Microsoft to Pay $240 Million for Stake in Facebook

Nrbelex writes to mention The New York Times is reporting that Microsoft has beat out Google and Yahoo for a 1.6% stake in Facebook. The investment will cost Microsoft $240 million valuing the total site at somewhere around $15 billion. "The astronomical valuation for Facebook is primarily evidence that Microsoft executives believed they could not afford to lose out on the Facebook deal. Google appears to be building a dominant position in the race to serve advertisements online. Fearing it might lose control over the next generation of computer users, Microsoft has been attempting to match and in some cases block Google's plans, even if that effort is costly."

The next Big thing, again

After hearing so much about mySpace I finally surfed it, set up a page and looked around. It's all rubbish. People ask to join your list of friends to spam you and the interface is clunky at best. I think such a site would be a good idea, but their implementation falls short of the mark by leagues.

Along comes Facebook, cleaner interface, perhaps better ability to keep crap from showing up in comments or messages people send you. Hopefully if you are spammed there's an actual admin who gives them the boot, though it's quick and easy to join so an abuser will likely create accounts as needed for pest purposes. When rot sets in people will leave and go to the next big site, leaving mySpace and Facebook to host an ever shrinking group willing to put up with crap.

Two hundred forty! Million! Dollars!? IIIIII'mmmmmm the CAAAAAT! Seriously this is great news for those who hold ownership in this site, they'll rake in a very considerable profit.

Re:good thing many people have the sites sourcecod

it was hacked recently and many people are making clones from the exact source

Isn't having the source pretty irrelevant? Isn't the community, as in the people using the site, that matter? You could create an exact same site using the same code, call it, Friendster, and if nobody shows up, does it matter?

Re:good thing many people have the sites sourcecod

As a guy who has worked in web development for a long time, I can tell you from personal experience those numbers are completely untrustworthy.

An extremely prevalent pattern is for kids/teens/young adults to sign up 2-20 accounts per actual human. They enjoy the "role-play" elements in taking on new identities. At one time, a site I worked with didn't limit "accounts" by email, it was astounding how many accounts per email we had - this was a kid oriented site. I think the average was 4 and a half or something.

So, even assuming they are all human derived (which they're not, but I have no educated guess on percentage), you can safely halve that figure and then you're STILL not accounting for abandoned accounts. I have two on myspace. :)

There is a real move away from user account stat usage these days, thankfully. I've been mocking it as a statistical tool for years so I feel a certain vindication. More useful now are page views and time per session (this is qualitative generally, but less so than 'account number')

Congrats to MS on purchasing a share in a great product that's clearly jumped the shark. As someone mentioned, the userbase of facebook doesn't have a lot to lose by jumping ship for a better product. Facebook seems like a smarter than the average .com though, perhaps they'll make a long term company out of it.

Re:good thing many people have the sites sourcecod

The real difference between Myspace and facebook. Myspace is already owned by a large mass media company, absolutely no space for a buy in by either google or M$ and of course facebook is basically up for sale to the highest bidder.

The problem with both of these sites in terms of future value, they are simply just a small microcosm of the overall world wide web, doomed to a limited existence. Cheap web serving appliances and IPv6 will be the death of both myspace and facebook.

M$ making the typical Ballmer blunder by buying into a section of the web at inflated prices as it's demise is on the horizon, well, at least to those who have at least some understanding of the changing nature of the internet, as hardware reduces in price, software becomes free and broadband bandwidth grows.

For either google or M$ to buy into facebook is an addmission of their own incompetence in managing their web portals and being unable to create their own desirable virtual community or in the case of both of those companies, to so mismanage their existing virtual communities, that they to lose to relative new comers.

You only buy competitors when you can't compete. As for web advertising dominance, expect a come from behind, old world mass media, fracturing of that business space. They have a depth of expertise, as well as extensive libraries of content. Admittedly slow to the party, which sees them currently behind, but they will leverage their existing media distribution systems to push out and marginalize what is basically just a 'search engine'(google) and an 'OS/office suite'(M$).

