Facebook investment puts spotlight on Microsoft stake
One of the things clearly worth noting about Tuesday's announcement about a $200 million investment in Facebook is the fact that it values the company at $10 billion, down a third in the 18 months since Microsoft poured $240 million into the company.
However, the fact that Facebook isn't worth $15 billion, while confirmed on Tuesday, has been pretty well understood for some time. Ever since Microsoft took its stake, there have been questions about what the social network was "really" worth.
The $200 million investment announced Tuesday came from European company Digital Sky Technologies, which now has about a 2 percent stake in the social network.
Although Microsoft may have to take a write-off at some point, the deal was never about the return on that initial investment. Rather, Microsoft saw the deal as the price of admission to get an advertising deal with the social network. At the time, Microsoft had lost several recent deals to Google, including one with MySpace that has also been criticized since for being too generous to the social network.
To land the Facebook deal, Microsoft had to win a bidding war with Google.
Facebook CEO Mark Zuckerberg also noted on the conference call on Tuesday that Microsoft's investment "was part of a broader relationship."
"We feel good about the progress we've made," he said.
CNET News' Rafe Needleman contributed to this report.
During her years at CNET News, Ina Fried has changed beats several times, changed genders once, and covered both of the Pirates of Silicon Valley. These days, most of her attention is focused on Microsoft. E-mail Ina. 
The whole thing is a mess anyway.
The ad revenue potential is huge. It is easier to sign up for advertising than Google for example.
Herd mentality.
That said, I don't have a FB account, never have and don't have any intention to. I haven't felt the need to do LiveJournal (dramaville), FaceBook, Myspace, or any of the social hangouts. Perhaps it's because like most geeks, we tend to be antisocial and go to our own little areas online to play around. I remember being on Second Life until it started getting media attention and became popular. At that point it was no longer fun and I moved on to another new site or technology instead.
You're right, I'd much rather go to the social networking website that has nobody there. The reason facebook is so successful, is because it has been very successful. That's how social networks become so large. You follow the herd because you want to be with the herd, not because of some ignorance inspired compulsion to do so.
But the best description I've heard for FB is "time vampire".
And yes, people go there because they haven't got the brains to know better. Being locked up in mommy's basement chatting online with people isn't being social, no matter what feel good label you want to delude yourself with. Try a bar, a dance club, a concert, a sporting event, a friends house, a park, a beach. Try getting a life.
This message was brought to you by a friendly, if slightly anti-social, gamer. ;-)
- by kwhsy82 May 26, 2009 1:10 PM PDT
- Fact 1: Many people (whether you personally like Facebook or no) like it. Just a few users out there, and increasing numbers, right? Sort of hard to debate that. Call them fools if you like, but could you not confuse your personal opinion about a product about whether it is very popular?
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- by Dalkorian May 27, 2009 9:50 AM PDT
- Wow, this is to easy.
- Like this
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(12 Comments)Fact 2: It's hard for them to make money. If it were easy, they would not be taking these huge investments, right? It dilutes the current owners and also, the valuation is down from the MSFT investment. Also, if they wanted "lots" of money, they would go public ( a la OpenTable). But Wall Street would want to see profits or a trend toward profits.
Fact 3: Bandwidth costs are hurting them. There was a good article in the New York Times detailing how folks like Facebook and Youtube have a problem: tons of people accessing highband content in countries where there is little or no advertising (e.g. Indonesia). Even Google said that someday it might conceivably turn off high-quality video to certain countries for economic reasons and one video site already had. Bandwidth and servers are not free.
Opinion 1: My daughters love it. Too much. But they never click on ads and even if they did, they don't buy.
Opinion 2: Gmail does a far better job of delivering relevant adds that Facebook. Maybe it's because more "work" flows through Gmail, maybe it's because Google has huge "supplies" of advertisers with every possible interest, etc.. But as a sometimes facebook user, the ads are rarely relevant to me.
Fact 1. Many people like fads, for a time. Let's talk about the popularity of this particular time vampire in a year or two. Until then, it's just the result of herd mentality. Moo.
Fact 2. It's hard for them to make money. They have no business plan (how could they??), so they can't go public because Wall Street would want to see profits or a trend toward profits and it's hard for them to make money.
Fact 3. Bandwidth costs are hurting them because they keep adding "features" to the site. It's called "digging your own grave" and harkens back to fact 2 - they have no business plan.
Fact 4. Your daughters are infected with a virus by now. No, not an STD, a computer virus. You don't have to buy anything to get infected, sometimes you don't even have to click anything. Look up "drive by downloads".
Fact 5. Gmail delivers more relevant ads than FB because Gmail is powered by Google. Who did we learn powers FB searches again? Hint: their web search site is sorely lacking as well, so much so they're willing to bribe you to use it so they can claim someone uses it!