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

[ackthpt]

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.

to translate

[User 956]

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.

MyFaceYouBook

[Audent]

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

[KeepQuiet]

"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.

Re:to translate

[ShiningSomething]

Exactly. Buying 1.6% does not mean they think the company has a future. But it probably makes it less likely that Google or Yahoo will take over the company, right?

Re:... why?

[MightyMartian]

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.

And Adobe...

[beakerMeep]

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:The next Big thing, again

[moderatorrater]

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

[2ms]

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.

What's 1.6% of nothing?

[sqrt(2)]

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*

[Qbertino]

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.

Re:good thing many people have the sites sourcecod

[Dionysus]

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:The future of social networking?

[0xdeadbeef]

In the big picture doesn't the future of social networking truly depend on the interopability of these social networks?

Exactly. Facebook answers two questions: what are my friends up to and who else do they know? How is that not better done with other technology? Who wants to lock into one company's platform to manage their social life?

Anyone remember Friendster? Yeah, it collapsed under the weight of its users, but long before that it stopped being interesting. Orkut had the hardware and was easier to use and its discussion group features brought something new to the table, but it never went anywhere, either.

It took "gen Y", with it's comfort with the Internet coupled with a lack of sophistication regarding it, to turn Facebook and MySpace into something enduring and popular. But they're still going to get bored with it. These things are toys, and they always will be until they can become as simple and ubiquitous as email or text messaging.

At least LinkedIn, with its focus on career networking, is actually useful for grown-ups. That *might* have a future, if they can get past the creepy spammer vibe to the whole thing.

I don't really think Google cares

[Derek Loev]

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.

Re:The next Big thing, again

[Professor_UNIX]

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.

Re:Yeah, but what IS Facebook?

[porcupine8]

To add a little bit to the previous comments, it was originally for college students, specifically at a handful of top universities. You had to have an email addy from one of them to join. Then they expanded it to all colleges. Now anyone can join, although your "networks" are often still based on colleges or high schools, though there are now city and workplace networks as well. It's got a much cleaner interface than myspace - you can do any of the crazy animated-background-plus-lime-green-text shit to your profile, it's always white background with black and blue text. People are also writing all sorts of applications that you add into your profile, for instance a map to show what countries you've visited or a Scrabble game you can play with others on the site.

Apparently a lot of HS and college students use it now to form homework/study groups, things like that. And, of course, less wholesome things. One interesting side effect of its history is that (from what I've seen) most people are registered under their real names there (and if you want to join a college's network, you still have to use an email address or alum email from the school). So it can be much easier to find people than on other sites where people use aliases, which has various implications.

Re:What's 1.6% of nothing?

[oenone.ablaze]

As a senior at a major university, I've been using facebook since '04, and I have to say that it's been a pretty important part of the lives of 95% of the students here and at other major universities for a long time. It's been great for keeping in contact with classmates from high school and in other schools. Since we (college students) developed have seen facebook grow and mature for a few years, it's come as sort of a shock to me that there's a debate about facebook's viability at all. I can't speak to facebook's staying power among the general public. In fact, though I use the site at least a few times per week, I only recently became aware that it was open to the general public. I can say, though, that it's played a fairly important part of our college lives. I've always just assumed that everyone would keep their accounts in order to help stay in contact with the numerous friends and acquaintances we've made over the past few years. For us (the majority of those pursuing undergraduate education in the US), it's definitely not a "fad."

Re:good thing many people have the sites sourcecod

[DDLKermit007]

Get me an "active account" number, and you'll have something. Hell, my open personal Myspace account could be considered active, but I mainly only ever go on it to clean out the spam. Everyone I know is on Facebook already, or transitioning to it. I only have one friend whos resistant to it, and the reason is because he can't fuck up the page like Myspace allows him to. He can stay there for all I care given I can't even look at his Myspace page without wanting to scream about HTML standards.

Due to his obstinacy over Facebook he now wonders why no one ever invites him out to do stuff now which I find slightly funny XD

Re:good thing many people have the sites sourcecod

[rtb61]

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.