October 25, 2007

Perspective: Facebook Is Now 5th Most Valuable U.S. Internet Company

Michael Arrington

106 comments »

Yesterday came news that Microsoft invested $240 million into Facebook, valuing the company at $15 billion.

How much is $15 billion? It’s hard to understand how much money that really is. But this evening a friend helped put it into perspective in a conversation about the deal: among the pure-play U.S. Internet companies, only Google, eBay, Yahoo and Amazon have larger market capitalizations. Their annual revenues range from $6 - $11 billion/year. IAC, Salesforce, Monster.com and all the rest trail significantly.

Big Internet properties like MSN/Live.com, AOL and MySpace can’t be directly compared because they are part of larger corporations. Still, its easy to imagine that Facebook, at $15 billion, is perhaps worth more than AOL and MSN/Live.com. Is it worth more than MySpace, which was acquired for a mere $580 million in 2005? The total value of parent company News Corp., with $30 billion or so in annual revenue, is just $70 billion.

Of course, Facebook is not being valued by the public markets like the others. And it may be some time before there is any updated valuation for the company. They are now positioned with a huge war chest of cash (the actual amount raised is likely above $240 million; rumors of a hedge fund or other financial partner who put in additional cash are already swirling) and a massive stock valuation. They can make acquisitions of key technology and talent without spending much. And they can go for years as a private company on that cash. Even with the 700 employees the company expects to have next year, they shouldn’t spend more than $50 million or so per year to run the company.

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Comments

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Khangaroo

October 25th, 2007 at 5:29 am

Facebook’s worth 15 billion dollars my ass…what makes Facebook today more valuable than YouTube a year ago?
Lou

October 25th, 2007 at 5:37 am

Current revenue and profits do NOT determine valuation, Hype 2.0 does.
Laurent

October 25th, 2007 at 5:37 am

What makes Facebook more valuable than youtube ?
they seem to have the same adopting usage but Facebook has been retrieving personnal infos and could use them (behavior adds,…) in the future
Mo Kakwan

October 25th, 2007 at 5:38 am

I wish we knew an accurate number that’s supposed to replace those ??? for revenue.
Anatoly

October 25th, 2007 at 5:39 am

Actually, I just paid a dollar to own 0.0000000001% of this new startup (in stealth mode).

That makes the startup worth a 100 billion dollars, taking it to #2 on the list (it is a pure internet play).
Dan Schawbel

October 25th, 2007 at 5:40 am

Do you think their user base is strong enough? I see a lot of competitors coming in and stealing some of their users, especially with the app functionality.
Christopher Finke

October 25th, 2007 at 5:44 am

So you’re valuing the part of the deal that makes Microsoft Facebook’s exclusive ad provider at $0? It sure seems like it. They didn’t pay $240m for only 1.6% of Facebook, so you shouldn’t calculate valuation like they did.
Elliot Yates

October 25th, 2007 at 5:45 am

@Anatoly

I agree with your statement, paying the wrong amount of money for a percentage stake in a company can lead to stupid valuations.

There is no doubt Facebook is huge, though really $15b ? Hmm..
market research company

October 25th, 2007 at 5:48 am

Steve Ballmer and Eric Schimit’s ego made fortune to mark zuckerberg1
Propaganda

October 25th, 2007 at 6:03 am

That’s false!

Somebody is paying big money to spread bullshit like that!
J

October 25th, 2007 at 6:05 am

A valuation and market cap aren’t the same (as the title of the blog post would lead you to believe). They may end up in that list but what separates Google, Yahoo, Amazon, Monster, etc from Facebook is that their market cap isn’t “potential”…it’s actual. HUGE difference.
Dave

October 25th, 2007 at 6:08 am

FFS!!!! Call this site FaceCrunch already…. I am looking forward to a week… hell… even 1 single day where techcrunch does not somehow talk about, reference or show facebook in a post!