Did no one pay attention to how Newscorp sutlely promoted myspace by inserting references to it in their news papers, television shows, cable network and movies (the most interesting targeted ones were references to myspace in Sunday paper cartoons). As well as of course the expected advertising as news articles.

Re:The next Big thing, again

I disagree with the summary saying that it shows the company is worth $15 billion, that's ridiculous. It's an exclusive advertising deal with a small share of the company thrown in for good measure. The real question is, how much of that $240 million is for the advertising and how much is for a share of the company? My guess is that the majority (75+ percent) is for the advertising.

What I really think this shows is that Microsoft thinks Facebook, and not myspace, is going to be dominant soon and for a long time. Facebook has the better interface and the better look/feel, and their user base is exploding. However, I also agree with the parent in saying that people will soon be leaving facebook for greener pastures. If the dot-com boom and embarrassing posting on slashdot about being worthy a lot of money are any indication, the owners should start selling their sharesnow, getting some of the insane wealth in case they can't get it later.

Re:The next Big thing, again

I disagree. People care much less about how clunky the interface is etc than they do about where their friends are. Right now everyone (of the generation that is using these sites ie college students and younger, primarily) and their pet duck is on Facebook and/or MySpace.

These are social sites. They are useless without the people you socialize with being on them too. MySpace and Facebook, thus, have it very good for the future.

Re:The next Big thing, again

Facebook and MySpace are the 21st century equivalent of Geocities. How many billion dollars do you think they could sell Geocities for these days? Remember, Geocities used to be VERY popular with idiots setting up free websites, just like MySpace and Facebook today. Anyone that spends more than $1000 investing in these fly-by-night sites is a complete fool or is looking to cash in on the pyramid scheme.

adblock

Use adblock and give the finger to MSFT.

Well, it's better than...

... a stake in the face, I suppose.

Re:Well, it's better than...

Esp. if you're a vampire. Which is pretty likely on Facebook.

to translate

Fearing it might lose control over the next generation of computer users, Microsoft has been attempting to match and in some cases block Google's plans, even if that effort is costly.

In other words, they didn't spend $240 million for 1.6% because Facebook is worth $15 billion. They paid $240 million because they're in the middle of a pissing match with Google.

Re:to translate

....because they're in the middle of a pissing match with Google.

Are they competing for distance or accuracy?

Re:to translate

Are they competing for distance or accuracy?

Volume.

Re:to translate

Fearing it might lose control over the next generation of computer users, Microsoft has been attempting to match and in some cases block Google's plans, even if that effort is costly.

In other words, they didn't spend $240 million for 1.6% because Facebook is worth $15 billion. They paid $240 million because they're in the middle of a pissing match with Google.

Actually I blame it on bad Bistromathics, someone took one too many toothpicks from the bowl by the register and there's an extra mustard stain on the tablecloth.

And Adobe...

Some have speculated that this could be a move to drive adoption of the Silverlight plugin to compete with Adobe's flash. There is evidence that could work too. When MySpace was hacked that involved some clever javascript and a SWF, the admins pushed Flash Player 9 (which had added security) on the userbase and it's adoption rate, many have speculated, is largely due to that. One of Microsoft's biggest challenges with unseating Adobe's Flash is it's insanely high adoption. (something like 95% of computers have flash 8) and now they just bought into a userbase of 20 million "early adopters." Will it be effective? who knows. But I would be surprised if we didn't start seeing Silverlight widgets and ads on facebook.

Re:And Adobe...

Conspiracy theorists will take note that there is a tag for inserting Silverlight elements into your Facebook app [facebook.com] in FB's pseudo-HTML markup language, FBML [facebook.com]. The only other formats to receive this support (inserting rich content with a single tag) are Flash and MP3.

Before everyone screams 'bubble'.....

