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.
Misleading, but technically, it works.
Count 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.
Dude, having the opportunity to throw sheep at you is priceless.
You 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.
Why does it have to be sheep?
Hey, where do I sign up to throw sheep at you?
Good to see you posting again.
Throwing 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.