I am reading here less and less

Dave
esofthub

October 25th, 2007 at 6:14 am

I guess Microsoft thought it was worth it to keep Google out of play for Facebook affiliation.
Anders Bendix

October 25th, 2007 at 6:15 am

Ok… Interesting.
So if FB is existing, based on the people in the community, approx. 50 mill. and valuated at $15b. That means that every person/asset is worth $300?

Is that so bad?

I guess if they invent smarter ad app then the once they have presented, then that might be even a too small valuation.

Hmmm…
Misanthropy Today

October 25th, 2007 at 6:24 am

Hate facebook? Tired of Arrington writing about it? Click the link below or my name above…

http://misanthropytoday.wordpr.....-facebook/

Only we can kill facebook.
TechTownNC

October 25th, 2007 at 6:25 am

I think esofthub has it right. It’s worth the money for MSFT to tighten their partnership and keep Google out of this property. Microsoft wants to develop the next generation of behavioral ad targeting, and Facebook’s data is just too good to let slip into google’s hands. Is it worth 15 billion to Joe Blow investor? No. Is it worth it to the most important tech company of the last 20 yrs? Maybe.
SHERVIN

October 25th, 2007 at 6:27 am

MS will make more on this investment in Facebook from ads and equity than Google will make from their AOL investment.
Tom

October 25th, 2007 at 6:30 am

This is really going to end up creating some problems for hiring. “Want to come to work at our hot pre-IPO company? Your options will only be priced at $500 a share!” How are they going to do that in the world of 409A? They are going to have to resort to heady salaries.
Harlan

October 25th, 2007 at 6:31 am

STOP TALKING ABOUT FACEBOOK. WE CAN’T TAKE IT ANYMORE!!!!!
Michael

October 25th, 2007 at 6:32 am

@esofthub: agreed. To put it in other words: this transaction does not prove that Facebook is worth $15 billion. It proves that MS is willing to pay $240 million to keep it away from Google.

–
http://viibee.com, online dating is fun again
Jonathan

October 25th, 2007 at 6:33 am

Next up, facebook donates 15 billion to TechCrunch for their idiotic posts.
Rajeev

October 25th, 2007 at 6:34 am

Cool News Friend,

15 Billion dollar would be in relative terms less valuable with dollar depreciating.

http://tekno-world.blogspot.com
Ben Werdmuller

October 25th, 2007 at 6:35 am

I’m not sure it’s not about the direct revenue potential from ads etc. The value Facebook represents for market research is surely huge, given the very specific real-world data that people enter - I wonder what kind of statistical analysis they do behind the scenes?
esofthub

October 25th, 2007 at 6:38 am

@TechTownNC
@Shervin,

I agree with both of you.
Amit

October 25th, 2007 at 6:42 am

The new Bubble is officially here.

Just look at the list and admire the surrealism.

Valuatin Facebook just below Amazon, with $ 10 BILLION revenue, and one of the most loyal customer base on the Internet, and above IAC - a lean, mean, Internet money machine - there is no way in hell fot this to happen unless we are in a time-space bubble again.

This is not to say that Facebook is not great. It is awsome.
But the valuation should reflect, at the end of the day, what potential investors would get if they put their money on Facebook stock if it were on the market. It is impossible for a company like that to return so much money to investors.
David Litsky

October 25th, 2007 at 6:46 am

Google is overvalued. You have a company that’s nine years old whose primary product is selling advertising based on the popularity of its search engine. I am not criticizing their products because I use their search, gmail, and a few others. However, they are not diversified enough to weather a bubble. I know that this may be difficult to envision, but what happen’s if Google’s search popularity plummets? With the Microsoft, Yahoo, and Ask search engines starting to differentiate themselves in one way or another and newcomers like Mahalo, it is a possibility.

Google has a market cap of $211 bln with a share price of $676 (as of 10/24/2007) and approximately 312 mln shares outstanding. Google doesn’t pay a dividend so investors are valuing Google their historic results versus what they will do in the future.

Microsoft has a market cap of $293 bln with a share price of $31 (as of 10/24/2007) and approximately 9.4 bln shares outstanding. Microsoft pays a dividend of 1.40% ($0.44/share) which based on shares outstanding, is approximately $4.1 bln paid to stockholders. This creates a value for Microsoft beyond their trading price in the capital market.

