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Microsoft Gets Stake in Facebook
ebound




msg:3486582
 8:37 pm on Oct 24, 2007 (gmt 0)


System: The following 16 messages were cut out of thread at: http://www.webmasterworld.com/community_building/3486367.htm [webmasterworld.com] by engine - 10:27 am on Oct. 25, 2007 (utc 0)


Microsoft Corp. agreed to invest $240 million for a minority stake in Facebook Inc. that values the social-networking site at $15 billion. As part of the deal, the two companies expanded their advertising agreement.

The software giant said yesterday that it will buy a 1.6% stake in Facebook, beating out Google Inc. after intense lobbying. The deal places a $15 billion valuation on the closely held Palo Alto, Calif., start-up. Facebook, which runs a site where people set up personal Web pages, expects to break even this year, on a cash-flow basis, with revenue of $150 million, according to people familiar with the company.

WSJ is reporting the MS has sealed the deal with FB.

[online.wsj.com...]

[edited by: engine at 10:26 am (utc) on Oct. 25, 2007]
[edit reason] added quote [/edit]

 

Philosopher




msg:3486601
 8:56 pm on Oct 24, 2007 (gmt 0)

can't believe I'm about to say it but, congratulations MS. (man...that actually hurt to say).

weeks




msg:3486623
 9:10 pm on Oct 24, 2007 (gmt 0)

Good luck and congrats to Facebook. (And to MS, although I lost.)

SEOMike




msg:3486643
 9:33 pm on Oct 24, 2007 (gmt 0)

Another source has some interesting info...

CHALK UP ANOTHER ONE FOR Microsoft in its stated intent to become a dominant force in online advertising. The company beat out Google and reached a deal to invest up to $250 million for a minority stake in Facebook, and will sell advertising on the site outside the U.S., reports the Wall Street Journal.

From: [publications.mediapost.com...]

[edited by: SEOMike at 9:35 pm (utc) on Oct. 24, 2007]

jomaxx




msg:3486665
 9:50 pm on Oct 24, 2007 (gmt 0)

MS got something significant out of the deal in addition to a small stake in Facebook. Thus if I'm understanding the deal correctly, the "$15 billion" figure is inflated, perhaps grossly inflated.

It's not impossible MS might have paid nearly that much for 0% of the company, in order to get access to the advertising base.

Clark




msg:3486714
 11:02 pm on Oct 24, 2007 (gmt 0)

Will people still feel like "donating" $1 for a digital "gift" avatar when the donation goes to Microsoft? Hey, they're suffering what with Google taking over the internet and all.

walkman




msg:3486744
 11:56 pm on Oct 24, 2007 (gmt 0)

I agree: MSFT essentially gave them cash in exchange to serve ads. The 1.6% is a it-would-be-great-if-it becomes-something, but MSFT isn't holding it's breath. $240 milion to serve ads on Facebook, to get some press and give MSN momentum (and Goog's a slight black eye) it's nothing.

Quadrille




msg:3486774
 12:34 am on Oct 25, 2007 (gmt 0)

Looks to me like M$ have got a great deal and FB have gone doolally.

They've denied themselves any future bids from Google Yahoo! etc., and for what?

A little bit of development cash in exachange for a long term advertising deal - which will get M$'s money back in twenty minutes.

Seriously weird.

But then, in 18 months time, we'll all be saying 'facebook who?' and others will be saying 'you remember, the one after the one after friendster ...)

[edited by: Quadrille at 12:38 am (utc) on Oct. 25, 2007]

GrendelKhan TSU




msg:3486808
 1:21 am on Oct 25, 2007 (gmt 0)

agreed. coulda shoulda done better.

[news.yahoo.com...]

ebound




msg:3486819
 1:44 am on Oct 25, 2007 (gmt 0)

saying 'facebook who?' and others will be saying 'you remember, the one after the one after friendster ...)

All I can say to this is I COULDN'T AGREE MORE.

walkman




msg:3486832
 1:59 am on Oct 25, 2007 (gmt 0)

>> But then, in 18 months time, we'll all be saying 'facebook who?' and others will be saying 'you remember, the one after the one after friendster ...)

never know. Yahoo offered them a Billion last year, and look at them now. Plus, they are making some $150 mil a year in revenue.