Can I be the first?

Simple API

From TFA:

The high valuation also represents a belief that Facebook is creating an important new operating system -- one that exists on the Web instead of on personal computers.

I'm not sure how a valuation is capable of representing a belief, but it does reflect an acknowlegement of important trends. Facebook's platform [facebook.com] is similar to other "Web 2.0" RESTful APIs but is pretty simplistic (i.e. CanvasPages--which is basically an IFRAME, alerts, feeds, and privacy settings, etc.). Don't expect a RoR framework or anything close to Google's API.

Re:Simple API

is creating an important new operating system

You really have to wonder if the people writing these articles - and this is the NYT as well - have a clue. I mean words can't really describe how flawed it is to suggest a website API (and as the parent points out, a simplistic & fairly inadequate one compared to others) equates to an OS. It seems that the journo's are happy to get caught up in "beliefs" that - when you actually sit down and say "hang on, lets genuinely have a look at the facts here" - sums up to be a big pile of vacuous SFA. Someone needs to fire a bolt of reality into this lot, we (on here) are all happy to point out the basic truth that it is a bubble and it will burst, but it goes beyond that now - even the supposed objective commentators are blowing air into the bubble.
As for MS's purchase - we all know they have more money than sense - but I didn't realise it was that much.

Yeah, but what IS Facebook?

Not trolling, curious, and not about to set up a page just for the fun of it.

I am curious, but yellow.

Re:Yeah, but what IS Facebook?

Yeah, there is, but that domain is just a redirect to slashdot.org.

MyFaceYouBook

I'm sorry but this is ridiculous. MySpace was the last Next Big Thing and is losing users to FaceBook at a tremendous rate. Facebook will face the same fate and so will the next one and the next one and so on.

In six months' time Facebook will be "worth" half that and in a year it'll be worth nothing.

I like social media, I think it's highly useful and may very well change the face of the internet in the same way the web changed the face of traditional media like newspapers, but this is Dot Com Bubble 2.0 as far as I can see. Crazy prices for Crazy products. Good on them for making the $$$$ but seriously ... it's insane.

I cannot hold myself

"total site at somewhere around $15 billion."

WTF!?! Facebook is worth of 15 billion dollars? I thought paying more than a billion for Youtube was dumb.

By "a stake in Facebook", do you mean

...the wooden vampire-impaling kind of stake? Because if so, I think Microsoft's got it all backwards.

Makes this guy a visionary

http://slashdot.org/article.pl?sid=06/10/16/0015203 [slashdot.org]
"A few weeks ago I wrote an open letter to my former friend from school, Facebook founder Mark Zuckerberg, telling him to take Yahoo's money before it's too late."

http://www.aarongreenspan.com/letter/index.html [aarongreenspan.com] - hire this dude, he's a visionary

Slogan suggestions

Facebook, now with 1.6% fail!

Facebook, Bill Gates is your friend.

Facebook, following vista all the way down.

Facebook, overruling a minority shareholder and using ads from a company that doesn't suck ass.

Is the interface really any good?

The past couple of days, I've been listening to my co-worker talk about hitting the wrong button and 'hugging' a large group of people. Not only is he freaking out that only the men have returned his 'hug', he is trying to figure out how tell these people that he did not mean it without alienating them.

Who needs soap operas?

I'd thought this had already happened

Based on the giant upgrade to IE7 suggestion that started popping up every time you log in, I'd thought this had already happened.

$15 billion in 3 years?

I'm curious if any other companies have experienced this kind of growth. Does anyone have any examples?

Re:$15 billion in 3 years?

I'm curious if any other companies have experienced this kind of growth. Does anyone have any examples?

Enron... WorldCom... Kozmo.com...

Nothing new from MS

What, Microsoft matching or attempting to block the plans of competitors? Nothing new from them, that's for sure!

A modest proposal.

I have a plan.

