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Microsoft invests £117m in Facebook

Microsoft invests £117m in Facebook

Facebook now has a massive valuation so refusing a $1 billion buyout from Yahoo last year was a great move by the company.

One month after we reported on Microsoft's possible investment, the company has finally sealed the deal and bought a stake in Facebook.

Microsoft will purchase 1.6 percent of the social networking site for £117 million, which brings the valuation up to £7.3 billion. That's a massive value for a site that is only expected to bring in £73 million in revenue this year. What's important though is that Microsoft managed to keep Facebook out of the hands of Google.

The new deal gives Microsoft the chance sell ads on the site throughout the world. Previously, Microsoft was only able to conduct the advertising business on Facebook in the United States.

Facebook now has the capability to hire new employees and expand the site beyond it's current reach. A new advertising system is already being developed and is set to be unveiled next month at an event in New York.

No matter how much you may hate social networking, there's no denying that it's a major player on the internet now. This deal just goes to show just how big of a role it will play in the future development of the web and software alike. Miniature web OS' could be deployed by Facebook in the near future as the site already features a plethora of web applications.

Rumours have been going on for ages now that Google is in the stages of launching a full fledged web OS, but nothing concrete has surfaced yet.

Do you still think social networking is a fad or are your thoughts starting to change? Let us know what you're thinking over in the forums.

29 Comments

Discuss in the forums Reply
Bauul 25th October 2007, 13:59 Quote
They have their place, and Facebook is a perfect example of website which got social networking down maturely and sensibly, unlike say MySpace, so I say long live it. I've always been very impressed by Facebook, I think it's rather none flashy presentation and simple interface appeals to a lot of people who are put off by the entire notion of social networking.

To be honest, I think there are two different ways people use such sites. Some people actually use them to network, to meet and interact with people. Most people though I think simply use it as a) an easy way to contact your friends, it's so more casual than email and b) download media from your friends, e.g. photos and music. There ability to simplify contacting your mates remotely is what fuels their success I believe.
Gunblade 25th October 2007, 14:00 Quote
It's a Microtrend bit-tech. Not a fad! A magical money making machine!

Well good on MS. Hopefully their investment does what they wanted. Jeesh, to think all the money over the years that MS has put into company's. Even Apple right?
Mankz 25th October 2007, 14:03 Quote
Please don't muck uf Facebook Microsoft! Please!

Facebook is far better than MSN spaces, MySpace and all that stuff becuase it works properly and you can actually have some privacy...
Gunblade 25th October 2007, 14:03 Quote
Quote:
Originally Posted by Bauul
They have their place, and Facebook is a perfect example of website which got social networking down maturely and sensibly, unlike say MySpace, so I say long live it. I've always been very impressed by Facebook, I think it's rather none flashy presentation and simple interface appeals to a lot of people who are put off by the entire notion of social networking.

To be honest, I think there are two different ways people use such sites. Some people actually use them to network, to meet and interact with people. Most people though I think simply use it as a) an easy way to contact your friends, it's so more casual than email and b) download media from your friends, e.g. photos and music. There ability to simplify contacting your mates remotely is what fuels their success I believe.

Mature? Are you kidding me! It can be as immature as myspace, and I see it all the time. Sure it's presented in a more eye-pleasing way....
Veles 25th October 2007, 14:04 Quote
Quote:
Originally Posted by Bauul
They have their place, and Facebook is a perfect example of website which got social networking down maturely and sensibly, unlike say MySpace, so I say long live it. I've always been very impressed by Facebook, I think it's rather none flashy presentation and simple interface appeals to a lot of people who are put off by the entire notion of social networking.

Yeah I haven't liked social networking sites at all before, but I think Facebook is actually decent. I'm hoping though that it stays less cluttered, the thing that makes it better than myspace is that you aren't greeted with people's crappy music and awful wallpaper every time you click on someone's name. Still, I rarely use it, but I think it's a hell of a lot better than myspace.
Jamie 25th October 2007, 14:11 Quote
That is an insane amount of money for such a small stake in the company. Obviously Microsoft can see a way of getting the return from that investment, I just don't see it myself.
Veles 25th October 2007, 14:22 Quote
Well MS don't seem that bothered about losing a bit of money, MSN, their gaming devision, both are making losses if I recall. It might just have been a move to make sure Google didn't get it.
Mister_Tad 25th October 2007, 14:40 Quote
I can't help but think social networking (and so many other "web 2.0" sites) are headed for a repeat of the 2001 crash.

