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October 25, 2007

Facebook Taps Into Hedge Funds For $500 Million More?

Erick Schonfeld

95 comments »

facebooklogo2.gifConsider this a rumor at this point. Forbes’ Elizabeth Corcoran is reporting that two NYC hedge funds have each matched Microsoft’s investment in Facebook for about $250 million each, at the same $15 billion valuation. If true, that would give Facebook a $750 million war chest, which is more than most companies make in an IPO. That should be more than enough to pay for those 700 employees next year.

On the conference call yesterday, Microsoft exec Kevin Johnson implied there might be other investors involved when he said, “If you look at this round of financing they are doing that we are in for $240 million . . .” We asked if there were indeed more investors involved, but Facebook’s chief revenue officer Owen van Natta would only say, “Microsoft is the investor we are announcing today.” But that left open the door for another announcement. Anyone who knows the names of the hedge funds involved, please tell us in comments (or send me an e-mail if you really know).

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  1. John C. McClore

    October 25th, 2007 at 9:04 am

    First! Facebook’s valuation should be closer to 15 Trillion dollars… That’s with a “T.”

  2. Rodger

    October 25th, 2007 at 9:07 am

    A Stealth Web3.0 company will be worth $30 billion

  3. Harlan

    October 25th, 2007 at 9:08 am

    Would it be possible for TechCrunch to create an RSS feed that doesn’t have Facebook articles in it???

    I love reading TechCrunch, but I hate reading about Facebook. In my opinion, it really doesn’t deserve the amount of attention that you give it. And, if anything, you’re only contributing to the unnecessary hype that you constantly write about.

    Please PLEASE PLEASE create a Non-FaceBook feed for us!!!!!!!!!! I can’t take it anymore!!!

  4. Rodger

    October 25th, 2007 at 9:08 am

    within six months of release

  5. Chris

    October 25th, 2007 at 9:08 am

    Do they script a storyboard for this stuff in the board room with an artist and everything or do they just wing it when they tip the first domino?

    “First! Facebook’s valuation should be closer to 15 Trillion dollars… That’s with a “T.””

    No way, I heard Facebook was worth a Googillian.
    I’d hate to see that hedge fund contract that let them throw money at this.

  6. Ryan H

    October 25th, 2007 at 9:09 am

    It almost seems as though Techcrunch has some incentive to publish Facebook articles. Or maybe Facebook is the only interesting game in town these days.

  7. Chris

    October 25th, 2007 at 9:12 am

    “I’d hate to see that hedge fund contract that let them throw money at this.”
    http://en.wikipedia.org/wiki/Leona_Helmsley

    In a year or so a seance is convened to notify Mrs. Helmsley that her dog is now on welfare.

  8. John McCrea

    October 25th, 2007 at 9:13 am

    Why read TechCrunch if you don’t want to stay on top of what’s going on in the Internet industry? Whether you like Facebook or not, this deal is very big news! Similar in import to when Netscape went public. I have no info on the hedge fund rumor, but I have done some analysis of the MSFT investment, and whether we should view this as a sign of a Bubble. My post is here: http://therealmccrea.wordpress.....is-part-2/

  9. Travis

    October 25th, 2007 at 9:21 am

    Whether people like it or not, Facebook matters, and this is just more proof of that. It isn’t going away anytime soon.

  10. Vijay Veerachandran

    October 25th, 2007 at 9:21 am

    Facebook is no Google. But that said by Calcanis long time before. But can it be bigger may be but how? Google is valued at 200B. Days are not far if the wall street expectation being met, Google crossing MSFT in market cap.

    Is there any metrics which provide how many users in myspace are in Facebook. There is only a handful of users to choose from. Once gain is another loss.

  11. Sean

    October 25th, 2007 at 9:23 am

    I am SO BORED of reading about FaceBook 10 times a day on this site.

    How about something that’s actually interesting?

  12. Yakov

    October 25th, 2007 at 9:27 am

    The value per user is much less than a value per subscriber in most of wireless telco acquisitions.

  13. Jason McMinn

    October 25th, 2007 at 9:28 am

    Yeah there is a lot of stuff on Facebook on Techcrunch but consider the news. A social networking site that is worth $15 billion?? This is absurd.

  14. Pierre Col | UbicMedia

    October 25th, 2007 at 9:29 am

    I agree with Sean.

