back to article Microsoft pays $240m for tiny sliver of Facebook

It was the worst-kept secret in the internet industry, but today Microsoft proved all the rumor-mongers right by confirming that it is taking a stake in Facebook, and shutting Google out of the social networking website. Microsoft is shelling out $240m for a 1.6 per cent stake, helping the Facebook reach a $15bn valuation in …

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Flame

Facewhat?

While I appreciate the effort the author has gone into writing the article, who the hell cares about Facebook? Just another outlet for emos to cry about how nobody likes them. "Wahhhhh, Daddy disowned me, waaahhhh, I'm gonna go listen to some Hawthorne Heights and write in my diary about how dark and mysterious I am, and how nobody understands me...

...

...wahhh"

"Social networking"...what the hell is wrong with going down the pub?

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MS - the big internet advertiser?

Selling ads... How low they fall! If that is MS's great new breakthrough strategy/product then they're doomed. Google always had advertising as a core revenue, but for a product-pusher like MS that's quite a mind shift.

I guess we'll kno MS is fully screwed when they start selling us Viagra.

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Jon
Black Helicopters

Dragons Den

I just have this vision of Balmer and Gates sitting on leather chairs (next to Page and Brin) saying, in a Duncan Bannatyne way.

'I will give you £240m for a 1.6% stake in your company.'

All of this for a company that doesnt take any sort of fee from its members and could be wiped off the face of the planet is a matter of minutes when people move onto the next best thing.

Got to admit the figures just dont make sense to me.

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They have no strategy

Now that the market told them they can take Vista and stuff it, they don't know what else to do. Luckily (for them) the coffers are still full and they have enough cash to survive the next 10 years. Unless they continue to pay 100 fold.

With web applications taking ever more space I wonder how MS is going to handle their market share loss.

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@ Michael

Erm, right, I can really see you've seen it for what it really is then....

Oh no wait, you've not.

Let's see, I'm in my mid 20's and arbitrarily useless at keeping in touch with people. I've lost contact with countless friends over the years, and it's always been an annoyance. With Facebook, i've found it incredibly easy to get back in touch with people who I've not seen nor heard from in donkeys, which is pretty damn helpful if you ask me.

Yes, I'd like to go to the pub with them, but they live many, many miles away. Hmm, with the exception maybe of a mate I hadn't seen since primary school, who I went for a night out with the other week. Yes, clearly just an outlet for emo's

Also, unlike myspace, facebook isn't a visual assault of galactic proportions, with people who know sweet FA about how to make a site look nice, chucking garish graphics left, right and centre.

[/facebook kindness]

With regards to the advertising.... erm, can't see it being a biggy. I'm barely tempted to click on the relevant ads I occasionally see as it is - at the end of the day, I'm there to "socialise", not buy things..

Plus, $15B!??! Pissing joke..

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lol @ Charles Manning

where have you been ?

MS were selling ad space long before google were even around

moving along quickly, you have to wonder where that figure paid, comes from......$240m for a 1.6% stake, while revenues are only est. $150m.

someone have either added too many digits or missed a decimal point.

oh and while i'm here...if you're going to show a banner ad for a whitepaper total cost of ownership, at least spell check !

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Unhappy

DotCom era...

This reminds me of the dotcom era when shares were traded and companies floated at ridiculous values which had no relation to their turnovers and profits. Facebook is only valued so highly because it reaches such a large audience; however until they turn this into something tangible, these valuations are meaningless.

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Gates Halo

RE: MS - the big internet advertiser?

Microsoft has been selling adds for years! And regularly battles google for the big website wins. It's easy money after all! Have a look at the MSN website (or live or whatever it's called now) and you'll see almost nothing but ad's!

Chris

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Anonymous Coward

@Michael Greenhill

Unfortunately, not all of us are so lucky as to have never left the small, inbred village we grew up in. I can't meet all my friends in a pub as the travel and accomodation arrangements would ensure there's no money left to spend in it. Thus social networking sites have a place even if, personally, I find the networking bit the least interesting.

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@Michael Greenhill

cock...

put your slippers back on and go back to reading Fishing Weekly where you live in the 1970s. OR, use some intelligence to understand the progression of technology as a means of communication with people you don't live more than a mile from, and then make some distinction between different enterprises and the relative functionalities they offer in the present day.

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@ Michael Greenhill

Social networking - it's a phenomenon that may have passed you by when you were towing your caravan to the Lake District while wearing a flat cap.

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@ Michael Greenhill

Whilst I would normally agree with you on this, Facebook is slightly different from most social networking sites.

Sites such as 'Bebo' and 'Myspace' are indeed, more about Emo kids crying over kittens and teenage males to spread pictures of their torsos. However, Facebook started as a tool for those going to university to stay in touch -and has now spread to allow anyone to use it, so in fact it's a great way to a) stay in touch with people that have moved away, and to see what kind of thing they're up to very quickly; b) let everyone know of any news you have, or events you have, very quickly; and c) find people you may have lost touch with a long time ago.

As a matter of fact, it's not for meeting NEW people - it's more for staying in touch with old friends.

I don't use MySpace, Bebo, or any of the others - but will gladly admit that I use Facebook. Try it out - you might like it... ;-)

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Alert

Has everybody missed the point?