I suppose MS putting in £117m is a bit like me investing a tenner though (mind you, not even a penny of mine is touching any of them). Valuing facebook at 7bn though, "bubble 2.0"?
will. 25th October 2007, 15:01 Quote
I think the best thing about facebook is it can, if you want it to be, very closed off from people you don't want looking at your profile. I only let friends view my photos and profile and I very rarely accept new friend requests.
Still, I hate the weird way people boast about their huge friend lists. Are those people all your friends then? If someone I don't like or don't even know asks to be my friend I'm damn well not going to let them view my profile. I even got asked once by someone who I knew in school that I bumped into on a night out why I hadn't accepted them as a friend. My reply of I'm not your friend, and I hope never to be (this wasn't a nice person) was given a funny look and then a quick shuffle of to the corner they came from.
Nova 25th October 2007, 15:46 Quote
im an american college student. Facebook is on the way down. To many college students facebook is simply a way to kill time and put off homework. to others its a way to catch up with a cute girl from the drunken encounter the night before. I think facebook is on the way down and out, and will be replaced by another up and coming networking site. hard to say what that will be though. facebook is a force to be reckoned with in the college crowd.
Firehed 25th October 2007, 16:12 Quote
Quote:
Originally Posted by Mister_Tad
I can't help but think social networking (and so many other "web 2.0" sites) are headed for a repeat of the 2001 crash.

I suppose MS putting in £117m is a bit like me investing a tenner though (mind you, not even a penny of mine is touching any of them). Valuing facebook at 7bn though, "bubble 2.0"?
Probably true... there's very little actual social value to things like Facebook. When I was at school, it was just a way to waste time, by and large. It was a bit interesting to see what people are up to, but I can find out just as easily by checking their AIM away messages. At this point, the only value to Facebook is having an online portable address book.
Pimp Daddy 25th October 2007, 16:16 Quote
Hold on - they've only bought 1.6% of Facebook - it doesn't really give Microsoft a stranglehold. Facebook could also accept further investment from Google at some point in the future (if it wanted).
MilkMan5 25th October 2007, 17:06 Quote
This deal goes beyond just a simple investment or a 1.6% share in Facebook.

Facebook has over 50 million users (worldwide) and growing, I read somewhere that Facebook on average, adds 200,000 new users a day.
This is a huge database, worth a lot more than just £117mil.
The bigger the user base, the more advertising they can attract.

It would be interesting to know what is the average “income/salary) of people registered to Facebook.
This should give you some idea of the wealth and potential extra revenue Microsoft could generate.

Facebook advertising can be very targeted, for examples, lets say you like cars, Facebook could possibility only have Car advertising when you log in.
They know this because Facebook knows what your hobbies are.

Facebook could have the potential of be its own “web”.

Google very much wanted a part of this pie, but MS beat them to it.
The fight between MS and Google is personal but mixed with business sense.

I personally don't think Facebook is worth US$ 15billion, although that is what MS claim Facebook is now worth.
Mister_Tad 25th October 2007, 17:46 Quote
Quote:
Originally Posted by MilkMan5

It would be interesting to know what is the average “income/salary) of people registered to Facebook.


Is there actually a field in one's profile to enter this? Or is that just a generic statement
(if the former, who the hell would fill it in!?!)
mclean007 25th October 2007, 21:30 Quote
Let's not get carried away. Microsoft's investment doesn't value Facebook at $15bn. Fact. MS paid what they did for two reasons:

