Facebook at $10 Billion Valuation, Microsoft to Invest?
online.wsj.com
online.wsj.com
But then a few interesting things started happening, my friends started using these little facebook applications (oh how much I hate the installing software analogy they've gone with is a whole other post) and I started using them as well. Like in the olden days (ie last year) when someone found a fun flash game and sent you the link and you sent your scores back and forth.
Like all these social networking sites its asynchronous communication with a low social overhead (your friends just happen to see what you're doing) and with lots of stuff to do. I think its going to become the internet for a large proportion of the population.
It might get beaten eventually, but in the short term the biggest potential challenger is google. If google leveraged the gmail user base to make orkut bigger and integrated it with igoogle widgets, it'd be something approaching facebook. I think they are somewhat reluctant to do that to their user base though, although it could be done unobtrusively.
-- PG, circa Nov 2005
:)
The problem with your example is that we all have limited knowledge about any given business transaction. Assuming ten people were standing around bidding on little rocks thinking they are diamonds, for that moment (to those people) they are worth $10k. When they have more knowledge (i.e. that this is glass and not diamonds) then the worth of those rocks drops. So the worth varies based on the knowledge in the market and valuations of others.
Now in any given market if one has more knowledge about a good or service one might be able to say that a good or service is over valued. For instance, I have always believed Myspace to be over valued. However, this realization does not give one the ability to pick a number out of the air and state that it is a correct valuation.
Nah, the hot young promiscuous girls were there from early on.
How many of those new users were because of News Corp's acquisition? If majority of those users would be added anyway (if it was just a matter of time), and an astute investor could predict that, its valuation of $580m or even more would be justified.
Today most financial publications believe Murdoch got Myspace for a bargain.
Yes, the latest e-Wave to hit the the Beach of Interweb e-Shores.
Just watch... Steve Ballmer will have some extremely hard time at the next shareholder meeting when questions start flying his way.
Ballmer was quoted as saying,"This wacky tobaccky is sooo good. Let's buy Dunkin Donuts for $20 billion! Mmmmm, donuts..." He then proceeded to do a Monkeyboy Dance, to the giggling delight of a baked Bill Gates. http://www.youtube.com/watch?v=Nc4MzqBFxZE
Google is nearly impossible to replicate where as social networks is and will always be a trend. Also people tend to use more than one of these social networks.
PG pondered once in one of his essays, if I remember correctly, that naturally myspace or any other current social network will not be the only one in the years to come.
update: "So in a hundred years the only social networking sites will be the Facebook, MySpace, Flickr, and Del.icio.us? Not likely." http://www.paulgraham.com/startuplessons.html
The internet population is already 1 billion. Thats plenty of people and opportunities.
Microsoft and Google with all that money should just buy all the startups they can and kill Facebook for good...
Or we should just expect the new "Norton" to invent the NEW anti-"socialnetwork"/virus
According to (people|person) familiar with (the matter|those talks|the company)
(In any event, they seem to only want a small stake.)
Last I heard their revenues were less than $50 million. This puts their P/E ratio in the triple figures. The whole business seems too risky. I don't think I would sleep well if I had a lot of my money in Facebook.
Put another way, facebook isn't really focusing on monetizing its users yet - it is (rightly) focusing on becoming the platform of choice for the social web.
10B might be a steal in the long run if you believe a site like this is the future of content distribution or advertising.
I read somewhere else that they suspect that Microsoft just wants the 5% so it has more control over serving ads, much like Google owns 5% of AOL so it can serve a ton of ads to AOL users/visitors.
And there are a tons of reasons that make it clear to a technology person, that bussiness persons will ignore and some will get the money and others lose big.
They have something in there to monetize, big time. Watch, $20 billion today would be a steal. FB will be worth $100B in 3 years.
Oh, and I upvoted you by accident. Damn.
Because right now that's the best idea I've got for bringing the wall down :(
This is because the strategic investor -in addition to reaping financial rewards- will also gain something else. In this case, it could be an exclusive agreement for Microsoft's ads, or use of MSN as the default search engine, integration of other MSN products, etc.
Even if Microsoft's deal puts a nominal valuation of $10B on Faceboook, Facebook's IPO (if it happened) could put the valuation lower.
Btw, this is an important point to note when evaluating exit strategies. Depending on the circumstances, getting acquired could be a much better exit even if the public markets are interested in your IPO. Youtube was probably not worth $1.6B based on just its financials, but it was worth that much to Google (or at least Dr. Schmidt thought so).