If I had to make a bet on which company would be around longer, I would wager on the company that that throws $4 bln to its stockholders, and still has a warchest.
NatC

October 25th, 2007 at 6:48 am

@Rajeev - You got it. With FaceBook valued $15 billion, no wonder why the dollar is depreciating.
thebusinessofsoftware.net

October 25th, 2007 at 6:51 am

Value stems from what a buyer is willing to pay.

It just so happens that Microsoft needs this stake in Facebook to compete with Google. Hence, Facebook is worth that much. Revenues and projections in the short term have nothing to do with it.

I just wrote a post on this too.
Amit

October 25th, 2007 at 6:57 am

To Anders (comment 14):

This calculation only shows the irrationality of this valuation.
It is extremely hard to get a user to generate an average of $300 in ad-revenue for facebook.

Let’s run a quick calculation.

I don’t know what is the real CPM for facebook ads, but I don’t think it is in the high range. For the same of this example let’s assume $2.0 CPM.

To generate $300, each user on the average has should have 150,000 impressions. A very savvy Facebooker will look at Facebook, say, 150 times a day? this means that EVERY SINGLE DAY, for about 3 YEARS, every Facebook user has to view 150 Facebook impressions.

In reality, the frequency of FB impressions per user is much lower.
So potential revenue by itself does not justify such value. Not by a longshot.
Jon

October 25th, 2007 at 6:58 am

I bet somewhere in the fine print it says “investment to be paid by Microsoft Canada in pro-rated 2009 Canadian funds” so really, this $240M US is really only about $100M CND (the way things are going) which would make the valuation a more $6B total. Still crazy money but not as crazy as first reported

Jon
HappySlappy

October 25th, 2007 at 6:58 am

TECHFACECRUNCH!
Chris R.

October 25th, 2007 at 7:01 am

This is assuming that the market will follow Microsoft’s TINY 1% investment as a cue to fill in the 14.75 BILLION DOLLAR GAP.

They will not.

Bottom line, Microsoft is their ad network. They know exactly how much Facebook pulls in, in actual revenue. They chose to make a tiny investment. I’m not saying investors are smart people, but I think they could be smart enough. Well, probably not on 2nd thought.
Chris R.

October 25th, 2007 at 7:03 am

The rest of the companies are public, whoever wrote up that chart, better put a squiggly line by facebook and a footnote for SEC in big bold type.
Gordo

October 25th, 2007 at 7:04 am

I didn’t imagine that Facebook is THAT important O.o

OK, I’m living in Germany and here Facebook isn’t used this often, there was a time when MySpace was used very often, but now there is another Service called schuelerVZ (German for: pupil / student network or community).

I’m using Facebook as well
Chris R.

October 25th, 2007 at 7:11 am

In other news I am planning on selling 1 share of our million private shares to IBM for $1000. Once the deal goes through BeerCo will be worth 1B. Or doesn’t that work for the rest of us?

Please enlighten me some one? Otherwise I’m flying to new England today with a minute book and a dream.
Fashion Network

October 25th, 2007 at 7:14 am

Mike actually myspace was bought in 2006 I believe not 2005.

Fred/Dobizo.com
sanmat

October 25th, 2007 at 7:18 am

We have to accept the reality . Facebook has been valued at least with this deal. This should boost up facebook.Of course its not an hit to Google.

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

October 25th, 2007 at 7:29 am

“Mike actually myspace was bought in 2006 I believe not 2005.

Fred/Dobizo.com”

Fashion Network, actually, you’re wrong and Mike is right.
Chris R.

October 25th, 2007 at 7:30 am

“We have to accept the reality ”

Why do we have to? I challenge Microsoft’s reputation as the valuating buyer. They’re not an investment bank. This was a private common stock sale.

Why are people so easily persuaded and fooled by the elite?

