Microsoft to Buy 5% of Facebook Valuing at $10bn

l-ascorbic writes "The Wall Street Journal is reporting that Microsoft is poised to buy 5% of Facebook for $300 million to $500 million, valuing the company at up to $10 billion. Microsoft already handles advertising for the site."

$10 billion

$10 billion for a site that has 34 million active users ~= $300 per user. Hmm. I think this site is highly overvalued. But let MS waste their money if they want.

Well, that's one way to get Silverlight adopted...

...just require 34 million active Facebook users (who are probably mostly young, rabid web users of other sites too) to install it.

How long till we see some cool new site feature -- or, hell, even an existing, basic feature -- reworked ("enhanced") to require Silverlight?

Re:Well, that's one way to get Silverlight adopted

Can't a company just invest in another company that looks promising?

Yeah! And can't a crackhead just admire your car stereo?

Re:$10 billion

The problem is that sites like myspace and facebook ARE NOT long term hubs for people to visit. They are trendy sites, back in '99 when I was in a freshman in college the place to go was blackplanet, mi gente, Asian Avenue, and livejournal. After these sites it was friendster which was ethnically all inclusive. Now the new trend is myspace and facebook. All of these social networking sites are just fads and when something that looks better comes along everyone will abandon myspace/facebook/whatever and start aggregating friends somewhere else.

The "White Pages" for eMail

I've come to see Facebook as being the "white pages" for eMail. People change their eMail addresses constantly - usually due to changes in employment or SPAM overload. What is needed is a way to find your friends current eMail address. This is the role that Facebook serves. If I need to send a message to a friend I can just use Facebook and it matters not how they have changed their eMail.

I'm not suggesting that this is a perfect solution but it does help explain the popularity of these sites. It is the reason why I joined Facebook.

Willy

Re:$10 billion

Microsoft calculated the cost per user of these shares in Excel 2007, and found that every user of Facebook would pay them several thousand dollars.

Depends which 5 percent they're getting

I definitely wouldn't want my money within a thousand miles of that "F*** the Jews" facebook group that got so much negative publicity...

This feels like 1999 all over again

How the hell is Facebook worth $10 billion? Less than a year ago, they were estimated to be worth $1 billion...does anyone seriously think this site can bring in real revenue?

Re:This feels like 1999 all over again

How the hell is Facebook worth $10 billion?

Repeat after me: BUBBLE

Next month it will be worth ONE HUNDRED BILLION DOLLARS, and the month after it'll be worthless.

Re:This feels like 1999 all over again

Repeat after me: BUBBLE

Next month it will be worth ONE HUNDRED BILLION DOLLARS, and the month after it'll be worthless.

I believe you mean "Bubble 2.0."

Re:This feels like 1999 all over again

Seeing as I'm currently in charge of the financial systems for a medium sized newspaper who puts all their content online as well, I think I'm in a better position to say how much money comes from what.

We get dick from online. I mean, it's like joke money. Maybe a hundred thousand a month...more on a good month. Retail ads are 20 times that, and classified more still. Actual circulation revenue, including single copy which is pretty expensive compared to a subscription, is well into the millions and that is money that comes in every month, like clockwork. Sure, on Thanksgiving you're pulling in enough ads to double your circulation money, and Christmas too, but then there's the rest of the year.

The problem with newspapers is that the actual process of creating and delivering the paper is a huge time and money sink. Despite that we're still running a solid profit, though as many people point out, it's shrinking. Online is obviously the answer to a prayer...we could afford a HUGE drop in ad revenue and still make a profit if we could close down the print product. But as it stands with online advertising, it's still not profitable enough to think about that.

Re:This feels like 1999 all over again

Well, IMHO, since I don't have any actual say in this stuff...

1) They're stupid. They whore out to doubleclick, etc, just like everyone else instead of doing quality chosen local ads that they could pitch to their local advertisers for better rates. They're slowly overcoming this problem, and ad revenue is increasing.

2) Most newspapers are still working their way into the whole "web" idea. I mean, print media produces more actual web-friendly content than most industries, and, even better, it has a short shelf life, so they have nothing to lose by putting it on line. Do they take advantage of this? No. they put it up for a few days, then take it down.

This is hilariously frustrating if you know anything about the web, because you know that it's not whats there right now that's valuable, it's whats there in total. Newspapers in particular are sources for immense amounts of detailed information about things in their coverage area, and while it's utility is pretty limited in the usual archival forms (e.g. Microfiche) it would be astoundingly useful if they just left the content up to be indexed by search engines. Couple that glut of content with some advertising, and you've got an archive of data that costs very little to host and will bring in ad revenue every time someone finds something relevant in your coverage area.

