Facebook Day – $15 billion!

Post ImageTo my knowledge there is no "Facebook Day" but that seems like a fitting label for today. Until the company eventually goes public, today is probably the most important day in Facebook’s (incredibly short) history. Today Microsoft announced that it would pay $240 million for a 1.6 percent stake in Facebook, which means:

The investment values the three-year-old Facebook, which will bring in about $150 million in revenue this year, at $15 billion.

“We are now stepping outside what is typically a business decision,” said Rob Enderle, the founder of the strategy concern Enderle Group. “This was almost personal. I wouldn’t want to be the executive that’s on the losing side at either firm.”

Yes, Facebook is officially worth $15 billion. I wrote in February that Facebook missed the boat by not selling to Yahoo, but also pointed out they’d get another shot. Turns out I was wrong on the first part, and right on the second. All of a sudden Mark Zuckerberg looks like a genius for saying "no thanks" to Yahoo’s paltry offer of $1 billion.

Microsoft and Google were said to be fighting over the deal to the very end, with Microsoft having the slight advantage thanks to a previous ad deal with Facebook. This deal is all about positioning – Microsoft couldn’t afford to let Google cozy up to Facebook’s growing network of eyeballs.

There’s a ton of commentary on this story in the blogosphere, so I won’t rehash that here, but there is one thing that seems odd to me: the amount. No doubt $240 million is a lot of money, but I was expecting an announcement in the billions today. Something more in line with Google’s purchase of YouTube or Microsoft’s purchase of aQuantive.

On the other hand, a smaller piece of a big pie is better than no pie at all.

Read: NYTimes.com

  • http://www.google.com/search?q=Kyle Kyle

    "Yes, Facebook is officially worth $15 billion."

    Sort of. It’s what MS values them at. And "A 500x evaluation doesn’t exactly position [Microsoft] as financially shrewd."

    http://www.37signals.com/svn/posts/670-can-microsoft-buy-cool-from-facebook

    Value aside, it’s quite a big deal for both companies. I’m not sure what Facebook’s cash flow is like, but I’m sure a cool $240 million will enable them to do some cool things.

  • http://blog.mastermaq.ca Mack D. Male

    Thing is, if $240 million buys you 1.6 percent this round, the next round will be even more expensive. This isn’t just Microsoft’s valuation any more. Their investment has essentially set the price.

    That’s the bottom line, even if it is a crazy valuation.