Didn’t anybody here go to college?
sanmat

October 25th, 2007 at 7:35 am

Chris:
The reality is that we have to come out of the 90’s valuation. Its not a couple which had boomed during 90’s is in the market. Because they have not quickly adapted to the current reality.

http://blogkatt.blogspot.com
samossa

October 25th, 2007 at 7:36 am

Is Facebook worth $15 billion at this very moment? No, it is not. Could Facebook have this value in the (near?) future based on ad revenue? It’s quite possible. Will that make Facebook a stable stock? No, Facebook will be overvalued and a bit unstable just as Google is today. As some have mentioned here, if anything comes along that is better than Google (and something will sooner or later, Murphy’s Law) Google could be in big trouble because the overwhelming majority of their revenue is based on online ads, hence the reason Google is trying to diversify their revenue. Facebook will be in a similar situation. If you don’t think this can happen, take a look at Yahoo!

As for Microsoft pulling off this deal, a good move on their part. Keeping Google out of this is key to Microsoft regaining lost ground in the online ad business. Microsoft will make way more with Facebook than Google will ever make with AOL. A really great decision on the part of Microsoft management http://www.newsvisual.com/news.....diver.html . However, no one has mentioned Yahoo! yet and how they will react to this. I’m curious as to their reaction.
Chris R.

October 25th, 2007 at 7:40 am

Let’s use this sale as a boiler plate and superimpose the same principle on a similar website. Let’s say IBM invests 100M in %1 of Friendster. Is friendster now instantly worth 10B ???

If the answer to that question is yes, then there will be a whole new cottage industry of stock bending like people have never seen before.

If the answer is yes, there should be a Friendster rep on a plane to IBM RIGHT NOW working this out.

This is going to be used as precedent, and it could mean catastrophe for investors, not just for this venture, but for others that use this as a boiler plate.

People are just going to start putting together any seemingly legit deal based on this, like an IBM investment in Friendster for 1% at 100M could seem just as legit as this deal because people ARE NOW SHOWING a tolerance for it.

Do you see my point or are is this above your head?
Someguy

October 25th, 2007 at 7:49 am

Until someone comes along and shows me how Facebook are making a cash flow of 15 billion dollars or how they are being a strategic resource which will at the end make 15 billions, I won’t believe the hype. If some company is willing to pay so much, then that company is managed by fools.
Chris R.

October 25th, 2007 at 7:54 am

“then that company is managed by fools.”

=~ s/fools/thieves/;
Samuel

October 25th, 2007 at 7:54 am

I went to college!

And, I am working on a new mozilla-based browser with:
1) the ability to extract all of a users data from any social network
2) adblockplus
3) integrated vmware player (allowing any vmw appliance to be added)
4) tight integration with Amazon

It’s called LeevMeAlone
-sam
Rajan Tawate

October 25th, 2007 at 7:54 am

Facebook is the only upstart which can give a tough fight to Google and MSFT wants to have a handle at them.

This is a big loss for Google.

http://www.meetingflex.com
(Upcoming Facebook)
Norman

October 25th, 2007 at 7:56 am

After the .com bubble, the value of internet companies were reevaluted now. May be now the value is real. And I believe so.
Dheeraj Sultanian

October 25th, 2007 at 8:00 am

This is actually a horrible deal for Facebook - and the PR people are spinning it, and Mike, you’re not even digging deep or putting this in context!

Remember the last major payouts for Advertising rights, both by Google - MySpace - they paid $900M for 40 months of exclusivity. AOL, they invested $1B for 5% ($20B “valuation”) for extending search advertising to 2010.

Lets say I want to buy exclusive rights to advertise on your site - I have to pay you for that right. Well, lets say your VCs decide to give me a very small percentage of the company in return for a large payout. In the case of MySpace, no percentage ownership was given. Lets say, however, that MySpace gave google 1% - well that is a valuation of $90B.