    Please, TC folks, write interesting articles about “real tech companies”, not about overbubbled start-ups…

  15. tim

    October 25th, 2007 at 9:31 am

    @Yakov: but users of Facebook don’t pay anything to use the service. they don’t bring cash to the company…

  16. JohnM

    October 25th, 2007 at 9:32 am

    Microsoft is LEASING Facebook for the next 4 years. Facebook is not worth $15B, Microsoft is leasing an advertising distribution system. The equity ownership is so small as to become almost immaterial.

    Of course, Facebook will now attempt an IPO northwards of $15B, saying that Microsoft already set the valuation floor. Of course this assumes all the lawsuits regarding ownership are settled.

    If the company does go public, what the myopic public should realize is that they are not buying the advertising deal, along with shares. Only Microsoft gets that. Don’t be fooled, Ballmer cut a better deal than the public will ever get. Microsoft is NOT valuing Facebook at $15B. No, no, no. Microsoft is valuing a potentially lucrative advertising distribution deal and a small percentage of Facebook at $240MM.

    The public are sheep though, so I imagine Facebook will line-up the investment banking sheperds to take them out at $20B+. Baaaahhhhh.

    Now why might hedge funds get involved? Because the bump-up in valuation will go from 15B to $20B on an IPO. Nice % increase for a holding period of likely only a few quarters.

    But keep in mind, it’s the investing public (proxied through mutual fund managers, etc.) who will pay the price for all of this. Feels like 2000 all over again. Great move for Facebook, probably a smart move for Microsoft, and probably a smart move for the hedge funds. But remember, this is a game of musical chairs. And as usual it is often the naive public investor left standing.

  17. Ryan H

    October 25th, 2007 at 9:32 am

    How many times can someone talk about Facebook’s pending investment, and still make it interesting? Techcrunch is like the news that every 15 minutes repeats the same news over and over. It might keep people hooked on gaining an extra nugget of info right when it breaks, but is the frequency really necessary?

  18. HappySlappy

    October 25th, 2007 at 9:42 am

    TECHFACECRUNCH!

  19. Adam

    October 25th, 2007 at 9:43 am

    #16 = smartest/most worthwhile post on the topic.

    “Facebook is not worth $15B, Microsoft is leasing an advertising distribution system”.

  20. Basti

    October 25th, 2007 at 9:46 am

    I agree with JohnM, Microsoft doesn’t value Facebook at 15 billion put pays the 250 million in order to get the advertising deal AND the tiny share.

  21. Kikimodo

    October 25th, 2007 at 9:48 am

    # 9. Stop throwing blanket statement. Simply say, FaceBook matters to you.

    It is sad that “some” comments here tell me how short our memory can be. It seems we don’t learn from history and that is why history always repeat itself. I know most of you will think I am crazy but fast forward 5 years from now and look back it these comments.

    Remember 1999 circa 2001, remember Broadcast.com ($5B) and the others. Where are these “flipups” today?

    This seem like hypes from the likes of Wall street etc.

    I have nothing against FaceBook but it is in sane to value the site at $15B. Why? Simply because users jump on hypes and what their friends tell them is cool. And what is cool today may not be tomorrow.

    http://en.wikipedia.org/wiki/L.....s_by_Yahoo!

    http://en.wikipedia.org/wiki/L.....quisitions

  22. John C. McClore

    October 25th, 2007 at 9:53 am

    What are the advantages to advertising on Facebook if no one clicks on or reads the ads?

    What’s the advantage of advertising at all. All it does is annoy me and makes me want to avoid the product. Firms should take a page out of Abercrombie & Fitch’s book and let your product stand for itself!

  23. Dan

    October 25th, 2007 at 10:01 am

    Better update the CrunchBase. It’s quickly becoming out-dated :)

  24. Amy Wilsch

    October 25th, 2007 at 10:02 am

    I honestly do not understand what a social network company needs with 700 additional employees.

    Are they hand building their own server farms? Policing the abusive members? Translating all the posts into every language? I don’t get it. The application is not that sophisticated. It seems to be scaling well. Unless those 700 are building all new fb widgets to push all the outside ones off.

  25. techcrunchreader

    October 25th, 2007 at 10:06 am

    This is just a big rumor. But this time, I think it’s not true.
    Fake Steve Job wrote it on his blog last night:
    http://fakesteve.blogspot.com/.....r-500.html

  26. jason

    October 25th, 2007 at 10:08 am

    Stop whining about Facebook news glut. If you’re not interested, don’t read it. Simple!

