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Posted by Rod in Microsoft at 12:30 pm on Thursday, 25 October 2007
Looks like it’s happening.
Microsoft acquires equity stake in Facebook
$240m at 15bn. Yikes!
blog
Does it really value Facebook at 15bn or does it value Microsoft’s potential ad revenues? Could it be argued that MS simply paid the 140m to keep the advertising deal?
I’m no expert in these areas but would be interested in getting feedback on whether this could be the case.
Microsoft paid $240m for x% of the company, which values the overall 100% at $15bn, correct? Isn’t this a way for Microsoft to lock anyone else out of investing in Facebook? i.e. 240m is peanuts to Microsoft, but nobody in their right mind would pay $15bn for the entire Facebook.
Just trying to understand the logic behind these sorts of deals.
Its interesting, I’ve had the opportunity to spend some time with someone who’s marketing director for a facebook application advertising network, and after getting a peak at the aggregate information they pull out of facebook, you see you’re talking about some pretty serious market research/intelligence, and the money is flowing very fast around this alone right now.
I don’t really understand to much depth the full scope of the advertising model around this, but after seeing the price people are paying for just getting installs of facebook apps like foodfight… you start to see that there are many many layers.
Most people expect advertising to be direct, and if they can’t see ads then they assume there’s no big commercial interest or involvement yet. This is ‘trusted’ network in that many people just publicise all their stuff up on facebook and either don’t believe or don’t care that theres a massive industry running around behind it using this information, but for better or worse, thats whats happening… and its very early days…
I personally can’t make the valuation model work, because I’m still largely a simple earnings multiple cat, but I do know that buying intelligence and insight into peoples lifestyle and behaviors is right at the root of big business, so when you’ve got a signal that this network is the one thats going to keep touching more and more people, its a live intelligence database like never seen before.
What they do with this, well with that sort of valuation, I’m going to struggle to see how its going to be in anyones major interest other than big business, so not too exciting for me, more just the way things still seem to go. Is the idea of a social network thats actually just about people socialising so hard to imagine? I’d rather just pay 5 bucks and know that someone didn’t have to sell my information to give me something for free.
I wondered if this $240m investment from Microsoft, so that they (Microsoft) could help out with the development of Facebook’s intelligence advertising that Tim Norton is talking about. I don’t know what sort of intelligence technologies that Facebook is implementing, since there isn’t much research publications about it ( I have only come across one publication from Stanford regarding their development of an image auto-tagging system for Facebook which is not functional yet, since the error rate is quite high, ie, high image misclassification error) but I am sure that with Microsoft’s vast expertise in this area (computational intelligence / machine learning) they could help to take Facebook’s intelligence advertising to the next level so as to be in the same par as Google’s intelligence ad technology (currently in use in their (Google) blog software).
It seems like the deal is much more about the advertising rights than anything else. This paragraph below is a direct quote from one of the news.com reports.