Microsoft to Buy 5% of Facebook Valuing at $10bn 216
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 (Score:5, Insightful)
Well, that's one way to get Silverlight adopted... (Score:5, Insightful)
How long till we see some cool new site feature -- or, hell, even an existing, basic feature -- reworked ("enhanced") to require Silverlight?
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Re:Well, that's one way to get Silverlight adopted (Score:2)
Unlike Slashdot only 5 or 10 percent of Facebook users use firefox.
Re:Well, that's one way to get Silverlight adopted (Score:2, Interesting)
Re:Well, that's one way to get Silverlight adopted (Score:5, Funny)
Yeah! And can't a crackhead just admire your car stereo?
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The potential of these sites to become long term hubs for people to visit has got to be worth the few million MS is dropping into it.
Re:$10 billion (Score:5, Insightful)
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The "White Pages" for eMail (Score:4, Insightful)
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
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Umm, no.
.com bust. Every one and their grandma was trying make trendy websites. And that's why the were just trends. Those websites you mentioned were minuscule compared to myspace and facebook today. FaceBook and MySpace are worth billions of dollars. Something worth that much isn't going to disappear in a few years. They are growing and are continuing to grow. I think most people would rather go to the networking site all their friends are on, even if there is something else better out there. Maybe in a few decades or generations, another website will take over. But most likely, a corporation will just by myspace or facebook and change the name.
There is a huge difference between trendy sites back in the 90's and the sites now. I was a frequent internet user as a high school student back in the 90's, and I've never even heard of those sites you mentioned except for livejournal, and I don't think I've ever actually visited it. All that stuff was before the
Tell that to friendster....
Tm
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Re:$10 billion (Score:5, Funny)
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It's very possible that over the next 10 years facebook can bring in $300 per user.
Many companies sell for 10 times what their yearly revenue is.
Revenue Multiples (Score:2)
Only if they are highly prospective ventures with a large potential upside, little/no earnings and possibly purchased during a speculative bubble. Most firms are purchased for between 1X and 2.5X revenue, or 5X to 8X EBITDA [wikipedia.org]. Any multiple over 3X revenue is a very rich valuation. 10X is purely speculative and the buyer had better hope they have the next google on their hands if they want to get any profit from the investment. Last time we saw
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Alcoa's price:earnings ratio over the trailing twelve months is 14.27
AIG is 10.93
American Express is 17.89
Boeing is 22.45
Citigroup 10.53
CAT 15.5
DuPont 14.04
Microsoft's own ratio is 20.67
It goes on like this. Now obviously this is only one aspect of valuation: the industrial majors are likely to have a much lower price to book assets ratio than facebook has, but a 10:1 P:E ratio is far from unlikely.
Earnings are not the same thing as Revenue (Score:3, Informative)
Earnings [wikipedia.org] are not Revenue [wikipedia.org]. Earnings are profit. Revenue is total sales. It's VERY important that you understand the difference. Companies are not valued based on their P/E ratio. The only real use of a P/E ratio is to determine if a stock price is relatively high compared to similar companies. It tells you nothing about how much the company is actually worth. The market capitalization [wikipedia.org] can be important (if the company is publicly traded) but the P/E does not give
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As it is, I also would not invest in tech stocks such as these (except where they fall in my tracker, but as most are US rather than British I don't have as much exposure there)
Looking at your figures, with $150k EBITDA, let's allow say 50% tax, interest etc for a profit of $75k. Discounting at say 7% per annum real value
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Fair enough. It's an unfortunate reality that in general in the finance world people are too loose with definitions. Drove me nuts when I was first learning about all this in school. You seem to have the concept down but there are a LOT of people who really just don't grasp the difference between revenue and profit. I try to educate where I can to help.
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You're making the same mistake as TFA.
There's a declining net aggregate utility in owning share in the company. A sharply declining one too.
The first 5% might cost them $300 million or whatever, the next 5% significantly less, etc.
Its not a linear function, and therefore, you can't make the leap to "Facebook is worth $10 billion, and each user $300"
Now, that said, I agree no matter what, its still wildly overpriced.
This feels like 1999 all over again (Score:3, Insightful)
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nope (Score:2)
Re:This feels like 1999 all over again (Score:5, Insightful)
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 (Score:5, Funny)
Next month it will be worth ONE HUNDRED BILLION DOLLARS, and the month after it'll be worthless.
Oh, a social bubble. We should call it Bubblr. (Score:3, Funny)
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Now you've done it (Score:2)
P.S. I've got some shares in Northern Rock - sounds like a solid investment, eh - now I would hang on to them but my daughter's getting married and I need the cash in a hurry...
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Not 10 billion though. If you started charging your users for special features you could start pushing toward that, but as long as you're relying on ad revenue you're screwed.