The “investment” should actually be REVENUE - but using this technique, they will have a lower tax burden. And as far as revenue is concerned, $240M for a 4 year exclusivity is very low and an affirmation that the ROI on facebook is pretty poor. Come on Mike, I thought you were objective?
Majestic

October 25th, 2007 at 8:03 am

TechCrunch should get down on its knee and propose marriage to Facebook. TC has already given it plenty of blowjobs.
thatotherguy

October 25th, 2007 at 8:06 am

Why would you buy such a small position at such a large valuation? It seems like a defensive move that would deter anyone else buying Facebook outright. 15B is a large deterrent.
Misanthropy Today

October 25th, 2007 at 8:09 am

@Everyone, Showing the fallibility of other social networking sites doesn’t strengthen Facebook’s value, it weakens it. (this point doesn’t need to be argued).

If Facebook plans to make 15B in 10 years on ads alone (which I doubt) the only way this would even be possible would be for them to (which believe me is their plan) to start a new kind of ads: micro-targeted advertising.

With the data of yours that they have, they’ll serve you advertisements so shockingly fit for you that it’ll scare you, and it should scare you.

But its the age old question with SNS’ and all the personal info they have:

What good is all that info if they don’t do something with it?

And, if marketers can reach their EXACT target audience, I assure you they’ll pay a lot higher than $2CPM, try closer to $20CPM. I for one, will not be one of the users whose info is sold by that evil brillo-pad head.
Chris R.

October 25th, 2007 at 8:12 am

“And, I am working on a new mozilla-based browser with:”

You should have made a plugin instead. Your browser will never gain acceptance. I am not saying that to be a dick. All those Mozilla MFC like C++ classes make me sick: nsString; nsBikini.
Even after all this time, everything is prefixed as NetScape in the Mozilla sources.

At any rate, good luck!
techcrunchreader

October 25th, 2007 at 8:16 am

Chris R., I agree with you, but the reality is, it’s their money. (MSFT investor’s money you can say)

If someone is ready to buy a Rothko painting for $73 million, congrats to the seller. Same here with Zuck and his friends. MSFT is willing to pay $240M for 1.6% of FB to keep Google out of the picture for years to come? Good for Facebook.

I’m Laughing Straight To The Bank Wit This,

Ha-Ha-Hahaha-Ha, Ha-Ha-Hahaha-Ha
(50 Cent…Mark Zuckerberg)
Amy Wilsch

October 25th, 2007 at 8:17 am

Amazing what silicon valley hype can do for a company.
lauralynn323

October 25th, 2007 at 8:24 am

Someone needs to make sure they have their millions and billions straight…the quotes in the article are inconsistent with the revenues in the chart…there’s quite a difference.
Chris R.

October 25th, 2007 at 8:25 am

@53, techcrunchreader

Of course, I agree with you. MS could have bought 1 single share for 1B. It’s their capital to spend. My point is that they most likely did this with an ulterior motive of

A. appeasing the Facebook board, in exchange for their aQuantative platform lockin

B. helping Facebook create a valuation facade for a future IPO

They actually started this campaign by leaking the 15B valuation to bloggers like Robert Scoble and others about 6-8 months ago.

This announcement was simply a milestone in what was a year long plan by both companies. The next milestone will be to announce 1 or 2 other investors to buy at the same share price, to further provide IPO buyer confidence, then they will go for the dutch auction on the shares like Google did.

The top blogs on Technorati are their instruments.

One day I hope we get big enough where I can just take a crowbar and throw it directly in their bike spokes. Boy I would just love to do that just once. F*ckers.
Amit

October 25th, 2007 at 8:27 am

I agree with Dheeraj, this is more about exclusivity to advertise than just to get a piece of facebook. And in doing so, if they raise the valuation to a ridiculous level to ward off Google then be it so. I think this is one of the smartest moves made by Microsoft in a long time.

Google currently trades at 53times earnings. Facebook’s revenue is unknown but even if they made an annual revenue of $300 million that means they are valued at 50 times revenue! Thats not totally crazy. Crazier things have happened on the web. Besides, with them rolling out their own ad network and payment gateway they have a long way to harness the potential revenue from their growing userbase.
coches

October 25th, 2007 at 8:38 am

You guys forgot baidu… Baidu is a 12 Billion dollar company
Chris R.

