Did Microsoft Over-pay For Facebook?

TIME commented: "The dotcom bubble just got bigger than ever."

Oct. 28, 2007 05:00 AM

When Microsoft parted with $240M for a 1.6% stake in a company with $140M in revenues and $30M in profits, was it over-paying? Conspiracy theorists were quick to say that the move was deliberate, to inflate the overall value of Facebook to $15BN and thereby prevent anyone else from buying it outright. TIME commented: "The dotcom bubble just got bigger than ever."

Typical of the reaction to the news last week that Microsoft was taking an equity stake in Facebook were the comments that quickly began appearing on Slashdot:

"they put Facebook's value at $15 billion to discourage others from investing in Facebook and make Facebook beholden to them.' (gbulmash)

"Absolutely correct. Not only will others potentially stay away, but it poisons Facebook themselves and creates a strong risk of complete implosion, which MS can use for leverage. Once a line is drawn in the sand, it engages the ego and creates strong psychological need to hold it, and if it starts slipping, it could exacerbate a dramatic downward spiral." (anonymous)

Darren Ginter saw a more purposive explanation. "Microsoft needs to get Silverlight out there. $240 million to Facebook is the cheapest method of getting hundreds of millions to install and use it, willingly," he opined.

Facebook is almost certain to try an IPO, which makes the Microsoft move all the more interesting. It immediately made the value of co-founder Mark Zuckerberg's stake worth $3BN, for example.

Certainly Facebook seems to be sucking users away from MySpace. But as one Slashdot commenter warned, "This feels like 1999 all over again."

Published Oct. 28, 2007— Reads 24,144 — Feedback 4
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About Jeremy Geelan
Jeremy Geelan is Sr. Vice-President of SYS-CON Media & Events. He is Conference Chair of the all-new International Cloud Computing Expo series, of the International Virtualization Expo series, of AJAXWorld RIA Conference & Expo series, and of the long-running SOAWorld Conference & Expo series. He's founder of Cloud Computing Journal, Web 2.0 Journal, AJAX & RIA Journal and other leading SYS-CON titles. From 2000-6, as first editorial director and then group publisher of SYS-CON Media, he was responsible for the development of all new titles and i-Technology portals for the firm, and regularly represents SYS-CON at conferences and trade shows, speaking to technology audiences both in North America and overseas. He is executive producer and presenter of "Power Panels with Jeremy Geelan" on SYS-CON.TV.