  27. davidp

    October 25th, 2007 at 10:12 am

    sure facebook is news…but when did this become a tabloid reporting rumors?

  28. techcrunchreader

    October 25th, 2007 at 10:19 am

    Mike A, please hire Mario Armando Lavandeira Jr. as a new blogger!

  29. Peter Verkooijen

    October 25th, 2007 at 10:27 am

    Exactly JohnM! Most insightful post I’ve seen on the subject so far.

  30. reagu

    October 25th, 2007 at 10:29 am

    Do we really need another social networking site glutted with ads?

  31. Wayne Mulligan

    October 25th, 2007 at 10:31 am

    Not sure why they would need that much capital - quarter of a billion is certainly enough assuming they weren’t completely pissing away their money and doing no revenue. My gut is telling me FB is gonna start acquiring companies…just my gut.

  32. WW

    October 25th, 2007 at 10:34 am

    trust, when ppl get tired of Facebook, IT WILL FAIL miserablly!!!

    Why?

    1. There’s another bubble coming next year because too much money put into web 2.0 stuff, trend, ….etc

    2. As more and more Social Network out to the mkt, ppl will just switch to different sites whenever they like.

    3. Facebook is too much “ego”, if he is smart…then get 15B now for real.

    4. What if there’s a SN raised no where but become a big hit in China? it will generate more users than other SN in the USA.

    5. You can NOT rely on ADVERTISING stream…try come up more creative products or strategy!

  33. Mark

    October 25th, 2007 at 10:36 am

    TechCrunch wants to have Facebook’s children. Or at least a filthy little grope.

  34. MediaOutrage.com

    October 25th, 2007 at 10:43 am

    Ok another $500million??? They better be creating the technological cure for Aids in the offices of Facebook! lol. What is this money being used for? I want to know how much revenue facebook as a company was already making annually. http://www.mediaoutrage.com it does seem that any site or magazine that you pick up if it pertains to business and technology that somewhere in the midst you will find an article on Facebook. No wonder Google, Yahoo!, and Microsoft were duking it out to get a piece. Who is Mark Zuckerberg’s publicist?

  35. Faramarz

    October 25th, 2007 at 10:45 am

    It’s very simple, Microsoft’s deal completely sealed the probability of a Facebook IPO. at this point there is no doubt in the economics of it.

    The smartest investments will be made Right Now! no other tech company can take the risk or capital pressure to do this, so Hedge funds pickup where they can’t. If anything, Microsoft mammoth investment for little stake reassures any other investor of the potential of Facebook.

    Once they go IPO, it’s going to be a cash machine! Facebook can then tackle Google in every single respect. I’m glad this is happening. there needs to be direct competition to google

  36. Chris

    October 25th, 2007 at 10:47 am

    Somebody should start a techcrunch aimed at the Chinese and based in analogy speech.
    They could convince people about anything, since they take things written online so literally and they think these are actual market queues.

    “Like a dagger amongst sheep, Microsoft runs the wolf by the facebook river through my heart., News at 11″

  37. Your Daddy

    October 25th, 2007 at 10:51 am

    Looks like there are some people that really hate GOOG

  38. Chris Ar

    October 25th, 2007 at 10:54 am

    Facebook is going to be the main contributor for a bubble burst. Facebook is a company without a revenue model, with less members than MySpace. But Facebook is valued at $15 Billion? No one can tell with a straight how they came up with that $15 Billion number. They have gone too greedy and going to destroy the whole industry for others.

    Imagine if Facebook was valued just like any other company. The industry will be able to proceed in a normal pace and a lot of other relevant sites will flurish and get attention. Bubble will not be in sight. One of the main reason the bubble burst in 2000 was people / companies realised that they are not meeting the revenue expectation that was initially hyped to be. We are repeating the same thing or even worst. This time, the hype in on a company which does not even have a clear revenue model. (If they had one, they will reveal their CTR.)

    This bubble will take out a lot of companies without a clear revenue model or questionable business model and VC’s who are investing on them. Companies that will survive the bubble are those who have good products. Products that are actually improving our lifestyle. Most social products or sites will crash in a bubble. People are not going to socialize when they are fired or laid off.