I would have thought that it was plainly obvious that the company isn't actually worth $15bn. I am fairly certain Facebook know that as well.

Microsoft: We want to control all of your advertising and are willing to pay for it.

Facebook: I am sure we can work something out. How about you buy 1.6% of the company for $240m?

Microsoft: Seems a little expensive. Are you sure you are worth $15bn?

Facebook: No. But you will make your money back over the next 4 years of your advertising contract and we will look like we are worth $15bn.

Microsoft: So if all goes to plan we end up with a chunk of you for free which is essentially our profits and you get to IPO yourself valuing the company at a ridiculously over-inflated $15bn+ before you dump your stocks just before everybody realises its not worth that much.

Facebook: Exactly.

Microsoft: Sounds good. We're in.

Seriously though it doesn't take more than some pretty simple maths to work out that unless they find some extra revenue streams other than advertising there is absolutely no way they can be worth $15bn (or even close to).

Don't get me wrong, I like facebook and probably sign on every other day. Its a great way to share photos and keep in contact with long lost friends and is certainly much easier than friends reunited ever was. But the advertising is starting to get pretty intrusive and I can only assume that with this deal it will only get more so. I don't believe it is a fad, but I think it needs to grow up out of its MySpace ideals. For example it could be a fantastic resource for single sign-on to lots of different sites, assuming they don't try and charge site for the privilege of course.

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Will M$ get any say in facebook going ons?

Because if I get one more Pirate/Ninja Hot Potato request I may set hunt people down.

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Everyone's focused on the valuation....this is a good deal for MS.

Every body can see that FB isn't worth $15bn today but that's not the point.....Now if MS had bought 10% of it for say $1.5bn that would have been a bad deal, but locking up this deal for only $240m could be very lucrative for the following reasons.

1. The valuation won't go up in the next round...so MS have 'locked in' a price and for their $240m they'll get first option on any more share purchases going forward - plus it now gives MS a 'grounding' in setting up a net based ad sales business with a pretty much guaranteed revenue stream.

2. Good deal for FB...he got his 'Headline' valuation, personally I'd have made sure I got $500m from MS as it would remove any need to do any further financing round before the float in say 2-4 years - plus give you cash in the bank to do any opportunistic deals if they come up.

3. Continues to pump the markets for the next dot com boom (it's all ad based this time round though it seems). The amounts of money getting thrown around are miniscule when you remember that the total advertising market in the US alone is worth almost $150bn per year.

4. As a strategic play prevents Gargle getting a lock on another potential major play.

At the end of the day if FB is a monster hit MS made a great deal, if FB is anything else then MS only lost $240m (and remember they have $50bn+ in the bank).

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Tom
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Looks like the kiss of death for them?

Thats lost them a lot of clients - all of our LUG and a lot of others I know have closed their accounts as a result.

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Unhappy

M$ moving in ...

... there goes the neighbourhood.

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@ Michael Greenhill and everybody else

Leave the poor man alone, I'm sure he doen't have a lot of time for feminine hygene products either and pointing out someones ignorance doesn't make you clever (although your ignorance makes me clever ;-)

@ Robert Woods

Do you honestly think that FB woud IPO at $15bn? would any investment house not understand this? if the initial offer came anywhere at a $15bn valuation then the price would almost certainly be revised and that would be a disaster for most IPOs

So the question is, is this all about advertising? has Microsoft just run out of income streams? or what I would consider more likely, they haven't just bought 1.6% to get advertising but instead they have something alltogether different up their sleeve?

I think that people forget the importance of the "killer app" concept, where would Microsoft be without MSWord? what if you had a nice interface to your contacts/pictures/diary/media/social/discussion facebook is this already, what if you could then extend it? ooooohhh... this can do this too, how about a mobile front end? voip? payment engine? facebook is potentially the new face of the internet, think about what people mainly use it for, it's already over critical mass and all other social sites will pass away, yes there will be MySpace people, but their day has gone, no doubt we will refer to the remaining users as luddites in a few years.

Microsoft is not stupid, and if you think things like Vista show the opposite then you are soooooo wrong, they will get their $240mil in blood, somehow, they have a plan.

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Anonymous Coward

"all of our LUG and a lot of others I know"

Tom, with the greatest possible respect to you and all the other Linux User Groups out there (assuming that is what you assumed everyone understood by LUG in this context), how much difference do you think that will make, when Facebook is being promoted left right and centre across supposedly non-commercial organisations like the BBC? For Linux professionals maybe there's still LinkedIn anyway, at least it starts with the right three letters. And Beebo might have been better for... oh, ok, I'll get me coat.

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Dead Vulture

Title

*** With Facebook, i've found it incredibly easy to get back in touch with people who I've not seen nor heard from in donkeys, which is pretty damn helpful if you ask me. ***

There was a site where I found many friends from school and high school. That was 4 or 5 years ago, I think; probably less. I don't even remember the name of the site now. I don't expect Facebook to be here in 5 years.

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Happy

@ Replies to me

So because I think "social networking" is a pile of bollocks that makes me a middle-aged fisherman?

I was born in the mid-late 80s, and have never been fishing :)

I'm not disputing that Facebook etc are useful for finding old friends - what I despise is how they're becoming an alternative to, as I said, going down the pub and socialising _face to face_.

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