October 25th, 2007 at 8:41 am

“You guys forgot baidu… Baidu is a 12 Billion dollar company”

Baidu is irrelevent. Baidu shows ads to people who make on average 20-30 times less than their free world counterparts. People who have largely never paid for any software or a DVD in their lives.

It’s not attractive to say the least.
JohnM

October 25th, 2007 at 8:42 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 be 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 shepards to take them out at $20B+. Baaaahhhhh.
Chris

October 25th, 2007 at 8:49 am

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

I couldn’t agree more on this point. baaaahhhhhhhhhh…. me too!!
Rodger

October 25th, 2007 at 9:05 am

A stealth Web3.0 company will be worth $30 billion
David Litsky

October 25th, 2007 at 9:13 am

Duncan had a great post about Facebook being the next Microsoft (http://www.techcrunch.com/2007/07/19/could-facebook-become-the-next-microsoft/) three months ago that scratches the surface about why Facebook is not just a “social network”.

@Chris R. (#42)
“People are just going to start putting together any seemingly legit deal based on this, like an IBM investment in Friendster for 1% at 100M could seem just as legit as this deal because people ARE NOW SHOWING a tolerance for it.”

Myspace and now Friendster opening their platforms are a defensive strategy against Facebook. They have set the bar higher and these two social networks are doing what they can to compete. I am sure that there will be investors that will go after Friendster, but the market won’t finance it. The reason MSFT could pay so much for a minority interest in Facebook is because they paid for it out of pocket from “petty cash”.
Pierre Col | UbicMedia

October 25th, 2007 at 9:18 am

All this financial competition between Google and Microsoft about facebook does not make any sense !
techcrunchreader

October 25th, 2007 at 9:25 am

@Chris R. It’s true that FB is doing a great job on PR thru bloggers and journalists. They created a big hype surrounding a SN and the medias are buying it.

I think Microsoft did the move, also, to keep an eye on FaceBook’s acquisition: Parakey. To see what these guys are going to make out of it. As the sicilian quote says: Keep your friends close, but your enemies closer.
Mark

October 25th, 2007 at 9:26 am

By any conventional measure of company value, this looks off. Even if they’re earning enough to justify this market cap on the basis of 10-15 years earnings (which is generous for an unlisted company, isn’t it?) who on Earth would say that they’ll be around for that long in any form? Next year something else will be the big thing, and there’s precious little guarantee that Facebook will continue to be as hot as it is.

The true answer could be that for $240m, Microsoft manages to position itself closer to the centre of the social networking scene (Live clearly isn’t doing that today) and that protects their $300bn market cap. Those numbers make a lot more sense. MS has the cash, and has to defend its own value somehow, doesn’t it?
Smiley

October 25th, 2007 at 10:04 am

The more the year goes the more bigger dogs in the SV evaluate the companies worth and stuff. In 2005 they swapped myspace for just $580m and in 2006 they took youtube for $1.6b NOW FB is WORTH $15B thats really cool i bet you guys in 2008 they will swap another web2.0 for something like $10b and evaluate it to something like $30B dont say i said it! lol
Uhhh..

October 25th, 2007 at 10:17 am

@57: No, it just means that both Facebook and Google are overweight. Google is worth five Yahoo!s or six Amazons? Please. That’s so laughable I don’t even know where to start. Just read @26 and you’ll understand all you need to know.

