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Microsoft to Pay $240 Million for Stake in Facebook 277

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."
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Microsoft to Pay $240 Million for Stake in Facebook

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  • by ackthpt ( 218170 ) * on Wednesday October 24, 2007 @05:46PM (#21105705) Homepage Journal

    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.

    • by moderatorrater ( 1095745 ) on Wednesday October 24, 2007 @06:12PM (#21106049)
      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.
    • by 2ms ( 232331 ) on Wednesday October 24, 2007 @06:13PM (#21106061)
      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: (Score:3, Interesting)

        The Internet is the biggest Social Networking site on the planet, and all these subcategories of it are going to be less and less important as larger percentages of the populace can build their own little inter-communicative sites.
        • Re: (Score:3, Interesting)

          by ackthpt ( 218170 ) *

          The Internet is the biggest Social Networking site on the planet, and all these subcategories of it are going to be less and less important as larger percentages of the populace can build their own little inter-communicative sites.

          Perhaps the real money is in creating a site which allows people to tie all their memberships together across these social networking sites. Should that happen, I predict lawsuits -- they don't want you to go anywhere else and they'll do anything to stop you within their power. But it would be a neat idea.

      • MySpace and Facebook, thus, have it very good for the future.

        For the very near future, at least. Remember Friendster?
    • by Professor_UNIX ( 867045 ) on Wednesday October 24, 2007 @07:11PM (#21106659)
      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.
    • Doesn't Facebook run PHP on Apache on Linux... I don't know the DB, but it sounds like it's basically a LAMP [wikipedia.org] setup!

      Is Microsoft going to pressure them to excise all that open-source junk from Facebook? And run it on some nice Windows server with IIS and ASP.NET and what not?

      Just as they did with Hotmail! [wikipedia.org] Microsoft spent years and $ migrating Hotmail from FreeBSD/Solaris to Windows 2000 :-P
  • by Facetious ( 710885 ) on Wednesday October 24, 2007 @05:48PM (#21105735) Journal
    ... a stake in the face, I suppose.
  • to translate (Score:5, Insightful)

    by User 956 ( 568564 ) on Wednesday October 24, 2007 @05:49PM (#21105741) Homepage
    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.
    • by Savage-Rabbit ( 308260 ) on Wednesday October 24, 2007 @05:57PM (#21105859)

      ....because they're in the middle of a pissing match with Google.
      Are they competing for distance or accuracy?
    • Re: (Score:2, Insightful)

      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?
    • by ackthpt ( 218170 ) * on Wednesday October 24, 2007 @06:01PM (#21105909) Homepage Journal

      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... (Score:5, Insightful)

      by beakerMeep ( 716990 ) on Wednesday October 24, 2007 @06:11PM (#21106039)
      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.
    • by ArwynH ( 883499 )

      The fact that MS was willing to pay $240 million for 1.6% makes Facebook worth $15 billion, since a company (or anything for that matter) is worth what someone is willing to pay for it.

      The profit the company makes is just one of the factors that determines how much investors are willing to pay. Sometimes investors consider other factors more important. In this case MS decided that Facebook was worth $15 billion to them and since there is at least 1 investor willing to pay that much, that is what the compan

    • And what is wrong with that? Everyone wins!
  • Can I be the first?
    • by Fizzl ( 209397 )
      I'd love to have some kind of "Web 2.0" piece of shit right now...
      Actually I have, but they are in Finnish and no-one is interested about 5M potential customers.^W^Wadd viewers.
  • Simple API (Score:5, Interesting)

    by SIGALRM ( 784769 ) on Wednesday October 24, 2007 @05:50PM (#21105767) Journal
    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 (Score:5, Informative)

      by MLCT ( 1148749 ) on Wednesday October 24, 2007 @06:19PM (#21106121)

      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.
  • MyFaceYouBook (Score:4, Insightful)

    by Audent ( 35893 ) <[audent] [at] [ilovebiscuits.com]> on Wednesday October 24, 2007 @05:51PM (#21105783) Homepage
    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.
    • by 2ms ( 232331 )
      Where do you get that people are quiting MySpace for Facebook? Do you care to support the basis of your opinion with any kind of facts, figures?

      I think you are wrong -- I think they are both growing exponentially and that there's no significant greater shifting to Facebook from Myspace than there is of shifting from Facebook to Myspace.
    • Every one said the myspace buyout was *crazy* that there was no way they were worth 1 billion; shortly after the buyout, they signed an ad deal for exactly 1 billion.
    • Re: (Score:3, Interesting)

      MySpace and Facebook have always attracted different crowds. At this point many people have both, but there is one that is what they use all the time and one that is pretty much dead. But there isn't evidence that MySpace is dying, it's just that Facebook has taken the spotlight as being the next big thing. People aren't still talking about Google's search engine capabilities like its 1998 but Google as a search engine is doing just fine, and possibly even gaining users still. Google the company is also exc
  • by KeepQuiet ( 992584 ) on Wednesday October 24, 2007 @05:54PM (#21105817)
    "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.
    • Afaik Yahoo and Google or whatever had offered 60 billion if I remember correctly, atleast I think someone did.