  39. Sramana Mitra

    October 25th, 2007 at 10:56 am

    I am astounded at the valuation. Now that they have managed to validate the valuation number, it is time to make a few acquisitions:

    http://sramanamitra.com/2007/0.....gy-part-1/

    Sramana

  40. jbwebs

    October 25th, 2007 at 10:58 am

    In other news, google did not buy facebook.

  41. Chris Ar

    October 25th, 2007 at 11:01 am

    #34 Faramarz ,

    ” Once they go IPO, it’s going to be a cash machine! Facebook can then tackle Google in every single respect. I’m glad this is happening. there needs to be direct competition to google ”

    I have heard a lot of dumb stupid things in the last few days. But yours has to be the winner.

    Tell me how FB is going to compete with Google. Google is providing solutions for business who are actually paying for the service. What is Facebook providing? Are people paying for something, anything on Facebook? Is FB coming up with a product to compete with ADSense or Adwords? Cmon, you have to be smarter than that? Even Microsoft and Yahoo who have been in the paid search industry can’t compete with Google, you are expecting a company without business model to complete with Google.

    Take your head out of the sand.You sound really uneducated when you say something like that. FB is a hype and uneducated folks like you are riding on it.

  42. NCR

    October 25th, 2007 at 11:09 am

    I have never ever gone to Facebook. Ever.

    All I know about Facebook is that it’s a site that was initially for college students and they opened it (whatever IT is) up for everyone. And they have some kind of “widget” applications (whatever THAT means).

    I use Google AT LEAST 50 times a day.

    I don’t have a clue on how Facebook can “monetize” me.

  43. Berlin

    October 25th, 2007 at 11:11 am

    $250 Million is a only quarter of what MS, Yahoo or eBay would spend annually on advertising. Coke and HP spends $2 Billion!

    Online advertising will increase to $35.4 billion in 2012 according to JupiterResearch.

    I think most of that money will go to Google unless a better form of targetting come up besides the carpet bombing approach of adsense.

    Don’t hate, emulate. So stop whining like a bunch of prebuscent girls and think about grabbing a piece of that 35 billion pie.

  44. Arjun

    October 25th, 2007 at 11:20 am

    my gut feels like legs mason is behind this…let’s wait and see!

  45. Chris

    October 25th, 2007 at 11:23 am

    “” Once they go IPO, it’s going to be a cash machine! Facebook can then tackle Google in every single respect. I’m glad this is happening. there needs to be direct competition to google ””

    No. People as smart as Larry Page would never work for facebook or Microsoft. Bloated companies like that pick up drone workers, or bees as I call them.
    http://www.thesmartestman.com/.....x?showID=1
    This kind, but a bit smarter.

    Google can only be competed against by a fresh start and clear thinking.

  46. Skeptical

    October 25th, 2007 at 11:24 am

    Chris Ar:

    You keep saying Facebook has no business model. Are you privy to inside information? All the reports I’ve seen that mention a specific figure say they have revenues of > $100M/year, which sounds like there’s at least *some* kind of business model. With just a few hundred employees, that might even exceed their burn rate (i.e., they might be profitable already). Do you know differently, and if so, how?

  47. sanmat

    October 25th, 2007 at 11:27 am

    This shows web 2.0 is getting matured and is getting the confidence of the financial community too. Facebook has taken a turn . I had commented earlier that now Facebook is pacing for an IPO and this deal has helped a lot.

    http://blogkatt.blogspot.com/2....._6464.html

  48. Faramarz

    October 25th, 2007 at 11:30 am

    #34 Chris Ar - That’s your opinion and i think it’s completely jaded. Google uses adsense revenue to fund it’s other developments. I.e. Mapping, social networks, blogger, their online office apps etc etc etc

    Facebook is looking to do the very same. they have reached critical mass, they have a platform, and they have the organization drive to expand the business model. Consider this 250m investment the invisible driving force behind all the more to come.

    I use facebook to communicate with friends, but at the same time I hardly think the focus will be to keep it a ’social network’ as it is coined today. they have a lot of products stored under one room. Most people are diluted to think outside the real of facebook just being a chit chat space for college kids.

  49. rons dixon

    October 25th, 2007 at 11:30 am

    Berlin, you have made the best comment on this post to date.. Simple says it best.

    Targeted advertising is be about 34-38 billion by 2012. How do you (Micorsoft) complete well you invest in a platform that is achieving the following
    1. Growing users at a fast rate.