At some point the big media companies (Gannett, McClatchy, Media General, etc) are going to realize that they're sitting on an informational goldmine and start actively leveraging that information to draw people to their sites. Right now it's all the aggregators (like Slashdot, Digg, Fark, etc) who are picking up the burden of providing the relevant information to the interested parties, because print is stuck in the whole, "Barf up a bunch of content and people will come" mentality. That will eventually change.

3) They still think in the back of their minds that if they put together a really good online component, they'll kill their bread and butter print product. This is, at heart, stupid. People thought television would kill print too. We still don't have a good portable disposable medium that will take up the slack, and moreover, there are a lot of people who are just wedded to the idea of the physical paper. That's going to be the case for decades to come, and that's a conservative estimate.

This means that they don't put enough real resources into online. I could give you numbers that would make you laugh your ass off, I mean seriously embarrassing. The people who are doing it are reporters, but not the good reporters...You get Peter Principle crap, so the reporters that end up doing it are people who can be spared to do it, and they have no special training, and no technical competence, and all too often, no fricking IDEA of what they should be doing...Just a very limited idea of what the hell the web is about.

Again it's just incompetence, and industrial blindness. Random example. You pay a professional photographer a daily wage. You send him out to cover a fire, a little league game, and a miss toddler usa pageant. He takes (conservatively) 500 photos. Of those 500 photos, maybe 4 make it into the paper, some probably in black and white. The rest are discarded. On the off chance that any picture will be used in the paper, the photojournalist has secured (in advance) the names of the people in it.

Can you imagine the kind of photo galleries you could create with that sort of information? Cheap to host, simple to index, throw some ads on it...Profit!

Print will die, but the content will live on. They need to transition that content to a digital forum, and then show the world what they really collect. The sheer volume of information has to be trimmed down to fit in the available space...What if there was no space limitation? Take every newspaper website, and, instead of making some ephemeral short term shallow content, make it like the tip of an iceberg, provide what you pay to collect already, and let people

that would make $ 294 / user!

wikipedia reports 34 million users. this would it mean $294 per user... sounds a bit overpriced to me..

Re:that would make $ 294 / user!

I think instead they should just buy every user an Xbox 360. . .

oh great....

Time to prepare for the Blue Graffiti of death.

Noooooo!!!!

Maybe if we all *poke* Bill Gates, we can get him to stop.

Hopefully not

Mark Zuckerberg would like to keep it independent apparently.

In any case, register your complaint by joining this group

http://www.facebook.com/group.php?gid=6197556554 [facebook.com]

Everyone knows that joining a group on Facebook can move mountains and change the world...

Scrabble

As long as I can still play Scrabble, I don't care!!!1

Actually, this input from Microsoft might help to fix the problems that Scrabulous seems to suffer every day... right, gang?? As you can see, I only use Facebook for Scrabble. There must be a group for me.

Bad move

IMHO a bad move for Microsoft as social networking sites continue to grow and become cliche'. First there was friendster, then myspace, now it's facebook. I think they all suck. Give it another year, and they'll be some one else who does it better.

I can't wait to see pictures

of Ballmer and Gates doing Jello Shooters at a rager.

This isn't surprising

MS is probably going to try to get student info to do more effective market research.

Yahoo predicament for Microsoft?

How does this affect their Windows Live Space garbage? If Microsoft really did take an interest could we see the same predicament we see Yahoo in with their "360" and "Mash" offerings? That said, I don't think this really matters. It's like 5% being bought by Google, more of a political move than anything of substance for users. Unless Ballmer starts throwing chairs at people who joined the "Micro$soft is teh evil!!!1!!1111!" groups.

How many real users?

Great. Just another reason not to use facebook.

As for the number of users, I wonder how many of them actually USE facebook, vs simply having registered in order to see someone elses crap. I know a lot of people who've been roped into 'signing' up to these sights in order to see their cousins christmas pictures, or to rsvp to a wedding shower where the idiot hosting it sent out the invitations via facebook.

So far: I don't have a facebook profile; I don't want a facebook profile; and I'm dreading the day where I have to get a facebook profile because I need to see someone elses effing facebook crap. I just know that sooner or later an important client is going to send me a facebook invitation that I'll -have- to register on the site to properly respond to...

I hate social^H^H^H^H^H^H viral networking sites.

Micro$oft? Facebook?

Hey! If I add Gates and the rest of the MS staff, I can start using my Star Wars Jedi plugin and start using the force on them! Maybe even recruit some of them to the Jedi Linux side! I think Darth Gates might be a tough opponent though his minions will be very easy to manipulate..