Seeing this level of wisdom, after painstaking, conservative estimates of revenues and dividends were calculated to come up with this value of $15 billion, which would in the "quaint, old-fashioned" world of people who actually built companies to feed their families and those of their workers be requiring something like a billion of yearly revenue and something like $10 billion in assets, I came to the conclusion that we Slashdotters too can take advantage of this insanity.

Here is what we should do: Each of us starts a corporation, with names like "IgnoramusMaximus' Megacorp Consolidated on the Internet!" (that last bit is important for the "traditional" investors) and then we "sell" to each other our "stakes" in these wonders of modern enterpreneurship for, say, conservatively, 20 million US dollars (or Euros) a share, with the price being "paid" in our equally valuable shares of the other Slashdotter's corporations. If we all say our stuff is worth beeeeeelions, who is to say otherwise! After all, we got web sites and email for these corps!!!

Next thing you know, our shares can be traded on NASDAQ, NYNEX and who knows where else, as they are far in excess the required share price for those markets and I am sure we Slashdotters can create sufficient trade "volume" trading our super-shares via email 20 times a day.

All that remains is for the turkeys, known as the "institutional investors" so start biting! After all they gamble on equally reasonably "valued" and brain-dead "opportunities" such as the above mentioned FaceBook. Why should they care if we have no product, no sales, no assets? That never stopped them before, did it?! And we are on the Internet!

And so dear Slashdotters, I am hereby giving you your way to beeeeeelions of dollars (or euros) as easy as filling some paperwork and registering the name!

So here it goes:

• 1. Set up a useless Internet corporation
• 2. Do a home-made "IPO" (complete with all the "buyer-beware" prospectuses as required by the FTC) and trade its shares for shares of other useless corporations, claiming per-share value in tens of millions (by mutual agreement).
• 3. Create sufficient volume of trades with many, many Slashdot users thus fullfilling "serious" exchange listing requirements.
• 4a. Get listed on NASDAQ
• 4b. Claim your net worth is into billions if you need an actual money loan from a bank for anyting (and you will be right, according to the silly Wall Street definitions)
• 4c. Wait for gamblers, otherwise known as "investors" to show up and start trading your make-believe corp (and they would not be able to tell a difference from a "real" one anyways). No danger of you getting accused of "inside trading" or "pump and dump" because you, on your corporation's website boldly state that "This company does Dick All, Bupkis and sometimes Didley Squat!" (in small print at the bottom)
• 5. Profit!!

The future of social networking?

I'll admit up front I'm not one of these technology pundits that make endless speculation but something occurs to me. In the big picture doesn't the future of social networking truly depend on the interopability of these social networks? And if so, wouldn't the player that steps up and comes up with a method to bring interop between social networks and then effectively control that method (heck they don't even have to make it proprietary just control the protocol) will be the one you want a stake in if you're yahoo/google/ms?

I'm on Facebook, I enjoy it but it's clear to me it's not worth $15 billion. As others have said the "next big thing" will come along and draw people away again. I can already see how facebook is going the way of MySpace, sadly with the number of applications that people clutter their profile with (myself included!). Then when everyone rushes off facebook then what's facebook worth? Hardly 15 Billion but the market seems to responded positively to this announcement and Microsofts stock price has done well today (because they beat google).

My point is that I believe the real stake will be the provider that brings people the ability to use the service that they want and still make their connections. Otherwise people are blowing their money on things that have no real value due to user flux.

What's 1.6% of nothing?

Just because you have a large user base does not mean you have a large source of income. I don't know if Facebook is profitable, but I do have my suspicions that it is grossly over-valued right now. This social networking craze reminds me of a little thing that happened a few years ago. Eventually these companies are going to have to find a way to make money...ads? That's the best idea they've been able to come up with. Eventually though, someone has to buy something for that model to work, and when your user base is a group of people that signed up for a service because it was free don't be surprised when they're not so eager to pull out their credit cards (If they even have them, since, surprise MS, your users are also a bunch of high school students!). The only thing I can think of is maybe MS thinks there is some value in the data, even that I'd say is nebulous at best. This screams of "me-too!" corporate positioning. MS can obviously afford this, they probably weighed the chances of being left out of the social networking fad and losing money on this deal and considered it an acceptable risk. The only major effect it could have would be positive, obviously they can afford it.