    2. Is now studying users behaviour pattern so it can provide better targetted advertising.

    3. Has a large user base.
    4. Very loyal user base.
    5. Last but not least a strategy.

    The focus shouldnt be on whether Facebook is worth 15 billion (a company is worth what people are willing to pay for it), I think it is, but i am more interested in the growth potential of facebook.

    For the media buyer Facebook in the next year or so may be the defacto platform for advertising.

    I can tell you as a media buyer if i can get better targeting for my campaigns then i am willing to pay mega dollars to be there. That is as simple as it gets.

  50. Rajan Tawate

    October 25th, 2007 at 12:07 pm

    This is called subprime lending for the tech industry.

    S U B P R I M E LENDING

  51. Tim

    October 25th, 2007 at 12:09 pm

    How long before someone creates an open RSS type feed for social data? Like HTML, it would be an evolving spec, but you have to start somewhere. Having some open social data spec available for creating/reading social data would let any web site provide the write and/or read capability of managing this information. Add in a few open/reusable frameworks and it would certainly contribute to popping this FB bubble.

  52. John C. McClore

    October 25th, 2007 at 12:14 pm

    @ Rons Dixon

    I understand what you’re saying. But what if your target audience doesn’t bother to read the ads?

    You can target all you want right down to an invidivual consumer, but if they ignore the ad what value are you getting out of your “mega dollars?”

  53. Togi

    October 25th, 2007 at 12:15 pm

    Alot of hype around facebook, somebody’s trying to inflate their value. Well basically its getting more strategic in the internet social networking landscape, and none of the big players want to loose a potential share. The next superstar of the web will be even higher priced. At somepoint the big bubble might burst again.

  54. Facebook founder

    October 25th, 2007 at 12:15 pm

    I find Chris very annoying.

  55. Mark Evans

    October 25th, 2007 at 12:15 pm

    You figure 700 employees would cost about $70M a year so Facebook has three years of burn left from its Microsoft investment. :)

  56. rons dixon

    October 25th, 2007 at 12:22 pm

    @ John, the same could be said about any medium, what value do you get from a TV commercial or a ad in a magazine.

    If what you are saying is correct then you are porporting that “no one” will click or read the ads, that kind of thinking is flawed. Better targeting almost ALWAYS (sorry for the caps) yeilds better results.

    Take this for example.

    I have a facebook account, i connect with my friends, John my best friends lives three blocks from me, his birthday party is 3 days away. We know john likes rock music and would like to get x for this birthday. So now i know to advertise to him a rock group that his more align with his wishes and taste.

    This is the power that we as media buyers are hoping that FB will harness. This is how social computing/networking with evolve.

  57. rons dixon

    October 25th, 2007 at 12:28 pm

    I dont get what people are talking about bubble? explain yourself dont just make perposterous statements because you can. Argue your point intelligently.

    explain to me (in layman terms) why there is a bubble?

    I bet 10 years from now when only advertising reaches say $100 Billion, most of you will still be posting to this blog saying, oh we are in a bubble.

    Media buyers are spending more to reach/target customers better. That will continue to increase as the data on customers become more holistic and structured. Years from now we will be able to look back at some of these post and target some of you, we will know how you vote, what you like to do in your off time, how much time you spend online, what you spend money one.

    People get it, media buyers like myself will continue to spend money to better target customers, period.

  58. Pimping Widgets

    October 25th, 2007 at 12:43 pm

    500 Million?! It must be because of how well Facebook integrates with 4INFO!

  59. Tim

    October 25th, 2007 at 12:50 pm

    rons,

    In my view, there is a bubble because of the excessive investment in what I feel will eventually become another open spec that anyone can read/write. When that eventuality does happen, there will no longer be a lock in to proprietary social data sites like FB and MySpace. As an example, news used to be hard to get at. Now, there are RSS feeds and aggregators everywhere. Can you even imagine a site that does mostly news aggregation worth $15 billion? I certainly can’t and I cannot imagine a social data aggregation site worth that amount either. It shouldn’t take too long to have feeds and aggregators for social data just like there is now for news data. When that happens, the social data bubble will burst.

  60. rons dixon

    October 25th, 2007 at 1:30 pm

    Tim, read your post again, and again, it is way off. News was hard to get yes i agree but media buyers were not into buying news. We have always cared about the measurable effect of our campaigns.

    Do you know why the “Got Milk” ad campign was so successful? Well i can tell you because i worked at a company that handle it back then. We were able to provide with a certain level of certainity how the campign was performing, the people who responded, how they responded, their spending habbits, etc.