The sad part is that for better or for much, much worse Google is a tech bellweather because of the unruly tide of idiots that continually invest in them. When they pop, everything pops (despite all of the other companies being much more fundamentally sound and diversified) and that’s going to be a very rough time indeed. Because, you know, Google is awesome and has everything figured out.
Felton

October 25th, 2007 at 10:32 am

Amazingly, social networking conglamorates such as my space, facebook, black planet, and many others have come a long way in proving to the American Corporate Elite that people do enjoy meeting, conversing, and sharing dialogue among each other. I think any investment into the avenues of online networking as a whole would be essentially wise, because 10-15 years from now, just about every human across the globe will either meet, greet, shop, and communicate online, so why not become a part of a growing market. The internet is an amazing tool for passing on & exchanging information. It does’nt matter whether it’s Google, Pay Pal, E-Bay, My Space or Face Book. The whole idea of an online presence is the way of the future.
MediaOutrage.com

October 25th, 2007 at 10:35 am

So they are the sillicon valley chosen company right now. That is a lot of cash that companies are throwing their way. What kind of company do you think Facebook will now morph into? How soon will they do an I.P.O.? http://www.mediaoutrage.com Oh by the way Michael I love Techcrunch and visit everyday to get my daily scoop of business and technology news.
anuj

October 25th, 2007 at 10:35 am

its going to be a gold mine if/when it goes public
Mayur

October 25th, 2007 at 10:48 am

Wow! So seems facebook is really catching up among other social networking sites, I’m not in it’s favor, though.
Alex Ho

October 25th, 2007 at 12:11 pm

Actually, Facebook would be 6th since VMware just became 3rd with a $44 billion market cap.
fadbook

October 25th, 2007 at 1:32 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)
Doogie Howser

October 25th, 2007 at 1:35 pm

Historically, the valuations of new online business models have been based on eyeballs and other non-traditional metrics that determine the future potential of the company because there are no precedents to compare many types of internet companies with.

On those basis, eyeball growth and other forward looking non-financial metrics, the valuation could be justified.
Steve Ballmer

October 25th, 2007 at 2:44 pm

FaceBook is only valued at 15 because we said it was.

http://fakesteveballmer.blogspot.com
Mark Mayhew

October 25th, 2007 at 2:50 pm

This deal inspired me to sell 1.6% of FacebookEconomy.com, for $200, to a friend. But when I read the fine print, the $200 is not to be paid in cash, he wants to pay me with beer (30 6-packs).
We are definately in a “bubble”!
Varun Mathur

October 25th, 2007 at 3:32 pm

Microsoft got 1.6% of Facebook for $240 million. This DOES mean that Facebook got valued at $15 billion ! Why ? Because if not, then Microsoft would have got a higher % of Facebook for their $240 million.

Also, the discussion about revenue per user, etc is totally irrelevant. This number of $15 billion is simply a result of a lot of excitement about Facebook’s future prospects as an Internet platform. Facebook is the next Google in the making, and boy oh boy…why won’t Microsoft try to get a tiny little chunk of it for any price possible
Wil Schroter

October 25th, 2007 at 3:48 pm

If Facebook is worth so much and Myspace is MANY TIMES the size of Facebook, wouldn’t MySpace be a leading indicator of how big Facebook could possibly be in the near future?
Dheeraj Sultanian

October 25th, 2007 at 5:44 pm

WOW - Microsoft just went up in value by over 2 “Facebooks” in after hours trading. From now on I will refer to every deal in terms of “facebooks”, just as I refer to dollars as “frosties” - you know, from that Wendy’s Commercial - rediculous !
David

October 25th, 2007 at 6:32 pm

Where is the internal cashflow to justify all of this?
Dashken

October 26th, 2007 at 12:14 am

I wonder, where does Friendster stands now? Hmm…
Ashutosh Kadakia

October 26th, 2007 at 2:21 am

Everyone is who thinks Facebook is worth $15 billion is nuts. And everyone who thinks that Microsoft paid $250 million for 1.6% of Facebook is more nuts. Yes, WSJ, you are wrong.

Sure if you do the math considering current equity positions it might come to $15 billion, but is that really what Microsoft is buying into? The most important part of the press release is that Microsoft is now the exclusive advertising partner for Facebook until the year 2011. The 1.6% equity stake is just extra gravy.

Google paid $900m for exclusive advertising rights for MySpace a few years ago. If they had received 1.6% does that make MySpace worth some multiplicative factor of $900 million?

If the press release had simply said, Microsoft pays $250 million for exclusive advertising rights, no one would have batted an eye.