"These are not the code bugs in Vista you are looking for" could have a whole new meaning... :)

They must have asked Rupert Murdoch's advice

I'm sure Steve Ballmer discussed this with Rupert Murdoch over drinks.

"So how are profits from your MySpace purchase, Rupe?"

"Oh, well ..." said Murdoch, looking nervous. "Actually, great. Great! It's going to be worth billions real soon now." He laughed icily at his own irony.

"Really? Because we were thinking of buying a stake in Facebook at Microsoft."

"Oh, you should totally do it," said Murdoch, grinning wildly.

"Yeah, we thought the developers would love using it on a sort-of group connection to MSDN."

"Do it! There's nowhere for these social sites to go but up."

"And we're thinking of extending the Welcome to the Social campaign to include it."

But Murdoch was laughing to hard to hear the rest.

Who are these people familiar with the matter?

During this article I count 14 uses of the phrase "said people familiar with the matter". After the 10th time I started wondering who these familiar people were. Is this some kind of WSJ in-joke that I'm not party to, or is the journalist just not very good?

buy people

Face it we are being bought and sold like cattle. In this case MSFT is buying a place to plug in their future office live apps. A few updates down the road you will see the edit interface look like office live. This will mean that thousands of people are getting used to a MSFT product on Facebook and will use office live when they have to decide where to type their next document. Let's say Google buys Slashdot and changes the Post Comment screen to a docs.Google style screen (with awesome presentation style comment ability) then when it comes time to choosing a Word Processor in 3 years I'm going to choose docs.Google since I've already been using it on Slashdot and you will make the same choice. So this 5$ share is nothing more then MSFT buying future customers. They didn't buy the farm for the land they bought it for the cattle. ---- Mooooo....

Hell!

Mark Zuckerberg is the Steve Jobs of our time! He's 23 years old and worth billions! Same as Jobs back when he was Zuckerberg's age. It just goes to show, if you're enthusiastic and driven, and you have an idea to satisfy a need people don't already know exists, you stand to make billions!

Oh, goodie ...

... then we can expect similar groundbreaking, innovative improvements as we saw when hotmail was microwashed.

valuation credits

So... Dr. Evil is doing due diligence for MS? Who knew.

Facebook is nicely done

Facebook is nicely done. They keep everything lowkey. No blinking, no spam, etc. They appear to respect user's privacy.
Its what users who aren't children want. That is one of the reasons it got so many users. Well, that and the network effect. But niceness certianly helps. Of course, Microsoft knows nothing about making an application low key and pleasant to use.

10 Billion Dollars Sounds LIke A Mde up Number

34 Million users => each user is worth 300$???

This usually means MSFT broke a law

or infringed a patent or other IP - they tend to pay off by buying shares - when you have a small firm "potentially" worth billions, it's hard to get cash sometimes.

Remember Borland and other such "investments"?

Facebook is the future

According to the latest ish of Wired magazine, Facebook has 40 million active users (real people and not sock puppet accounts, thanks to the fact users can only view other's profiles upon confirming relationships) who generate more than a billion page views a day. Lately, Facebook has also been signing up 1 million new users a week.

Facebook also has that supercool Newsfeed feature which aggregates the latest activities on friends, family and associates, and manages to connect people who haven't seen each other in twenty years. Admit it, it's like nothing we've ever seen before (Myspace shouldn't even be in the same category).

I'm not a Facebook fanboy (alright, maybe I am), but I marvel at how well its connecting people in meaningful ways. It's a social universe within the internet. It's going to be bigger than money, because of it's worth and usefulness to you and I.

I don't like Microsoft one ioda, but they made a smart move here.

Plenty of innovation left

There is plenty of innovation left to be done in social networking. First of all, it is kind of bizarre that people let their social relationships be handled by a third party. It should be done in a p2p way, with social clients right on people's computers or mobile phones and directly built on top of their phone numbers or email accounts.
And listen Microsoft: for $10bn you can pay 10 million people $1000 each to move all their friends over to your social network. Most impoverished college students, the core FB audience, would do it in a minute. If you're ready to spend that kind of money, why not give everyone free cellphone plans with built-in social network functions that works equally well on both the computer and the phone.
FB is not the endgame in social networking. In a few years, there will be another king of the hill. Network effects work both ways. So the $10bn valuation is just ridiculous.

Feels wrong

Does anyone else feel the nostalgia of this insignificant conquer nothing investment?

I get it...

...After Vista, their just trying to "save face".