    That is called targeted marketing, that is why Microsoft’s investment in FB is such a great strategic move. I applaud them.

  61. fadbook

    October 25th, 2007 at 1:34 pm

    Growth story

    13-21 You like fadbook and are the real target audience for microsoft ad network.Unfortunately you dont have lots of cash.Music related business likes to target you based on your profile.(But you prefer free downloaded/swapped music)

    21 -23 you sign in occasionally to facebook.You started to get some cash.

    24 - … you prefer linkedin as it is a good place to network for a job or for
    business(maybe the next fadbook)

  62. Just a guy

    October 25th, 2007 at 1:42 pm

    My view is exactly that of JohnM. Buying one or two percent, locking up advertising and setting a $15 Billion benchmark that Google, Yahoo or anyone else would have to pay to play. A great defensive play by MSFT. That said, the deal in place does not mean the whole of FB is worth 15B’s.

  63. rons dixon

    October 25th, 2007 at 1:46 pm

    fadbook,

    who cares if you sign into facebook once or twice a day or year. All i care about as a marketer is that when i deliver a target ad to you (the once or twice you login) the likelywood that you will respond is better than if you logged in 50 times a day with no demographic information.

  64. hmmm

    October 25th, 2007 at 1:47 pm

    # 9. Stop throwing blanket statement. Simply say, FaceBook matters to you.

    It is sad that “some” comments here tell me how short our memory can be. It seems we don’t learn from history and that is why history always repeat itself. I know most of you will think I am crazy but fast forward 5 years from now and look back it these comments.

    Remember 1999 circa 2001, remember Broadcast.com ($5B) and the others. Where are these “flipups” today?

    This seem like hypes from the likes of Wall street etc.

    I have nothing against FaceBook but it is in sane to value the site at $15B. Why? Simply because users jump on hypes and what their friends tell them is cool. And what is cool today may not be tomorrow.

  65. jman

    October 25th, 2007 at 1:48 pm

    Harlen, try adding a filter to your feed reader. It can do wonders.

  66. SOE 2.0

    October 25th, 2007 at 2:11 pm

    Tim-

    Allow me to oversimplify:

    Yahoo.com is a site that does mostly news aggregation. They have several products and services they offer beyond their simple portal proposition, but I believe their core value lies in the partnerships they’ve established to provide content and services on their landing page.

    Facebook’s offering isn’t as robust as Yahoo’s, obviously. But as they develop their service selection (read: get in bed with large partners a la Yahoo) and fine tune their advertising services (a la Google), they are well positioned to be a major player in the social networking web movement.

    Facebook is ~3 years old, right? If we hold the Yahoo! analogy constant, that would have been Yahoo! in 1998. Did anyone expect that Yahoo! would have a market cap upwards of $40 Billion back in 1998? Maybe. In 2000? Definitely. In 2001? I’d say definitely not. Talk bubble and adjustment and inflated valuation all you want, but Yahoo! is still worth a pretty penny.

    Like I said, this is all oversimplified, and feel free to flame on. But I think that there are a lot of people underestimating the power of social networking sites and the efficacy with which Facebook offers solutions. I shop at Costco a lot, because I know they’ll have the majority of the things I’d like to buy there, both essentials and impulse buys. It isn’t the only place I shop, but I find myself going back again and again, week after week, year after year. I’m starting to feel the same way about Facebook.

  67. mmt

    October 25th, 2007 at 2:36 pm

    The valuation is crazy. It would be crazy at $5 billion frankly. Look at the comparable to News Corp. News Corp has revenue of $30 billion and a market cap of $70 billion. And it owns MySpace, a social network more than twice the size of Facebook. You may hate MySpace but there’s no denying it’s larger and still growing. So, Facebook, with estimated revenue of .33% of News Corp’s has a valuation 20% of News Corps? Not feasible.

    This really does remind me of 1999.

    More at:

    http://www.bestcashcow.com/sto.....he-revenue

  68. Steve Ballmer

    October 25th, 2007 at 2:40 pm

    We arranged this under the tables! FaceBook owes us a lot more than they think they do! Muahahahahahahahahahaha….

    http://fakesteveballmer.blogspot.com

  69. Jeff

    October 25th, 2007 at 2:50 pm

    Just like many of you, the Facebook gossip annoys me to no end. But I must admit Facebook and the investors behind them are smart. They are not building a social networking tool. Facebook is building a competitor to Google Adsense that can be used to monetize any site around the world.

