Facebook and Microsoft
Microsoft just bought a 1.6% stake in Facebook for 240 million lira dollars. This is insane. It places the valuation of Facebook at $15 billion.
I have basically stopped using Facebook. Lots of people I know are using it less and less. I understand that this isn’t exactly reliable market research. But I can certainly count a number of people that have closed their accounts.
The investment was also based upon advertising revenues. I can’t, off the top of my head, think of a single ad that I have been served on Facebook. And I know for certain that I have never clicked on one. Has anyone?
What this all really means is that the valuations of companies are bubbling over again. It is time to short Google, Baidu and Microsoft. Just for giggles, the current prices of the three are GOOG:675.82 BIDU:335.95 and MSFT:31.25 Let’s see how low they can go.
Funny, but I don’t think that these guys ever ask their customers what they think. If you would have explained to Joe User the deal with MySpace and News Corp. Any user would say, “well, MySpace kinda sucks. I wouldn’t pay $580 million for it.” Or “240 million for a 1.6% stake in Facebook? Are you nuts?” Not with my money, no matter what kind of Web 2.0 snake oil you are selling.
October 25th, 2007 at 11:22 am
I love Facebook and use it all the time (especially photos, events, groups and general interest in what my friends are doing), but that does seem like an insanely high price for a 1.6% stake.
I don’t click on ads, and I find the ’sponsored’ thing that pops up on my home page occasionally rather annoying, but I know that certain ’sponsored’ groups - like the one for Apple - have been pretty successful with very high membership. IFL have advertised through there too, and some politicians have even announced policies or inaugurated campaigns through Facebook (there was an example on the news recently that I handily can’t remember), not to mention a good number of politicians have a profile up on there.
So I can see why its worth a fair bit, even if $15bn is way over the top: would be interesting to see shareholder reaction (though don’t they have to do some kind of vote or something when investing that kinda money? Or is business even less regulated than I’m imagining?).
October 25th, 2007 at 12:13 pm
I don’t think anybody clicks on ads. With their current number of 50 million users, the investment gives an implied value of $300 per user. I don’t think any single user has clicked on $300 worth of ads. Let alone an average. I’m not saying Facebook isn’t worth a lot of money, but there is no way it is worth fifteen thousand million dollars.
As the real estate bubble bursts in the States, which is currently happening, these wild valuations are going to have to see some market-based scrutiny. I just am wondering who is going to be left holding the bag.
November 1st, 2007 at 2:33 pm
You scratch my back and I’ll scratch yours: In fact Microsoft weren’t so keen on the 1.6% stake. But since they messed up quite a bit (doublecklick etc.) this was a good moment to get into webvertising. And Zuckerberg has his bride dressed up well i.e. the company value bloated to the max.
Do you know that we have a similar scn in Germany called StudiVZ? It is actually a 1to1 copy of the facebook. Lots of my german mates are switching to facebook. Some even closed their StudiVZ profiles (as I did). Matter of time that even facebook loses its attraction. StudiVZ has long been bought entirely by Holtzbrinck publishing group for $100 million app.