*Sniff* ... *Sob*

I'm sitting here in my mid-30s, webdeving against abysmal insignificance since 2000 and along comes some highschool punk and cashes 250 MILLLION DOLLARS for a website totalling a nominal 15 billion in worth. Un-f*cking-believable.

Karma can be tough.

Goes to show a main business rule:
Not what *you* think is a cool interweb app is a cool interweb app. If you can think the concept 'cool interweb app' you are most likely more intelligent than 99% of the poplulation and what you think matters zilch against any possible demografic. What your *customers* think, on the other hand, is *all* that matters in business. Be they 250 Quadzillion Facebook users or a board of half-a-dozen ... *GASP!* ... *SOB* .... MS Execs with truckloads of cash to burn.

240M for 1.6% of Facebook - Back to boom time

Here is my opinion on this deal reproduced from this blog [dynalias.com]. I don't understand it. Are we back to late 90s? This type of valuation is a signal of late 90s valuation which cannot be justified PERIOD. We first had E-Bay acquiring Skype @ ridiculous valuation and then righting it off. Most likely Microsoft will write off this investment in a few months as well. Given the cash position of the MSFT, this will have little impact on their bottom line. But this completely distorts the market space for near future acquisition and startup activity. The VC money flow starts diverting on ".com" and starts drying off from infrastructure where such valuations are still not there. I loved late 90s. Lots of people made a lot of money. But I was just too young at that time. May be if MSFT/Yahoo/Google keep fighting, I will be able to make some money in late '00s :)

$350 Mill is PR Number

What usually happens is there is a little cash over the table with some other promised cash materializing if the project hits some agreed-upon benchmarks.

Let's say they actually make $150 million this year, since the company is fishing for investors, they are burning through whatever they are making.

Today's lesson: Company seeks investor == Can't grow on it's own capital =~ disfunctional business model.

It will be interesting to watch the flame-out in a couple of years.

I don't really think Google cares

Google has shown that they are willing to do what they have to do to get users to put as much of their lives on Google as possible. People are talking about how everybody left Myspace six months ago and will leave Facebook in six months too, it seems pretty likely that Google could be the new "Facebook" if they really wanted to.

control

Now they are share holder that have some control. That's what they are after.

Google have Orkut

I really started dislyking Orkut a while ago (I am brazilian, insert jokes/trolling about it here), but the interface redesign and better photo, video and community tools just made it very good.
But I don't see how any of those community sites could be the next thing or change the internet. They are just what ICQ was once, and before what email was, a way for people to find each other and communicate. I don't see how a clear winner will emerge. Probally the market will be segmented as it is now and people will not be afraid to change from one to another social network. A system that could interact with multiple social networks, as social stream google is studying seems to me a much more interesting horse to bet int.

All I can think about

is the price of pudding.

This posting is silly

Google is a leader in paid search, which serves only a portion of the advertising on the internet. In fact most folks consider the long-tail paid search area to be played out in terms of revenue.

The longer-term money is in other areas of the "buying funnel" -- namely display advertising. This partnership plays to the strengths of Microsoft'd display space and is more of a competition with Yahoo than Google.

In fact Display Ads is where GOOG is the weakest. That's an area they are trying to improve via the Doubleclick acquisition.

The one login to rule them all

Facebook apps will make Facebook accounts the one login to rule them all. Something Microsoft failed to do with Passport.

