If you have been keyed in to the online space and the global acquisitions and investments that are taking place in the online space you would have surely heard of the exhorbitant valuation of Facebook by Microsoft!
Microsoft Values Facebook at 15 billion $!!
Yes Microsoft has acquired 1.6% of Facebook for 240Million $!!! Even though facebook doesn’t even have revenues of more than 200 Million! Business sense would say this sounds insane! but then even Youtube which was a 19 month old startup was valued at 1.65 billion by google when it acquired it. But in this case the valuation has just hit the roof with respect to facebook which was launched 31/2 years back as a college students allowed only network. But since it opened access to all and more importantly opened its API its started to be recognized more as a platform than a application.
Facebook as per Alexa
Facebook as per alexa.com is the number 1 site in canada and No 5th in USA. Even in India it ranks number 16th which is higher 13 places since we last tracked it. Overall in the world facebook is ranked at no 7th most popular site.
Not only Users but Marketers smitten too..
Its not only the users that seem to be thronging to facebook its also the marketers as thousands of branded applications have already been developed for facebook and we had listed down 10 reasons why marketers should look at developing a facebook application.
Now all this is great but does this still justify a 15 Billion valuation for a 31/2 year old startup run by a 23 year old??
Hereare 5 reasons why WATBlog feels Microsoft paid such a huge sum!
1) Already an Ad partner - Microsoft current powers the ad selling on facebook and by taking this stake it has confirmed that facebook will not look at changing that ad selling partners! So its confirmed revenue to microsoft through ads.
2) Lost out many good deals – Microsoft has been laging behind google when it comes to identifying acquisition opportunities online (after hotmail nothing else that microsoft has invested in or acquired has really made news! Google has come out trumps when it comes to acquiring or investing in smart startups so be it Blogger, Writely, Youtube, Feedburner, Jotspot, Doubleclick or the recently acquired Jaiku! Google has been leaps and bounds ahead of Microsoft!
3) Not no.1 in Ad networks - Microsoft has obviously been far behind in the online advertising battle as well. Google with its adsense and adwords network has literally garnered the entire self publishing ecosystem of blogs to use its adnetwork along with most of the major publishers as well. And as compared to adwords and adsense Microsoft Ad centre is like a poor me too product.
4) Not no 1 in Search – Microsoft has also lost the battle in search and even though its live.com is a great product it hasn’t impacted the market share of google in a big way!
5) No youth connect – Though microsoft owns MSN Spaces Live it still didn’t have even one online product which it could be associated with which has a fanatical sort of following among the youth in US and globally!
So all in all this valuation and buy of stake by Microsoft could be termed as a “Desperate Attempt” by a fading Giant in trying to secure a strong position in the online space.
Read this: http://reddevnews.com/news/article.aspx?editorialsid=9183 More than the above said reasons, the way i see the deal is more to be a long term strategic partner deal. Lets take the case of the 3 biggest SNS on the net. Myspace [with murdoch group], Bebo [ad. deal is with Yahoo!], facebook [ad deal with MS].
The game plan if you look from Yahoo! is that they acquired Zimbra, they are re-organising their portfolio. They moved Yahoo! photos to Flickr. In the social media scene, they already have the larger eyeballs in del.icio.us, mybloglog, flickr and other small deals they had. They are strong in Mobile space.
Google the monster gets his 98% of its revenue from its ever expanding online advertising, with smart startups to buy in to keep more audience to clue in. From Blogger, Orkut, Jotspot, Writely and the recent Jaiku, everything revolves around users and these users are captive users locked to a single big owner.
That leaves a larger question of MS. MS is very strong in the enterprise segment and SME segment. But on the consumeer front segment they are prettly lame. Except for the hotmail acquisition, nothing in last decade is impressive from MS. This deal gives them users with a big thumbs up. Users at the end of the day with smart & innovative online advertising will justify the increasing cost per click for advertisers. Today’s MS lacks users, with this deal, along with a long term Ad deal with Facebook, they can save some face. But the big value is not with Facebook, but with their buy out of Aquanitive. If they can smartly build on aQuantive’s distribution and client consolidation, then you will see a good come back for them.
This doesn’t leave the table for Google wholeheartedly, the slight improvement in Yahoo!’s earnings are results of their implementation of panama, and Jerry Yang does his job decently well to do th reorganisation. Now the big question is how MS & Yahoo are going to respond to the “presence services” like Twitter, Pownce and like.
With the Murdoch empire getting larger & larger online [they acquired Dow Jones & Wall street in turn] the residual value Murdoch’s investments will be higher than these guys. For me atleast, i still rate WSJ and Dow Jones at far higher plane than other publications. So, if they start promoting, MySpace, combined with their MTv audience, then the world once for all will be changed.
As for as a watcher of the online advertising space both as passion & profession, its time, that the online advertising [all search / cpc / display / behavioral ] is getting a big thumbsup from advertisers and brands worldwide, and MS buy paying a decent price snatched a first mover advantage in a SNS site flocked by youngsters and people who can afford to buy things online.
Interesting! IN depth understanding i say! Keep it up!
are u sure 1,6% or 16% for 240M$?