450SEL6.9

I read about Microsoft talking about a 5% investment in Facebook for between $300-500 million. At the top end, it values Facebook at $10 billion! Are we in 1999, 2000 tech bubble again? It is a three-year-old social networking site with an estimated $100 million in revenue. At the price I read about, the multiple is 100x revenue! Google's P/S is closer to 10x.

Facebook's founder talks about his company being worth $10 billion, but has he founded a believer in Microsoft? Is Mr. Softy desperate or have they lost their marble paying that much? I think they'll actually go through with this deal.

Does anyone use Facebook? I have it blocked on my computers.

monster

Holly crap, there is no way Facebook is worth $10 billion. I signed up for it 2 weeks ago cause all my friends upload their photos in there, and I can't view it unless i sign up. There are just so much random stuff going on in there with mini programs and stuff like "rasing a pet", "poke a friend" "turn into a vampire"... etc useless confusing stuff. I don't like to use it at all. I guess there are a lot of people out there with not a lot of things to do, that is why it is so popular.

450SEL6.9

Monster, who actually uses the site? It generates huge traffic, but are the main users still teenagers and college kids who don't have that much money?

I think Microsoft is desperate enough to catch up with Google to value FB at $10 billion. If they do, I'm selling my Microsoft shares. If they are willing to value a networking site at $10b, then I think they'd lose my confidence as an investor. Besides, my investment has been dead money anyway.

Centurion

I use facebook. It's really one of the best communities out there. Very easy to find and stay in contact with friends from around the globe.

What is like about it is the simplicity. On the other hand I hate all those stupid small applications people are adding to their profiles. It clutters Facebook, and clutter is one of the main push factors of myspace which has users migrating to facebook every day.

The 10 billion figure is ridiculous and Facebook is over-valued like any fast raising internet company. Sure they make a little money by letting companies advertise in form of applications.

M$ are already big with hotmail, and google are enjoying their success with Gmail, blogspot and youtube. There's a horse race going on between the two companies but I have to admit that there's potential in Facebook. It's very hot and popular at the moment.

Microsoft has plenty of play money and a 5% investment in Facebook is reasonable. In case Facebook turns out to be an over hyped phenomenon ending up not becoming as big as analysts have anticipated, MS won't hurt by losing $500 million.

If it does blow up huge the 5% will come in handy when trying to prevent other companies like Google from buying a slice of the cake.

450SEL6.9

Most of the articles I read in the financial press already assume Facebook will be huge forever. To me, they all read like propaganda justifying Facebook's price. I think paying that much for a minority stake is just bad business. I'm not saying a 5% investment is not reasonable. I'm saying that $500 million for only 5% is not reasonable. Last year the price quoted for all of FB was $1.3 billion.

How much would Rupert Murdoch's myspace be worth today? He paid $500+ million for it in 2005. I think he called a $5b valuation for FB ridiculous. I think he is the savviest businessman around. He really has to reason to talk down social networking site valuations because the value of his asset rises if FB fetches $10b. Murdoch was in this business before it was cool and fashionable in 2005.

Do smart business executives have some brain defect when it comes to valuing internet companies? Everyone raves about the online ad market today, just as experts raved of TV advertising in the 1950s and how it would be huge for the networks and entertainment companies. You would have done better holding a boring old investment like tobacco stocks than buying entertainment and advertising stocks in the '50s.

monster

All these small applications are seriosuely cluttering Facebook, I opened up my account and I have a billion request to join this, sign that, accept this, invite that.. extremely annoying. I have no idea how Facebook is valuved at $10billion. $100m to $400m maybe but $10 billion is a joke. Those company are getting money from advertisements in form of applications, as well as getting your details and give it to some marketing companies and get paid even more.



Main users varies from a wide range of people, teenagers, college kids even to professional people.

450SEL6.9

The problem is there needs to be flow-through from these ads. The companies paying top dollar for these ads have to see a benefit. I think that is contingent on whether these FB users actually have money to spend. Some skeptics think they don't have much.

I just read that Microsoft accounted for $75 million of FB revenue, but I don't know if it is a reliable source. Why is the bloody hell would they pay up to 100x revenue for a company when they themselves contribute half of that revenue?

bmer

At first it was for Harvard students only. Then they expanded to Boston area universities, next to all Ivy League universities and soon all university students around the world were approved to join. Soon they also included large companies and high schools. Now it's open for everyone.

I joined last year just to see what the site was all about but never used it until this summer when my old friend found me there and soon other people who know me started joining. Now I use it every now and then.


Yahoo wanted to buy the site last year for $900m but Zuckerberg said he wants to keep it independent. Later he has put down a couple of bigger offers.

One thing is for sure: Google is not going to just sit back and watch Microsoft getting more intimate with Facebook. Let the bidding war begin:
- ONLY REGISTERED AND ACTIVATED USERS CAN SEE ALL LINKS - CLICK HERE TO REGISTER

450SEL6.9

Great link, bmer. Thanks.

So from the article, at a $5b FB valuation, myspace would be worth $12b. At $10b for FB, myspace is worth $24 billion. Myspace's parent company, News Corp, has a market value of $75 billion. According to these crazy valuations, their myspace unit (which cost $580m in 2005) could account for 33% of the world's largest media empire's market cap. Does that not seem absolutely absurd? But then again American mortgage lenders granting mortgages to people without checking their income is equally absurd.

If FB gets to a $10b valuation (and it probably will), we're looking at 2000 internet stock bubble all over again. With the mortgage mess in America, the last thing it needs is another bubble. The article says the bidders don't care about price. I don't know why I read that line so much today. They better start caring about price because the goal of business is to make a profit. You don't make profits when you overpay. I think the American economy is setting itself up for a mighty, mighty fall, but most economists are too blind or conflicted in their interests to see it.

cawimmer430

I'm on it. If anyone wants to add me, look for Christian Wimmer (Richmond, UK).