To those people who are comparing this valuation with Broadcast.com you are comparing apples and oranges. $5.9 billion in cash/stock (outright purchase) is far different from $250 million to purchase exclusive advertising rights. Microsoft has not paid $15 billion for Facebook but rather simply purchasing advertising rights.

And I think it’s brilliant on Microsoft’s part taking 1.6% equity. The equity has little monetary value to Microsoft – it’s unlikely that Facebook will ever be worth $15 billion, but look aren’t we all talking about it?

This is a win for Microsoft. And naturally a win for Facebook. Its good seeing smart people making correct decisions.
webdesign

October 26th, 2007 at 3:28 am

Well Facebook deserves it ! its a good site and its purchased by microsoft so no big suprises here
webdesign

October 26th, 2007 at 3:29 am

i have to agree that facebook is a big site ! but with new commericals on the pages it will sure be making money in no time !
vca examen

October 26th, 2007 at 3:30 am

Where does all that money go to except from employees and servers ?
reggie

October 26th, 2007 at 4:02 am

All the naysayers get over yourselves. MSFT aint dumb, never was and never will be, and they can see the once in a lifetime potential of facebook. Frankly it could be worth a hell of a lot more based on all the key valuation metrics of dcf and multiples (in time) but more importantly, its strategic value is immense. To be able to reach (eventually) a large proportion of the global online population in a structured manner is worth about as much as ExxonMobil, a shitload, and that’s the potential of what we’re talking about here. Sure there’s risk of the new new thing but all dominant players in an industry face these risks and overall protect their turf. If we roll forward 12mths and facebook has 3x their current number of highly active users, we’ll be talking and valuing them in the same way as GOOG
GSmith

October 26th, 2007 at 5:35 am

The money probably goes back to msft. In its hey day, AOL did deals such as these where the company being invested in was “forced” to buy advertising space in AOL. The more transactions you complete, the more value you create. Keep your friends close and your enemies closer.
Misanthropy Today

October 26th, 2007 at 6:01 am

#83, you said it best. Come write tech business articles for Misanthropy Today.

#85, I realize from the .nl that you’re from the netherlands, but, goddamn that was a dumb worthless comment.
Misanthropy Today

October 26th, 2007 at 6:04 am

another thing, the first bubble happened because everyone, even average joes, invested in internet companies’ IPOs.

I think we’ll look back on this bubble as mainly companies wasting money on mostly worthless websites.

Nothing as Hyped up as Facebook has ever lasted—- ever. Meteoric. Consider it.
roaminmmatt

October 26th, 2007 at 7:06 am

i knew this would happen, ever since it came out i knew it would some day be better then myspace and now its on its way.
Kipp

October 26th, 2007 at 7:09 am

Facebook is a one-company internet bubble. Social networking sites are like fashion, or other fad based social movements. Remember the images of that balloon in Canada recently crashing and burning (burning and crashing)?
Ian at College Colosseum

October 26th, 2007 at 8:35 am

MS was in talks with FB back in july. At that time they wanted to buy it out for $6 billion. http://www.collegecolosseum.co.....topic=37.0

I guess they settled for $240 million for 2%.
Nicholas Juntilla

October 26th, 2007 at 10:08 am

Facebook is a joke. No one likes to use it because it’s interface is tiny and ugly. You can’t customize it at all. The customer has to adjust to facebook. With MySpace the service adjusts to the customers or users. Facebook it like this tiny box where you have to fit your identity into it’s tiny holes. It will never be big because people are not machines that fit nicely into cookie cutter stamps. I imagine the same type of people who get engrossed in online games like second life like facebook because it is an online world that has nothing to do with reality. MySpace reflects reality and in the end reality will win. Cya peace

-Nick
Leap Year Photography

October 27th, 2007 at 8:07 am

Facebook is Great!
Dave

October 28th, 2007 at 6:02 am

First Skype, now this….om my, it must be noce to have Billions to bet on Internet crap shoots—the bubble is definately here, folks, it’s just not so pronounced, becasue it involves investment from public companies, rather than IPO’s…