      They didn't took it thought and from that article I got the impression they wanted to have it valued in the range of 100 billion instead.

      So the price Microsoft is paying is very low and very cheap. I wonder why they got it at all for that amount of money, guess they wanted some cash without giving away the whole company.
    • Re: (Score:2, Informative)

      by rhizome ( 115711 )
      WTF!?! Facebook is worth of 15 billion dollars? I thought paying more than a billion for Youtube was dumb.

      Read it again. The only number in the entire story that is not invented out of thin air is "$240million."
      • Not invented out of thin air. I read a reuters article too, it specified the percentage. One can reasonably extrapolate the "value" from this percentage, regardless of how ridiculously obscene an amount it may be.
    • Actually those are pesos.
  • by Dachannien ( 617929 ) on Wednesday October 24, 2007 @06:01PM (#21105915)
    ...the wooden vampire-impaling kind of stake? Because if so, I think Microsoft's got it all backwards.
  • by Anonymous Coward on Wednesday October 24, 2007 @06:05PM (#21105961)
    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?
  • by 2ms ( 232331 ) on Wednesday October 24, 2007 @06:09PM (#21106009)
    Based on the giant upgrade to IE7 suggestion that started popping up every time you log in, I'd thought this had already happened.
  • by IgnoramusMaximus ( 692000 ) on Wednesday October 24, 2007 @06:18PM (#21106113)

    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!!
    • Re: (Score:3, Interesting)

      Your problem is in step 1. 1999 called, they want their business model back. You see, Facebook is worth 15 billion because investors acknowledge that it is. Money _isn't_ real anymore. Everything is based on faith and trust in the handlers of the money, whether it be the bank, the government or the company. There is no backing of silver or gold to money any more, only trust, and Microsoft, a big player, trusts that Facebook is worth 15 billion and that's all that matters. A pointless company that can't back
      • Facebook is worth 15 billion because investors acknowledge that it is. Money _isn't_ real anymore.

        That was the whole point of my silly proposal, but it seems it is making some people rather uncomfortable. Too close to the mark I guess!

        A pointless company that can't back up it's existance is not worth 15 billion to Microsoft. So yeah, your idea might work until the second web bubble bursts and the tons of sites following your plan already will experience the pitfall of ebusiness when there is actually no b

        • Facebook is pointless like email, Google, Amazon and Ebay are pointless, as in it has no point unless people use it. People use it, therefore it has a point. But I see where you are coming from, I just disagree with the ends you see.
          • Here's the way the (investing) world works.

            1) "fat cat" institutions buy early and sell to suckers before the bubble bursts, raking in huge rewards and using the proceeds to finance more pump-and-dump schemes that the SEC turns a blind eye to because they're in bed with them.
            2) For the millionth time, the investing culture becomes goggly-eyed and turns the markets into one big glorified casino.
            3) Ordinary "investors" (overconfident naive people with too much money on their hands) get their money deservedly
  • by IgLou ( 732042 ) on Wednesday October 24, 2007 @06:19PM (#21106119)
    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.
    • Re: (Score:3, Insightful)

      by 0xdeadbeef ( 28836 )
      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
      • by IgLou ( 732042 )
        Good point about LinkedIn it skipped my mind. Funny that, because I almost don't think of it as a social network. I guess that really shows how different it is amongst the others and given it's business slant that's where Google needs to be! I have to admit, it's too scary how well the Ads that come in to me on linkedin match up against my job function.
  • by sqrt(2) ( 786011 ) on Wednesday October 24, 2007 @06:25PM (#21106175) Journal
    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.
    • Re: (Score:3, Insightful)

      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 t
  • *Sniff* ... *Sob* (Score:3, Insightful)

    by Qbertino ( 265505 ) <moiraNO@SPAMmodparlor.com> on Wednesday October 24, 2007 @06:26PM (#21106195)
    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.
    • The trick here is being able to predict what the aimless, mind-numbingly stupid consumer will use for the next fifteen seconds, and selling it before the dipshits with the money figure out that it wasn't anything at all. Oh yes, and taking that payment in cash, and not in some soon-to-be worthless stocks, because as paper goes, they're really not that comfortable to wipe your ass with.
  • by mpapet ( 761907 ) on Wednesday October 24, 2007 @06:36PM (#21106283) Homepage
    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.
  • 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.
    • it seems pretty likely that Google could be the new "Facebook" if they really wanted to.

      Really? Google tried with Orkut. It really did. What did it get? Brazil.
  • control (Score:2, Redundant)

    by hey ( 83763 )
    Now they are share holder that have some control. That's what they are after.
  • 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 w

I THINK MAN INVENTED THE CAR by instinct. -- Jack Handley, The New Mexican, 1988.