With all the recent coverage about the Microsoft investment of $240 Million in Facebook. I have a few quick questions for everyone. What do you think Microsoft if buying with this investment? Just equity? If that were the case, then I think you could argue that at least a few companies (people) value Facebook at ~$15 Billion.
- Is there a larger advertising deal at work here?
- What is the amount of money that MSFT expects to recoup from this relationship?
- What is the value to MSFT to keep Google from securing a relationship with Facebook?
- Is $$ such a non-issue for MSFT that they can invest $240 Million without batting an eye?
YES, YES, NO.
Since MSFT is engaging in a larger advertising deal with Facebook. Why does everyone assume that the money is solely for equity? I don’t have any hard numbers (obviously, since I am such a huge Valley Insider, sic), but MSFT expects to get some type of return from the advertising deal. This on it’s own shows that the 1.6% was just a portion of the deal.
As for Google… It is my assumption that MSFT would do a lot to keep Google from developing a deeper relationship with Facebook. The Facebook platform is getting lots of attention, but I would say that at this point it is still unproven as a business model. One with a lot of potential certainly, but it is not quite there.
MSFT is betting on this relationship returning significant gains both in terms of a strategic relationship as well as in helping to extend its advertising network. MSFT is in third place behind Google and Yahoo and is essentially buying access to gain traction. It would be interesting to see the ROI calculations for MSFT in regards to the advertising component to determine the dollar value in proportion to the larger deal.
$18.88 Billion on hand… Microsoft has enough money to buy most publicly trade companies outright. The money they invested in Facebook represents a little over 1.2% of the money they have in cash. Obviously a minor detail, but still significant. I might be wrong here, but something with this many zeros HAS GOT TO MEAN SOMETHING.
My point is not that Facebook isn’t worth $15 Billion, my point is that the public data that is available doesn’t necessarily mean that they are worth that much.
About nathan kaiser
I had initially posted my opinion that MSFT negotiated the farcebook move with three takeaways:
1. MSN LiveSearch as default search within farcebook. Over 600MM searches/month is compelling.
2. Exclusivity on ad representation/sales for certain ad types. Probably not ALL ads, but enough clearly. They already had this deal, but probably added to it.
3. Access to social graph data for MSFT’s competitor to AdSense.
I didn’t think it was a defensive move to keep Google out, but I was wrong. I recently talked to a recently departed MSFT guy that (to the above opinions) said “don’t give Microsoft that much credit. It was because they couldn’t let Google take the deal.”
Ughh. This post and several more about “farcebook” at http://kickstand.typepad.com/metamuse/farcebook/index.html