    The social networking aspect of their business is simply a means to compel users to provide personal data. Facebook will then use that wealth of data to target ads at you. All you need to do is log into their system once and Facebook will set a cookie. Now, anywhere you go, they’ll know who you are and what your interests are, what your friends interests are, what groups you belong to, and where you live.

    Facebook will be one of the few ad networks that will be able to target an ad at you for a gift that a friend may like because they know:

    - you have a friend with a birthday coming up
    - they know who that friend is
    - they know what that friend likes

    It’s kind of scary when you think about it, but with the data that all the users freely provide to them, they can build a very strong ad targeting system.

  70. Andy

    October 25th, 2007 at 3:38 pm

    Jeff,
    I disagree. First, they can target all they want but user response will be low (FB’s CTR are abysmal) simply because users come to FB to socialize and mostly ignore ads. While Google users specifically search for things that Google offers them through their ads.
    Second, their targeting ability is low. Through their adsense clone FB can focus on the info users provide — favorite books, movies, and vague “interests”. It’s not specific. Best they can do is zero in on specific demographics — 18-22 single females living in Seattle. But this still doesn’t overcome their main problem — most FB users simply ignore ads.
    Basically, FB can not successfully monetize their user base to justify even a $2 billion valuation. Economist has interesting analysis. imo.http://www.economist.com/business/displaystory.cfm?story_id=9990635

  71. Chris Ar

    October 25th, 2007 at 4:04 pm

    Jeff,

    How many times have you clicked on an ad on Facebook?

    I have posted ads on other websites including social networking sites and have my adsense ads on Google 24×7. The CTR from Google is no where near CTR from ads from other sites. Our eyes have been trained to ignore ads on social networking sites. People come to Google to search for a service and they click on ads. People go to Facebook not to search for service or look for a company, they are looking to socialize.

    It is almost scary to think that there are people who think Facebook can compete with Google Adsense. There is a reason why Facebook will not reveal their CTR.

  72. FB User

    October 25th, 2007 at 4:07 pm

    How many FB users are there? I’m one. Why did I sign up - to see what all the hype was about. Do I use it - hardly if any. How many thousands of sign-ups are like me - lookyloos just wondering what the hype’s about and not really using it or really caring about it.

  73. Rob

    October 25th, 2007 at 4:16 pm

    @3 - When websites have articles posted that are of no interest to me I simply….don’t read them. Give it a shot.

  74. chris

    October 25th, 2007 at 4:41 pm

    The only ones who really believed MS invested 250 million in Facebook are the same ones that believe that Google paid 1 billion to Myspace for advertising.

    Take a look at Fox Interactive’s numbers … where is the 1 billion?

    The deal with Microsoft essentially is a round trip transaction. Yes theý “invest” 250 mm, but guess what, they are guaranteed to get this back in “revenue” from FB. FB agrees to give up a small shareholding for this, so that they can then proclaim their 15 billion valuation and the fact that MS invested at that amount.

    Sorry, the winner in this deal is MS, and to a certain extant existing FB shareholders, who would be happy selling out at 10% of the purported “valuation”, since this limits their donwside even more.

    The losers … anyone in the public that invests post IPO, and any new FB employees. Guess what, your options may get set at the 15 billion “valuation”meaning, there is not much upside for you.

  75. Searchquant

    October 25th, 2007 at 4:42 pm

    I’ve been running several campaigns on Facebook, via their FlyerPro CPC-based ad offering which is analogous to Google’s AdSense for Content. Whereas AdSense for Content averages ~0.15% CTR, FlyerPro is averaging 0.35%, which is to be expected given the better targeting options Facebook offers (company and/or network affiliations, for example).

    People do click on Facebook ads, and to a much greater degree than Google’s *contextual* ad system (as distinct from their search ads which have 2.5-3% CTR on average).

    -SearchQuant

  76. MJ

    October 25th, 2007 at 5:23 pm

    The $15B valuation means nothing when MSFT’s $240M only fetched a paltry 1.6% stake. The guys are MSFT aren’t dummies. They obviously feel this deal will help them in a way that is worth the money. $240M is not a lot of coin for them. Some are saying this metric sets the new valuation. I don’t buy it. MSFT paid this inflated valuation because it was worth it to them so that others couldn’t get their hands on Facebook. This was a defensive strategic move more than an indication of Facebook’s true valuation. The actual revenue numbers at Facebook are nowhere close to warranting this valuation. I read a blog today that mentioned $1 of Facebook revenue is being valued at 7.1 times Google’s
    and 17.5 times Microsoft’s. That’s just ridiculous.