(1) Lock-out. 1.6% may not be a large stake but there is a little thing called a shareholders' agreement (i.e. a contract between shareholders as to how they will act). MS will undoubtedly have negotiated an agreement that gives them veto over shares being sold to Google etc.
(2) Exclusivity. Facebook may only generate maybe $150m of revenues this year, and 1.6% of that isn't very much - certainly not a decent return on a $240m investment. MS doesn't care. Let's not forget that with every ad the revenue is split - Facebook gets some and the ad server gets some. What MS is really interested in is the 100% of its own cut of the ad revenues, and by spending $240m on Facebook stock you can bet MS just bought themselves exclusive access to serve up ads on Facebook.
mclean007 25th October 2007, 21:31 Quote
And, as a nice aside, it gets Facebook in the news far more than a simple behind-closed-doors ad deal would do. "Facebook Valued At $15bn" makes a nice headline for the sensationalist press.
Mankz 25th October 2007, 22:04 Quote
Quote:
Originally Posted by will.
I think the best thing about facebook is it can, if you want it to be, very closed off from people you don't want looking at your profile. I only let friends view my photos and profile and I very rarely accept new friend requests.
Still, I hate the weird way people boast about their huge friend lists. Are those people all your friends then? If someone I don't like or don't even know asks to be my friend I'm damn well not going to let them view my profile. I even got asked once by someone who I knew in school that I bumped into on a night out why I hadn't accepted them as a friend. My reply of I'm not your friend, and I hope never to be (this wasn't a nice person) was given a funny look and then a quick shuffle of to the corner they came from.

Amen. I have people that I call friends, and simply ignore all the other randomers...
yodasarmpit 25th October 2007, 22:22 Quote
As others have said this is simply a way of preventing Google getting in there first, much like BSkyB's 17% stake in ITV preventing Virgin buying out ITV.
mikeuk2004 25th October 2007, 22:23 Quote
Ms has too much money and not enough things to spend it on. THis will be like ever day joe spending his spare change on a Mars Bar.
Veles 25th October 2007, 23:33 Quote
Still, MS are a company, they didn't become so rich by throwing money around willy nilly. They may have made some bad investments, but they won't buy something "because they can", if it doesn't advantage the company in some way.
The_Beast 26th October 2007, 00:41 Quote
they only bought 16% of the company
Mister_Tad 26th October 2007, 00:59 Quote
Quote:
Originally Posted by The_Beast
they only bought 16% of the company

out by a bit there - 1.6%, hence the obscene valuation of $15bn
Neogumbercules 26th October 2007, 01:12 Quote
Am I the only one that doesn't give a crap about this whole social networking fad? I'm the only person my age that I know that doesn't have a myspace.
bloodcar 26th October 2007, 04:43 Quote
Quote:
Originally Posted by mclean007
And, as a nice aside, it gets Facebook in the news far more than a simple behind-closed-doors ad deal would do. "Facebook Valued At $15bn" makes a nice headline for the sensationalist press.

Um, Facebook does hold a $15bn valuation now dude.
Veles 26th October 2007, 10:54 Quote
Quote:
Originally Posted by bloodcar
Um, Facebook does hold a $15bn valuation now dude.

Based on the profits the site generates this is a huge over-valuation, even if it is really valued at this number. It's artificially inflated due to MS's high price of the 1.6% share because they weren't investing in the site purely for it's profit margins.
bloodcar 26th October 2007, 11:30 Quote
Well duuuuh. Microsoft one the deal with Facebook thanks to the massive valuation. That point was originally in the article, I guess it was snipped by the editing gods.
xrob 26th October 2007, 12:09 Quote
...
Pimp Daddy 26th October 2007, 15:07 Quote
I'll be interested in seeing the type of advertising that they do. If they used images/flash files then they will be blocked by adblocking plugins in browsers. It would be better for them if they went for more subtle, text-based ads.
mclean007 26th October 2007, 16:10 Quote
Quote:
Originally Posted by bloodcar
Quote:
Originally Posted by mclean007
And, as a nice aside, it gets Facebook in the news far more than a simple behind-closed-doors ad deal would do. "Facebook Valued At $15bn" makes a nice headline for the sensationalist press.

Um, Facebook does hold a $15bn valuation now dude.
Thanks for that educated and sarcastic comment. I happen to have a grasp of basic arithmetic and am more than able to calculate that $240m/0.016 = $15bn. However, it's a gross oversimplification to extrapolate from that that Facebook is actually WORTH $15bn. Even in fantasy dot-com land you don't get a $15bn valuation off the back of $150m of earnings. Period. If Facebook floated on a stockmarket tomorrow, it wouldn't raise $15bn (well, it wouldn't raise anything because tomorrow's Saturday and the markets are closed, but you get the point). The value of Microsoft's investment lies not in the fundamental value of the shares but in the rights Microsoft has presumably gained as regards exclusivity to serve Facebook's banner ads.
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