-a.d.-

amazing growth ... but I must be getting old

It's simply amazing how fast they managed to grow both the site and the company since 2004, congratulations on getting such a valuation within 3 years(!).

That said, I feel a bit old when I look at Facebook, since I do not understand at all why it appeals to so many people. Perhaps they managed to pull in all those who never made their own homepage/myspace profile/yahoo account etc. ...

doesn't support standard email address

I've refused to use Facebook (despite some pressure from friends) since they won't allow me to use my chosen email address, despite it being perfectly standard.

The problem is that I use 'plus addressing' (eg [e-mail]) and their email validation scripts has a bug that claims it is invalid. It's not uncommon for validation scripts to have this bug, but most web sites are happy to find the bug and fix it. Not so with facebook - my impression is that they're just a little bit arrogant. So be it.

Yeah, I could not use plus addressing, or use some other account, but it hasn't got to the point where I want to bother yet. It's still annoying though.

Raw deal

Didn't Newscorp pay $10 billion for MySpace..and get the whole damn thing?

Facebooks offers $250k each to app developers

As I just posted to the Firehose [slashdot.org], Facebook are now offering grants of $25k - $250k to developers with promising ideas for new Facebook applications.

I guess that $10bn is going to a good home! Do you have an app idea good enough to justify a $250k grant?

Re:wow

Probably because it would cost so much for FB to migrate to .NET (or any application server). Think about how much traffic FB gets -- now think about how much extra hardware they would need to aquire to switch from a CGI-esque technology like PHP to a big and heavy AS like .NET, let alone the man hours needed to recode everything.

Re:wow

Quite impressive that PHP was able to model itself on Microsoft software that didn't exist yet

Re:wow

Plus, Facebook uses Java to upload its images and Flash to play the videos.

They'll be replaced with .NET and Silverlight.

Oh, and kiss goodbye to the mail account that you've registered with Facebook. Spam ahoy...

Re:wow

I know your post was sarcastic, but any mac users dealing with the agonizing slowness of their photo upload applet should be cheering for joy if what you're saying is true.

Flash on Mac isn't all that hot either. Adobe's more or less been shitting all over the platform ever since Apple started directly competing with them. A single Youtube video can easily suck up 80% of the CPU cycles on a modern Core Duo machine.

As long as the number of competitors remains small (ie. 2), I think that Silverlight will actually boost the quality of web applications on ALL platforms.

Java's had its time, and frankly, while it's found niches in other fields, it sucks for web applets. Java applets need to disappear into the ether, resting alongside VRML. (Facebook IS in a pickle, because at the moment, Java probably is the best solution for multiple photo uploads...)

Re:20002 called.

There's no reason an applet is necessary to perform a binary upload.

Facebook resizes the photos before uploading them.

1. They are saving a ton on storage and bandwidth by doing this.
2. They are saving a ton of Sally's bandwidth by doing so (since she has 800 pictures of her and her friends drunk on Facebook).
3. They are saving a ton of Sally's stalker's bandwidth (who would inevitably download all of her photos in hi-res).
3. UI: Users can easily browse to and check off which photos to upload, with thumbnail previews, which is much nicer than any other non-Java upload system out there.

They do, however, have a HTML form fall-back in case you don't want to use Java. But frankly, it is the most convenient, transparent, and well-designed Java applet I've ever run into. In fact, I'd hypothesize that Facebook's photo system is a success precisely because of the Java applet.

Re:Weak.

I'd vote for that. I mean where else to all those people that never graduate college have to call their own. Shame on the graduates for not unregistering their accounts!

Re:Weak.

Nice to have something for yourself, but you're only in college for 8 years!

Re:wow

Its sort of funny that myspace is so Microsoft loving ( .NET and SQL server), but facebook the Lamp Champ is the one now partially owned by MS.

Re:Weak.

I got on with just an email account from college. I haven't been a college student since the Commodore 64 was a good computer and the Amiga was cutting edge.

Re:Weak.

Though I really despise the ridiculous amount of profile clutter some of the more myspace-y users have, I don't think their opening up is a bad thing at all. Yeah, I was able to connect with a few people at my school and whatnot before, but after opening up, I was able to connect with far more people. Not everybody I know goes to school, and the increased universality seems to have compelled some of my friends who do go to school who hadn't joined previously to join. And thus far, Facebook has avoided some of the biggest plagues of myspace, which are bright backgrounds, music, and blinking text.

Re:Weak.

Exactly what I was telling someone today. I hate the third-party applications. It's making it so messy and cluttered. "You see...this is why we can't have nice things."

Re:wow

i smell another dot com bubble rising.

there's no way facebook is worth 10billion. they dont' produce anything.