Microsoft Pays $240 Million for 1.6% of Facebook
October 25, 07 by kenrich
Yesterday, Microsoft paid $240 dollars for a 1.6% stake of the social networking site Facebook. Ever since the success of MySpace, social networking sites have been the new investment darlings. The estimated company value is derived from companies such as Google, whose value is largely based on the large audience of web surfers it draws.
Social networking has been growing at an exponential rate. Initially made popular by teens in high school and students in college, it has grown to encompass all demographics. It has also been helped by the popularity of blogging, and to a lesser extend, Wikipedia. Many schools have configured their Internet filters to block these social networking sites because their systems are intended for educational purposes and not socializing.
Given the price paid by Microsoft, the total estimated worth of Facebook would be around $15 billion dollars. Not bad for a company started by a 23 year-old only 3 years ago. The application that Facebook has built is simple and easy-to-learn. It makes it easy for anyone to create a profile and connect with their friends. Although instant messaging and e-mails also accomplish the same goals, there is something special about putting yourself out there for the whole world to see.
Part of the deal that Microsoft made with Facebook allows them to partner on advertising displayed on the site. Microsoft will manage the ads and split the profits 50/50 with Facebook. This is a pretty sweet deal for Facebook, since the Microsoft advertising machine can get some high paying clients and allow Facebook to focus on serving their community. Only time will tell if Facebook can stay on top - if the history between Yahoo and Google is any indication, being the first to market is not the most important criteria for success.
