In the picture: Mark Zuckerberg, the 23-year-old who founded Facebook
Lately I’ve noticed my friends’ migration from Friendster to Facebook. All I know is that everyone seems to be having lots of fun with the literally limitless features you can install in your facebook. Plus there are more virtual actions to it: throw someone a sheep, send someone a scotch, karate-chop someone. Sounds all too familiar?
But, do you know that Microsoft has decided to buy 1.6% of shares from Facebook at the price of $240 million? That means the 3-year-old firm Facebook is valued at $15 billion. (Geez! That’s a lot of money!).
It seems like Microsoft is really willing to pay high price to compete with Google. Microsoft has clearly realised that the future of online advertising could not be overlooked. (Read: software-licence fees alone are not enough). It’s even built its own online-advertising network (called “adCenter”) to compete with google’s.
In terms of acquisitions and alliance, so far we had seen that Google got the aces: a stake in AOL of Time Warner; winning the deal to supply advertisements on MySpace (the world’s largest social network); YOUTUBE acquisition; and recently the acquisition of DoubleClick (an online-advertising firm). Rumours said that Microsoft was desperate as number of potential partners was getting smaller, hence it was willing to be generous in price and terms with Facebook. In May this year, Microsoft also bought aQuantive, an online-advertising agency for $6 billion! And that was its biggest acquisition ever!
As part of the deal: Microsoft will now become Facebook’s sole broker for international advertisements (other than the American banner advertisements). Well, Microsoft seems to be on the way to becoming Google’s proper rival!
One thing I’ve never really got a hold of: the valuation of internet company. How does one value an internet-based firm like FACEBOOK properly? How do we come up with a bottomline of $15 billion? Anyone can help explain?
I read: The Economist Oct 27th - Nov 2nd, Business, p.76
2 Comments
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interesting world of tech companies’ core business shifts we live in right now…microsoft is prodding the online ads business whom google is most proficient at, and google is prodding the OS business by launching gOS whom microsoft is most proficient at. what’s next?
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“Well, Microsoft seems to be on the way to becoming Google’s proper rival!”
The way I see it, Google is becoming a proper Microsoft rival.. but never mind.. (I’m all for Google by the way
“How does one value an internet-based firm like FACEBOOK properly? How do we come up with a bottomline of $15 billion?”
I believe Microsoft once offerred a huge chunk of money to takeover Friendster but they refuse to sell the business. I’d have cried my eyes dry if I were the founder of Friendster 
One of my client, a FTSE 250 company recently paid £0.5bn to acquire one of the world’s leading provider of online data, analytic and forecasting platforms for key vertical sectors. Like you, I can’t fully understand their justification for paying half a billion quid for a company that worth much less than that. I guess at the end of the days, the value of a company depends on how desperate the seller is for money and the buyers are to get a piece of the firm. Just like BBC’s Dragon’s Den