250MM to Facebook for a 4 year exclusive ad deal, no one would have flinched, this is cheaper than the Google/MySpace deal.
I think it would be naive of us to think that MSFT is looking at doubling its $250MM investment. Locking in a potential ad platform on the other hand is lucrative.
On that note, I doubt that there will be other investors, because the returns on a $15B valuation is probably none to negative
He who has ear, let me hear …bubble rain is coming and this time it is going to be different …slow and longer. The users are not loyal to any social networking site. Remember Geocities?
the next you will see maybe iphoneFaces and everyone will jump on the bandwagon. So, it is all about time. Let’s wait and see what we happen to these sites in 5 years to come.
Also remember the some psychologists talking about the impact of virtual friendship compare to good old day “face-to-face” meeting. Again, I am not sanguine about the whole thing but I don’t think this will last 5-10 years to come.
If I were the facebook guy, I will take the money just like Cuban did with Broadcast.com and run a sprint or marathon and don’t look back. Only a loser will pay $15B for a website that can evaporate in 5 years. That is a $3B burn rate/year.
Instead, MSFT should invest in green technology or something meaningful with good RETURN.
Just my 2 cents
I totally agree with Prashant’s comment.
For MSFT, this is nothing more than spending $250 Mil so they can continue advertising. They have a warchest of over 30-40 billion dollars. This is a small drop in the bucket. After losing out to Google on earlier purchases of Doubleclick, this is a small victory with some long term consequences.
And yes, MSFT probably bidded up to this high to ENSURE no one else will be willing to invest in a company that is valued ($15 Bil) so ridiculously high. It’s like buying a .COM at the peak in the late 90s and just waiting for it to drop.
I’m glad as a MSFT shareholder than we got it done though. It’s a write-off, but definitely the ROI will present itself in other ways.