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[qi:010] How much is a 5 percent stake in Facebook worth? $300 million? $500 million? $750 million? It all depends on how desperate the buyer is and how well Mark Zuckerberg can play a game of corporate poker. Rational thinking long ago flew out the window […]

[qi:010] How much is a 5 percent stake in Facebook worth? $300 million? $500 million? $750 million? It all depends on how desperate the buyer is and how well Mark Zuckerberg can play a game of corporate poker. Rational thinking long ago flew out the window when it comes to anything Facebook.

The Wall Street Journal, citing unnamed sources, is reporting that Facebook and Microsoft (MSFT) are in early talks about an investment that could value Facebook at upwards of $10 billion. Although the valuation is huge, the talks themselves shouldn’t come as a surprise, for Microsoft executives have long been enamored of the fast-growing social network based in Palo Alto, Calif.

If the Z-meister takes the cash, then in a sense he is getting an put call option from Microsoft, which prevents Facebook from embracing anyone else. Like Google (GOOG). It also ensures that Microsoft’s advertising business doesn’t go elsewhere…ever! The Journal says that fresh cash is needed to buy others and pay for infrastructure investments.

Of course, when you have little a monetization issue, like Facebook has (and refuses to talk about), it is time to get OPM: other people’s money!

  1. $10 billion? Jesus…well at least that figure is keeping it out of Google’s clutches…

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  2. Lets not put our heads too much into it before it is reliably learned from named source.
    I call unnamed sources as rumours..

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  3. This might be a good moment for people to consider what that inventory is really worth. Unless MSFT has some novel way to get the CPMs to something reasonble, that’s an awful lot to pay for an insurance policy against further Google dominance.

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  4. Microsoft already has an invesment in a social networking website. Does anybody remember Wallop? I guess if the one you invest in doesn’t do well, you can buy your way into one that is successful. That’s the great thing about free cash flow.

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  5. Bryan

    I am told Wallop is getting big in China, though doesn’t have much traction locally. Anyway i think this is going to be an interesting quarter and would love to watch Google’ response.

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  6. Could you explain what you mean by:

    “If the Z-meister takes the cash, then in a sense he is getting a put option from Microsoft, which prevents Facebook from embracing anyone else”

    How is Facebook getting a put option from Microsoft, and how does it prevent them from embracing anyone else?

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  7. [...] favorite write up of the day is over at GigaOm where Om says: How much is a 5 percent stake in Facebook worth? $300 million? $500 million? $750 [...]

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  8. Microsoft, Google, and Yahoo! are fighting for it all these days. Microsoft and Yahoo! will do anything they think will allow them to catch up with Google. A WSJ article this morning even said that Microsoft is using its backroom connections to get ad firms, Time Warner, and AT&T to not support the Google-Doubleclick deal. I found the maps on NewsVisual http://www.newsvisual.com/newsvisual/2007/09/microsoft-ties-.html that show the connections Microsoft may have used to pressure Time Warner and AT&T.

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  9. They must have listened to your comments in our little conversation…

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  10. I don’t think Facebook needs corporate investors at this stage. Why wouldn’t Microsoft buy up the entire company? Seems like a very small bet.

    Paul Lopez

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  11. [...] to post on the Microsoft Facebook deal seeing how all the usual credibles had it covered such as Om, Valleywag and VentureBeat. Even so, I couldn’t resist the juicy WSJ story and had to add my two [...]

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  12. [...] and VentureBeat. Even so, I couldn’t r… microsoft facebook deal | Startup Addict Musings on Microsoft Wants A Piece Of Facebook? [...] do more on this device than any others in the past. Unfortunately, there are also more (and [...]

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  13. [...] Sold To EchoStar For $380 Million If 5% of Facebook is worth $500 million, then one can’t be surprised that place shifting pioneer SlingMedia is [...]

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  14. [...] 25th, 2007 · No Comments Different sources (for example here, here, here) reported that Microsoft might be putting a large financial injection into Facebook. [...]

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  15. Alexander van Elsas Tuesday, September 25, 2007

    I think this is a high risk investment. While google spreads their advertisement revenues over many different platforms, Microsoft will be forced to monetize their investment on Facebook by creating more advertisement pressure on the Facebook users. That is a risky strategy. If you’re interested I wrote more about that on:
    http://vanelsas.wordpress.com/2007/09/25/high-risk-investment-microsoft-wants-a-piece-of-facebook/

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  16. [...] buy a stake in FaceBook that Google, however, there is a concensus that FaceBook is going to need some sort of cash injection to help it grow. It seems that Mark Zuckerberg is in a position of strength at the moment. Let’s see where [...]

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  17. The Future of Mobile Web 2.0 Part IIa – Mobile Porn 2.0

    One of the areas of great wrangling in the Mobile Web saga is The Business Model that shall emerge (more in a later post). But Something that was definitely not spoken about at the Informa Mobile Web 2.0 conference when this subject was broached was (ahem

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  18. Maybe if Microsoft is involved, fewer corporations will block FaceBook on their networks.

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  19. [...] Om Malik gets it with his “put option” concept, but I think he’s wrong to say Microsoft will never sell advertising anywhere else.  Where was the advertising going anyway?  Smaller players will always want to play with grown-up Microsoft.  Most of the bigger players are choosing up sides against each other.  Here Microsoft is at least gaining a dance partner. [...]

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  20. Financial Terms Auditing Dept. Tuesday, September 25, 2007

    I think you mean “call option”…

    Nevertheless, the strength of any first refusal right will depend on the terms of the investment agreement and may not prevent Facebook from acting independently. Yahoo, after all, had an investment in Google that didn’t prevent Google from going public.

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  21. [...] indicated that it might hold out for a valuation of as much as $15 billion rather than the $10 billion valuation the Microsoft investment currently being discussed would give it. … there is always another fool in line to [...]

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  22. FTAD

    good catch. thank you. made the change on the post.

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  23. Microsoft is really trying to get back into the game, and if anyone could do this, its the giant himself..I’d be inclined to dismiss this as a rumour right now, but who knows!

    btw, OM, my husband is your greatest fan, he reads your blog daily, just never leaves comments:) Kudos for doing a great job here!!

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  24. [...] Slashdot) was this must be why Microsoft is buying into Facebook at a $10 billion valuation (here, here, here, and here). The next thing that came over me was… ha ha a math error in Excel! Then I [...]

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  25. [...] mreža pokrenuta prije tri i pol godine iz jedne studentske sobe, danas se procjenjuje na pet deset milijardi [...]

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  26. [...] indicated that it might hold out for a valuation of as much as $15 billion rather than the $10 billion valuation the Microsoft investment currently being discussed would give it. … there is always another fool in line to [...]

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  27. [...] (MSFT) CEO Steve Ballmer, following rumors last week that the software giant is considering an investment that would value the social networking company at $10 billion, is saying the craze for social [...]

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  28. [...] Facebook virus has finally hit Singapore. My initial skeptism led me to wonder why on earth would Microsoft valuate FB at such a pricetag. I had an account but didn’t really bothered with it since I assumed it [...]

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  29. [...] Zonk wrote an interesting post today onHere’s a quick excerptHow much is a 5 percent stake in Facebook worth? $300 million? $500 million? $750 million? It all depends on how desperate the buyer is and how well Mark Zuckerberg can play a game of corporate poker. Rational thinking long ago flew out … [...]

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