I clicked on Search Engine Land in my feed reader today and nearly crapped in my best pair of GAP jeans. Barry Schwartz posted a piece about Facebook. The title is “Microsoft May Buy $10 Billion Stake In Facebook” and the content is:
Microsoft Is in Talks To Buy Facebook Stake from the Wall Street Journal reports that Microsoft is in talks with Facebook to place a $10 billion stake in the company, giving Microsoft a 5% stake in Facebook.
Everybody I sent that too read it the same way I did: MS is dropping $10B into Facebook. That’s actually not the case. If you read the WSJ piece you’ll find that MS is looking to drop somewhere in the neighborhood of $400M for a 5% stake. The math on that gets you to $10B. C’mon Barry – linkbait is linkbait and I’m totally on board with it but I think you’re completely misleading this time.
My favorite line in the article is:
The company expects this year to have a profit of $30 million on revenue of $150 million, according to people familiar with the matter. Based on that, a $10 billion valuation for the company is sky-high.
Sky-high? SKY-HIGH!! I hereby award the understatement of the year to the WSJ.
I still don’t understand how turning me into a zombie, throwing sheep at me, giving me virtual drinks and allowing me to know when you’re at work, at home, on the bus or picking your nose is worth a potential $10B but maybe I’m just stuck in my ways at the tender age of 34.
Barry Schwartz
September 24th, 2007 at 2:15 pmMisleading, but technically, it works.
Jon Kelly
September 24th, 2007 at 2:29 pmCount me as another 34 year old who thinks this is nuts. Facebook talk about being a “platform” all it wants, but the fact is that their users are there mostly to waste time. Low purchase intent = low CPMs. Consider that Yahoo has a bucketload of (valuable) search users plus Yahoo Finance and other valueable inventory and is only worth $34Bn.
Vanessa Fox
September 24th, 2007 at 3:08 pmDude, having the opportunity to throw sheep at you is priceless.
Dave Davis
September 24th, 2007 at 3:20 pmYou actually just stated the value yourself. The laser targeted demographics.
If I want to only advertise to 18-20 year old bi-curious college students who pick their nose on the bus and have a family in New York but live in Boston, I can with facebook. I have the ULTIMATE demographic targeting engine.
Not even Google can do that.
shandyking
September 24th, 2007 at 4:01 pmWhy does it have to be sheep?
Matt Cutts
September 24th, 2007 at 8:23 pmHey, where do I sign up to throw sheep at you?
Good to see you posting again.
Brian Mark
September 25th, 2007 at 11:21 amThrowing sheep or not, $10B for something turning $150M in revenue is insane. Isn’t valuation typically at 3 – 7x annual revenue, and 1.5x in some industries? Where can someone say a company is worth 66x their annual revenue with a straight face and not be dubbed totally insane? This Math 2.0 stuff has me confused as well.