    I’m not convinced yet about Facebook as an advertising platform especially when Facebook has been coy in revealing any significant advertising effectiveness data such as CTRs. Google works well as an advertising platform because users are proactively searching for information, products, services, and a plethora of other things while related ads are served via Adwords.

    What are users searching on Facebook? It seems users are mostly there to socialize not proactively search which probably explains why social networks deliver such poor CTRs at this point in the game. Just because ads match personal data profiles isn’t enough by itself for it to be a robust ad platform if the users aren’t searching for squat. I hope the true picture of Facebook’s effectiveness as an ad platform emerges before it is too late. If Facebook is able to IPO with such a shroud of mystery regarding the success of advertising on their platform, then a lot of people in the secondary markets may get burned ala Internet bubble 1.0. Facebook investors & execs have been very smart about fueling the hype but I hope public investors are smart enough to learn lessons from the past regarding buying into the hype. Facebook is the sexy company right now but numbers should drive how much a company is worth not hype.

  77. Chris Ar

    October 25th, 2007 at 5:37 pm

    Sorry made a mistake on my earlier post.

    I said: The CTR from Google is no where near CTR from ads from other sites.

    What I meant was: The CTR from ads from other sites (including social networking sites) are no where close to the CTR from Google. Google CTR is even a lot higher than Yahoo’s CTR.

    To gauge the true valuation of Facebook, FB should reveal their CTR and compare that to Google or Yahoo’s CTR so that the public will know what the company is worth since their sole revenue is from ads. This should stop all the “high schoolish” statement comparing Facebook to Google.

  78. Jon

    October 25th, 2007 at 5:45 pm

    Nice to know lemmings are alive and well in the financial circles… may they all end with the same fate.

    Jon

  79. Dheeraj Sultanian

    October 25th, 2007 at 5:49 pm

    Headline - Microsoft gets free 4 year exclusive Facebook advertising deal, Facebook improperly records revenue as investment as a tax dodge

  80. John C. McClore

    October 25th, 2007 at 6:26 pm

    I don’t see how you can set the valuation at 15B. Remember, Microsoft gets the 2% stake AS WELL AS the advertising deal. Do IPO investors get a corresponding advertising deal with their stake?

  81. hendra

    October 25th, 2007 at 6:32 pm

    From now on, Facebook will also be know as the Blue Screen of Death.

  82. garage guy

    October 25th, 2007 at 7:20 pm

    I was bored after five minutes on FB. All hat, no cowboy.

    I am interested in seeing how FB deploys the $$$. Looking forward to google’s response……

  83. agnieszka

    October 25th, 2007 at 8:57 pm

    looking forward to nov 5.

  84. Rajan Tawate

    October 26th, 2007 at 8:01 am

    This is the reason I love TechCrunch.

    The overall value, does not come from the posts alone….but by the wide variety of user opinions.

    It is as if a room full of analysts are ripping-out the facts about the talked company and then I go out with the full picture..i really do not mind if the post did not cover everything…in fact most of the times…the post just decides what the room is going to talk about today…thats all.

    http://www.meetingflex.com
    Video+Social Networking

  85. Just a guy

    October 27th, 2007 at 4:59 am

    GG I think it is “all hat, no cattle” ))

    Dheeraj, great point. With that in mind I wonder what the price point will now be for options given out to their next 700 employees. It might make it hard to hire.

    It they set an option price lower then 15B’s then the IRS would be justified at looking at improperly booked revenue on MSFT’s ad deal with FB.

    Also if the hedge fund 500 ever does show up, I would not be surprised if it wasn’t directed from a fund holding many of the billions “the MSFT boy’s” have holed up some where

  86. sovereignjohn

    October 27th, 2007 at 10:50 am

    Here’s a Youtube video exposing Facebook Connection
    http://sovereignjohn.wordpress.....-internet/

    Yes I use Facebook but I don’t put private data on it .

  87. Arnold Leung

    October 28th, 2007 at 9:16 am

    @63: There are actually a lot of 25plus using FaceBook nowadays, and this appears to be a trend that will stay as Facebook is used as Login system for certain apps like OpenID.

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