Vijay Anand | The Startup Guy.

The Hoopla on Facebook’s valuation.

Posted on: October 27, 2007

The Bubble is back again. Facebook is grossly-overvalued. I am turning green with envy at the guys who are raking in money. This is not going to last. Facebook should go public.

I hear many such comments at the recent news that facebook is valued at USD 15 billion.

Hold your horses, will ya?

Microsoft has bought a less than 2% stake in the company at about USD 240 million. People are extrapolating it to the point that if 2% of it is worth 240 million, then 100% puts it at 15 billion. The calculation is all wrong.

A 2% stake in Facebook, for microsoft is worth 240 Million. and thats all there is to it. What does Microsoft get out of this entire deal? A foothold on trying out their advertising network on Social Network – and on one of the most popular.

Does it make sense for Microsoft to do this? I think its perfectly justified. Facebook makes around 140 Million USD on revenues – and most of this revenue would be through advertisement. If the Advertisement revenues that they make are around that much, imagine how much the guys behind the advertisement network would be making. Microsoft would rake in back whatever they have invested quite quickly.

Also, this is a way to keep google or their alliance Yahoo! from getting in there. Its most probably considered as a marketing cost that can be recovered in no time. In all this, there is the added reputation that is built, saying Microsoft is getting agressive in the web space.

So, Is Facebook worth 15 billion? Nope. Is that 2% worth 240million to Microsoft? Absolutely.

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3 Responses to "The Hoopla on Facebook’s valuation."

[…] Check it out! While looking through the blogosphere we stumbled on an interesting post today.Here’s a quick excerpt, will ya? Microsoft has bought a less than 2% stake in the company at about USD 240 million. People… billion. The calculation is all wrong. A 2% stake in Facebook, for microsoft is worth 240 Million. and thats all there is to it. What does Microsoft get out of this entire deal? A foothold on trying… sense for Microsoft to do this? I think its perfectly justified. Facebook makes around 140 Million… would be making. Microsoft would rake in back whatever they have invested quite quickly. Also […]

Exactly. MS hasn’t spent $240m on only buying a stake. They also get an exclusive advertising partnership beating out Google. Thats a huge win for MS. I think a substantial value of the $240m is for that.

hiiiiiiiiii guys i got so many news in I FIX..1 of the best service in chennai zone…..i wnt join the community………

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