Let's not forget that Goog guys reached to Y! founders initially (to buy them out is my guess)

Clark




msg:3486879
 3:00 am on Oct 25, 2007 (gmt 0)

Um, who says this will make goog give up on them?

That's a ton of development money that instantly gives them an inflated valuation of $15 billion. That's how they are probably viewing it.

Quadrille




msg:3486913
 4:38 am on Oct 25, 2007 (gmt 0)

who says this will make goog give up on them?

Precedent.

Granted, this could be a first - but I've never seen a case were the big boys get to fighting over a minnow - once one gets their teeth in, t'other shark goes off in search of an untainted meal!

Habtom




msg:3486929
 5:40 am on Oct 25, 2007 (gmt 0)

Good decision Facebook.

What was the reason again *we* hated Microsoft?

Quadrille




msg:3487028
 8:46 am on Oct 25, 2007 (gmt 0)

Same reason we still do?

Habtom




msg:3487037
 8:55 am on Oct 25, 2007 (gmt 0)

. . . and those are?

mikedee




msg:3487206
 12:52 pm on Oct 25, 2007 (gmt 0)

Can someone please explain why this is a good thing (for anyone except the owners of facebook)

15 BILLION!

How on earth is a company that TURNS OVER 150 million per year worth that? What does facebook actually make in profit? Surely we will be all dead by the time MS sees that money back?

Even if their profit is 50%, they will need 200 years to make the money back at this rate.

Putting it in perspective, imagine I have a company which turns over $150 per year. Their way of valuation makes my company worth $15,000!

Am I totally missing something? Facebook surely has some assets, but are chairs and telephones and a few computers really worth that much?

Oh yes... MS is involved in a pissing competition and value for money does not mean anything in bubble 2.0

XtendScott




msg:3487239
 1:25 pm on Oct 25, 2007 (gmt 0)

Microsoft Corp. agreed to invest $240 million for a minority stake in Facebook Inc. that values the social-networking site at $15 billion. As part of the deal, the two companies expanded their advertising agreement.

$240 million is not that much money for MS, but that will take some time to earn back in ad revenue. When was the last time you clicked on an ad in FB or that other one after Friendster?

Like Google distributing Open Office so MS doesn't make a few buck on MS Office, this is Money well spent for MS just so Google doesn't make a few bucks.

mikedee




msg:3487256
 1:41 pm on Oct 25, 2007 (gmt 0)

Like Google distributing Open Office so MS doesn't make a few buck on MS Office, this is Money well spent for MS just so Google doesn't make a few bucks.

I understand this, but you still need to make good investments even if you are really really rich.

Imagine MS and Google both have $240m to spend with the objective to make back > $240m. I would rather spend that money on something that will return it back with interest in a short time than spending it just to stop another company making 10% of that.

If I were a MS shareholder, I would want to be seeing how that $240m will be returned. They should be spending money sensibly, not because of some stupid overwhelming desire to 'f**king kill google'

Google should spend it on their office operations - if they manage to pull that rug from under MS it will be a much much bigger coup (and the money would be much better spent). The amount Google lost on this is nothing compared to what is at stake with Office.

Another idea is that this is to push silverlight onto the public. I think that if you have to buy companies for stupidly over-inflated prices to make them use your technology then there must be something very wrong with it.

bateman_ap




msg:3487363
 3:18 pm on Oct 25, 2007 (gmt 0)

When was the last time you clicked on an ad in FB or that other one after Friendster?

One word - Brand. You tell more to Facebook than prob your very best friends know about yourself, from your favourite music and films, to where you live, where you work, your age and sex, your polictial choices and your fascination with getting someone you have never met and almost certainly doesn't exist to name their first born Spiderman.

Think how highly targetted now the advertising can be, Ford can start targeting users that not only live in their target country but who are male, 24-32, college educated with an interest in cars. The click doesn't have to be there, with a good creative execution that is going to stick in your head as good advertising should do.

