Is Facebook worth 15billion?


On the October 24, 2007, Microsoft Corp Chief Executive Steve Ballmer confirmed his firm’s acquisition of a 1.6% stake in socializing Web site Facebook for $240 million – which would value Mark Zuckerberg’s creation $15billion.



Microsoft’s investment highlights the skyrocketing value of online communities – spaces where millions of people edit their personnal profile, connect with friends and family, share photos, videos, music and so more. In 2005, News Corp. paid $580 million for, the only social network larger than Facebook (200millions vs 50millions in november 2007,Facebook according to wikipedia). Last year Zuckerberg refused a $1 billion takeover offer from Yahoo Inc.


As Ballmer said himself:


The valuation of Facebook is still to be determined. Certainly today, it’s very, very popular. So for a company like ours that wants to be a pre-eminent presence in this space, it’s very important for us,” but “Will Facebook be worth $5 billion, $15 billion or $50 billion some years down the line is really up to their team and how they take it forward.”


By what is this value determined?


Audience: not only is it big, not only is it growing at an astronomical rate, but it’s also qualified.What really matters now is how long do people stay on a web page: and the time spent on Facebook (around 20min everyday) is a big asset. The other important thing is the detailed information people are giving out there. But audience is interesting only if monetized, which leads us to:


Marketing and Advertising services: for a better understanding of the system Facebook revealed in november, i recommend you just read this article which is very clear about something quite complex. I also learned a lot with David Kirkpatrick article explaining how “The social networking site promises to turn advertising on its head by blending e-commerce with word-of-mouth marketing”.The main idea is that of “Social Ads” that combine social actions from your friends — such as a purchase of a product or review of a restaurant — with an advertiser’s message.


Why is Microsoft interested?



Of course, Microsoft might be able to harvest some of the data to pick out ads more likely to pique someone’s interest and trigger a revenue-generating click on a link. But there is more than that:


Take part in web 2.0: a long term strategy to keep pace with whats going on. Ballmer wants to acquire 100start ups in 5years, and Microsoft needs an entrenched position in the online ad market.


War with Google: its also a symbolic move: by putting Facebook in its camp, it takes away the Google hegemon and take its veangance after losing previous battles involving a stake in AOL and ownership of YouTube and Internet ad service DoubleClick Inc.



Toward an integrated operating system? Analysts have said Microsoft paid a steep price on a bet that the three-year-old firm would be able to transform itself into a hub for all sorts of Web activity. Some say that a “natural extension of Microsoft’s business and a huge potential revenue generator for Facebook” would be “porting the Microsoft Office suite to Facebook applications”:


“The Office suite of products would certainly be a way to place Facebook squarely at the center of an increasing number of people’s everyday lives, which in turn would make the platform even more compelling to advertisers.

If Microsoft and Facebook played their cards right, this arrangement would clearly be a game changer. Microsoft could capitalize on the immense Facebook market, while monetizing this newly integrated software suite, and Facebook would increase user engagement”

To be continued…




One Response to “Is Facebook worth 15billion?”

  1. Google: sucess always make you the villain « E-culture, so what? Says:

    […] It’s getting so hegemonic that the New York Times once titled ” Relax, Bill Gates; It’s Google’s Turn as the Villain.” and that Microsoft does fear the new giant, as shown by the recent symbolic move toward Facebook (cf previous post). […]

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