Posted September 28, 2007 3:23 pm by with 18 comments

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Monday, it looked like Microsoft was interested in buying 5% of Facebook for a sum of $300-500 million. The following day, the plot thickened as Facebook CEO Mark Zuckerberg visited Seattle—and Microsoft—according to

Senior editor David Kirkpatrick hits on the reasons why Facebook is so attractive to investors:

Facebook is the closest thing the world has to a next-generation Internet, one structured not around Web sites but around people. In the Facebook topology, every data source or service is defined by who else is using it.

The company has, in a crude way, solved the critical problem of Internet identity. Each member’s profile is tantamount to their personal Web site, which defines who you are, who you know, what you are interested in, and what you are doing now.

Kirkpatrick hedges his bets as he concludes:

I doubt if Zuckerberg sees it as essential for his company to align with Microsoft or any strategic investor. But he is enough of a pragmatist to realize that Facebook would be immeasurably strengthened by the kinds of sums now being bandied about. He won’t refuse them.

However, Kirkpatrick also notes that the $10-15 billion valuation of Facebook is likely overinflated, stating, “There’s no way the company is worth that kind of money today, despite the 43 million active users it claims.”

While it seems to be the general consensus that $15 billion is too high, it really looks as though Facebook could be getting quite a bit more from Microsoft than the $150 million revenue it’ll turn this year.

  • Facebook is said to ‘only’ make $30m in profit (Out of $150m revenue), so I do not understand why people are valuating that it is worth $15b. With the rapid growth of the site, the $30m will easily be passed year after year, but with the rapid change of the internet, who knows if Facebook will even be around in 30-40 years.

  • facebook wont be around in 30-40 years, internet is such a place where balances shift drastically. where are the top companies of 90ies?
    i agree with you, 15b is just too much, this company will never make lets say 50m in every year over the next five years, and with internet technologies emerging so fast facebook wont catchup with trends and will slow down as did or friendster.
    every age has its own Mark Zuckerbergs, Mark is Mark today but who knows who will become new Mark, thousands of students join Harward every year right?:)

  • As a social network portal, quite what MS hopes to achieve with this acquisition defies logic. This morning’s NYT further states that the deal seems to be going through further discussions. Mergers seem to be hitting the IT industries like the smoke stacks did some years ago only to be stripped later. In this case, where is what to be stripped?

  • Paul Drago

    Top companies of the 90s? Amazon, Yahoo, and Ebay all seem to be doing smashingly. (well maybe Yahoo needs some work but still) There is absolutely no way to tell how companies such as Facebook, Amazon, Google, Yahoo, or Ebay will evolve over the next 10 years– to say companies with the kind of capital that these giants are making will no longer be around would be like saying Toyota will no longer be around in 40 years. Sure the game may change– but these giants will find a way to swim when others skin.

  • The value is only going to go up at this rate. I can’t remember the last time I was so excited about a website. 🙂 Thing is, Facebook isn’t just a ‘site’ – it’s a powerful, dynamic, interactive tool *anyone* can utilize for myriad purposes… for me, it’s to demonstrate relationships are key, not time.

    I’ve tried other networking sites, but FB is the mother lode. I don’t know anywhere else I can start to build real relationships–at the click of a button–with highly successful internet marketers, authors, speakers, copywriters, actors, and singers I’ve admired for years.

  • all that companies had strong business models and many revenue sources like subscriptions and sales and were not depending only on advertising which is what facebook is planning to do.

  • I think sites like facebook, myspace et al all have a lot going for them in the “hear and now”, but as long term investments I’m not sure. But having said that, if the investors can make a healthy ROI via site ads in some way, then that would help support the crazy figures being banded around.

    Bottom line is if MS want to invest $130M, who are Facebook to say “no thanks”?

  • I think Microsoft will end up paying more for it’s share in Facebook, but that it is overvalued.

  • Of course overpaying for a stake in Facebook might be worthwhile to Microsoft if it prevents another search engine form acquiring that same stake.

    Over the years the Yankees and Red Sox will acquire a player at the trading deadline not based on any need or added value to their team, but rather to prevent the other one from adding the value of that player.

  • I think Microsoft need this deal more than ever. Vista was a letdown, Google has acquired just about the ‘best’ out there on the net, well Microsoft they need something to turn it around

  • $15 billion valuation of Facebook is just absurd. No need to use some technical words or something, it’s just absurd.

  • I agree with Perde. It’s just absurd to buy a website for that kind of money. You might as well buy a small country… like Luxembourg!

  • What is the latest in the plot. After the announcement of the rushed visit, no further announcement from either party!

  • Jordan McCollum

    Hey now, let’s be kind. The GDP of Luxembourg was $34-40B last year; I’m sure they could get a bit more than Facebook on the open market! 😉

  • Consider Google, how much did they pay for youtube… now thier trying everything to get a return on that investment.
    Facebook will be faced with the same problem. It will have to produce to give MSN a return, and the question will be how and will it fall well with it’s type of users????

  • I would have loved it so much if facebook continued on their own.Let the facebook people grow and evolve facebook in their own way.We are tired of Microsoft 🙁

  • can OpenSocial influence or change the way Facebook interact with users.

  • I think Microsoft will end up paying more for it’s share in Facebook, but that it is overvalued