Volusion




msg:3487377
 3:24 pm on Oct 25, 2007 (gmt 0)

Great. Now if Microsoft's PPC tool wasn't ridiculously slow and painful to use, we would actually consider advertising on their network.

walkman




msg:3487420
 3:56 pm on Oct 25, 2007 (gmt 0)

>> If I were a MS shareholder, I would want to be seeing how that $240m will be returned. They should be spending money sensibly, not because of some stupid overwhelming desire to 'f**king kill google'

I have yet to see one complain that MSFT hasn't been good to their shareholders (long term ones that is). Mistakes do happen, but in the end look at the cash they generate, quarter after quarter after quarter...
They must know something

Calculus




msg:3487524
 5:15 pm on Oct 25, 2007 (gmt 0)

Walkman

I doubt the shareholders who bought in 1999 - 2001 at $35 to $60 are that happy with the long term performance of MSFT :)

walkman




msg:3487572
 5:49 pm on Oct 25, 2007 (gmt 0)

>> I doubt the shareholders who bought in 1999 - 2001 at $35 to $60 are that happy with the long term performance of MSFT

and that is MSFT's fault how? People inflate prices and then reality hits them. MSFT still has a great company. If its sales or earnings had gone down 50%, then you could blame them.

Look at Forbes' article:
"Google Loses Face"
"..In a meeting with reporters, a tense-looking Google Chief Executive Eric Schmidt refused to answer questions about the deal, in which Microsoft..."
[forbes.com...]

Also: Microsoft Gets Some Face Time
"The deal is a huge boost to Microsoft's struggling online advertising business..."
[forbes.com...]

mikedee




msg:3487632
 6:34 pm on Oct 25, 2007 (gmt 0)

The shareholders from 2001 onwards are probably not too happy with the growth either.

Thats the point (and why its their fault)... The growth of MSFT in the past few years has been negligible and the reason for that is because MS peaked in operating systems and office software a long time ago and ever since they have been trying to use their muscle to carve out new markets so they could continue to expand. I think this has been at the cost of its core business.

This is why we are always hearing about microsofts new idea on how they are going to grow. They dont care about the market they just want to dominate it like they do in the OS space.

Look at the history of failures, msn, plays for sure, zune, xbox, search, advertising. They are trying to grow into these markets with little success. Now they appear to be paying for customers which is never a good sign.

While they have been busy trying to force into other markets, others have been invading on their cash cows. I dont think it would take much loss of earnings from them to cause some sort of panic internally and externally. Maybe this rushed buying of customers is the first sign of internal panic? Either way the next 5 years will be interesting. Will they see a return on this investment? Will it kill google?

I doubt it...

XtendScott




msg:3487664
 6:57 pm on Oct 25, 2007 (gmt 0)

Imagine MS and Google both have $240m to spend with the objective to make back > $240m. I would rather spend that money on something that will return it back with interest in a short time than spending it just to stop another company making 10% of that.

Companies have always paid premium dollars at times for "Product Placement". Frito Lay / Pepsi pay good money at your local convience store for new or improved products or just to get back into view of the customers eyes.

MS just spent a premium to place their advertising on FB. They can tell potential advertisers that they have so many Millions of pages of websites that they provide ads for and thousands of them are related to their product. This will help them draw more advertisers, which they greatly need, which then will help draw more "publishers" which they need.

That does not mean it will be a great money making decision on their part, but did they want to risk losing it to G.

drall




msg:3487961
 1:43 am on Oct 26, 2007 (gmt 0)

Speaking of overpaying for companies, who bought youtube for a unreal over inflated value and has yet to see any real return on that investment and cannot predict when they will?

tntpower




msg:3488040
 4:25 am on Oct 26, 2007 (gmt 0)

Win-win deal

trillianjedi




msg:3489119
 11:22 am on Oct 27, 2007 (gmt 0)

How on earth is a company that TURNS OVER 150 million per year worth that?

Growth-rate.

It's a perceived value based on future performance. It isn't an accounting exercise based on present performance.

High risk for most people, but for MS it's peanuts. Potential reward, if it continues with that growth-rate, is huge.

Bear in mind the valuation is based on what MS were prepared to pay, and they're a special buyer.

TJ

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