I am writing a Facebook app and am surprised by how willing people are to give up their personal info and social network, to send somebody a virtual "gift". They remind me of those cutesy forwards, on steroids, except you can't participate in them unless you add the sending application to your account and give away your data. Every time I think about it, I picture a bunch of lemmings walking off a cliff. Am I overreacting? After all, the apps are just a tool. I don't respond to every spam message a I get, and I tend to ignore forwards.

Here is something I got when I logged in today -

"Marty Mcfly would like to play Texas Holdem Poker with you. If you join, Marty will receive 500 chips. Help out a friend and install Texas Holdem Poker."

Well if I don't join, Marty won't get his 500 chips. Also, not to mention Marty might feel snubbed if I don't want to play poker with him. Decisions, decisions.

Wow

Wow.

Facebook is tiny. It's this one little building on Hamilton in Palo Alto, next to the nail salon and the foam store. The servers are in some colo elsewhere.

"Web 2.0" is starting to look way overvalued. Companies are buying "clicks" and "eyeballs", not revenue. Remember what happened last time. [downside.com]

This is a DUMB move by Facebook

Basically Microsoft just peeled off a few bills to give to Facebook to keep it out of Google's hands. They basically can afford to pay out this money without blinking -- and now Facebook has a valuation that's way too rich for it to be acquired or go IPO now.

I don't think Microsoft expects to get this money back. They just basically did it to screw everyone.

Oh great.

What a way to show to the millions of young and hip teens the "facts" about Linux.

TrucK for sale - only $6 million

Dear Mr. Gates,

I have a 1985 GMC pickup truck for sale, with very little rust. I'm quite certain that you don't want to see it go to Google, so I wanted to give you a chance to pick it up for the low low price of only $6 million. It's capable of hauling large loads. Imagine yourself hauling Balmer's broken chairs, piles of money or boxes of Vista to the the dump. Better hurry, because the Google guys are coming buy this afternoon.

Check or Cash would be fine. No Microsoft stock, please.

Ken

A bit overestimated?

15 billion $ - the social network bubble keeps on growing...

Oh... shucks....

Time to close the facebook account. It was fun while it lasted....

Re:... why?

If I were Yahoo and Google, I'd probably be hunting out these overpriced businesses, making it look like I was oh-so-interested, and then "losing" to Microsoft, wasting its time and resources on meaningless acquisitions.

Re:Facebook??? Thats funny.

That really is funny. I just added facebook.com to the url content filtering block list on my network. I look to keep my kids safe and keep the perverts away....

Heard moments ago in Redmond, WA: "I'm going to fucking kill content blocking..."

Re:Facebook??? Thats funny.

When your kids are in college (Yes, I know they allow High School now, and maybe even younger) I'm pretty sure your adblock isn't going to reach all the way to the college campus. I suggest teaching responsible computing, not taking the same path the schools are (Blocking everything they don't understand: EX, Wikipedia).

Re:Facebook??? Thats funny.

I also block it at home too, along with Bebo and Myspace. Not because of perverts or anything though, just that bandwidth is too expensive for me to allow people to chew up gigs of it in a month browsing it. At work we block it for obvious reasons.

Re:Still never been to Facebook.

Facebook isn't concerned with you then, just like you aren't concerned with Facebook. Facebook is concerned with the millions of other users who do have a reason to go there.

Re:Still never been to Facebook.

I've said this before. No reason to wear makeup. I've never owned any makeup, and I never will. I've never even looked at any makeup (unless someone I'm looking at just happens to be wearing it.) Investing in Cover Girl is ridiculous.

Re:adblock won't kill this plan...

Well you must be using a different adblock to the one I'm using because I've never seen an ad on facebook.

Re:Still never been to Facebook.

Microsoft again shows that it is composed of ignorant idiots.

Only on /. will you ever hear about company1 investing in company2 (when company2 is averaging 250,000 new users a day [arstechnica.com]) implying that company1 is composed of ignorant idiots.

Oh yea, I forgot to mention that company1 has to be Microsoft, or it's a brilliant move.