It's like cable, or newspapers...The ad revenue is what people talk about, but the bulk of the money comes from subscription fees! Advertising is just the icing on top. The reason you pay 100 bucks a mont
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Yeah, but not all 34 million are active. I'm one of them
Re:This feels like 1999 all over again (Score:5, Interesting)
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 (Score:5, Interesting)
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 dig through it.
Sigh.
This is obviously and old and polished rant. You can guess how seriously they take my opinions...I'm just a techie after all...What do I know about newspapers? =P
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That means Facebook is worth almost nothing. The advertisers haven't caught on yet tho, they aren't exactly the type that real research studies
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It's worth whatever someone is willing to pay for it. If Microsoft figures it's worth $10 bn, then it's worth $10bn. Of course, I won't argue that MSFT might be making a huge mistake, but huge mistakes can just be written off anyway... It takes balls to take risk, and risk doesn't always pay off. But when it does, it's well worth it.
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Typical Financing (Score:2)
Step 1: Sell the first tiny bit of a company to someone for $100.
Step 2: Sell the next tiny bit of a company to someone else for $1000. You can casually drop impressive phrases like, "My investors..."
Rinse and repeat minimizing losing control of the company.
Given the amount of wealth held by the top 2% in the U.S., this kind of private placement financing will be quite the norm going forward. Another reason why income and wealth dist
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Looks like I'm going to start back editing my postings to be "copyrighted material" and dare fb or ms to remove it from my postings. Looks like I'll have to prepare to find another social networking site and minimize my use of fb... maybe...
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Targeted ads are worth far more than non-targeted, for obvious reasons.
that would make $ 294 / user! (Score:3, Interesting)
Re:that would make $ 294 / user! (Score:5, Funny)
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If the growth has been rapid, then 34 mil today could be 50 mil in a few months. And even more down the road.
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5% is enough to guarantee that they'll keep using ads from Microsoft, and probably enough to get them to embed some technology that Microsoft wants to embrace and extend. We all know that Microsoft is willing to spend billions to buy into new markets with minimal merit, so getting equity for their buy-in is a bonus.
Noooooo!!!! (Score:5, Funny)
Google is already poking him (Score:2, Informative)
--
Microsoft Subnet -- the independent voice [networkworld.com]
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Pooper Soak..
Hopefully not (Score:5, Funny)
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...
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Scrabble (Score:5, Funny)
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.
I can't wait to see pictures (Score:4, Funny)
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How many real users? (Score:5, Interesting)
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.
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Micro$oft? Facebook? (Score:2)
"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 (Score:5, Funny)
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.
Hate to spill the beans, but... (Score:2)
I think it took a media guy to understand this. MySpace is actually a "social channel" of sorts... a kind of new entertainment media all its own. Like Fox or NBC it may not always be on top
buy people (Score:5, Interesting)
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Hell! (Score:2)
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Oh, goodie ... (Score:2, Insightful)
valuation credits (Score:2)
Facebook is nicely done (Score:3, Insightful)
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.
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Did you know that I have a facebook profile, without ever previously visiting their site? So now I have to sign up myself to find out what this profile says about me!
It's like automated blackmail.
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This usually means MSFT broke a law (Score:2)
Remember Borland and other such "investments"?
Facebook is the future (Score:3, Insightful)
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.
doesn't support standard email address (Score:3, Interesting)
The problem is that I use 'plus addressing' (eg me+facebook@home.com) 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.
Re:wow (Score:5, Informative)
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Sure you will. Right after you meet that lass in a pub that wants to be your "friend...."
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Even with the mod PHP processes are hogs. However, no licensing costs. The
Re:wow (Score:5, Funny)
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They'll be replaced with
Oh, and kiss goodbye to the mail account that you've registered with Facebook. Spam ahoy...
Re:wow (Score:4, Interesting)
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...)
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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.
You do know about the official Mac OS X-native FaceBook Exporter for iPhoto [facebook.com], don't you? It's th
20002 called. (Score:3, Interesting)
Just because the people implementing the technology suck doesn't mean the technology itself does.
Re:20002 called. (Score:5, Informative)
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.
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When you're uploading 60 files like you would frequently do on Facebook, this becomes a HUGE hassle. Plus the thumbnails and check-marks are nice for users who have Operating systems that don't make thumbnails available in their file-chooser (or for those who do, but don't know how to use it)
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Gerry
How are you gentlemen? (Score:3, Funny)
Re:wow (Score:4, Insightful)
there's no way facebook is worth 10billion. they dont' produce anything.
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It really looks like another bubble, but I can't help but wonder how long this could go on. After all, most of the people throwing the money around are already rooted deeply into the ground and wouldn't suffer too much if their investments went bust.
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Well...your money won't be because the evil Jew bankers have it all and they are using it to bring in the New World Order.
Note to Mods: That was supposed to be funny.
Seriously though, you (the parent) might actually have a reputation to tarnish unlike the prospective puchasers of Facebook (Microsoft and Yahoo)...
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