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Summary:

Microsoft (MSFT) has invested $240 million in Facebook at a valuation of $15 billion and gets the rights to sell third-party ads on the Facebook network. That’s about 2 percent stake. Not as crazy as the $900 million that MySpace (NWS) pried out of Google (GOOG), […]

Microsoft (MSFT) has invested $240 million in Facebook at a valuation of $15 billion and gets the rights to sell third-party ads on the Facebook network. That’s about 2 percent stake. Not as crazy as the $900 million that MySpace (NWS) pried out of Google (GOOG), but still pretty steep. I thought the deal was for $500 million, so I am guessing there is another shoe to drop here. (Looks like Microsoft is going to be to Facebook what Yahoo was for Google….transition strategy!)

Today Facebook also launched an application for BlackBerry, and got RIM and T-Mobile USA on stage with Facebook co-founder Dustin Moskowitz to announce it today. Facebook already has an iPhone app that early adopters everywhere love to brag about. Moskowitz also announced the Facebook platform was expanding to all web-enabled phones, with apps appearing on mobile Facebook profiles and getting access to SMS to communicate with users.

Press call live blogging below the fold:

* The call was supposed to start at 2 pm, its already 2.04. Bad muzak playing!
* Mark Zuckerberg , if you want to play Steve Jobs, learn to be punctual like Steve.
* Maybe they are getting their stories right, and haven’t figured out how to put the obscene finger gesture to Google in polite/politically correct language.
* 2.10 pm, and still terrible music and no sign of anyone.
* 2.12 pm: It’s on. Vivek Verma and Kevin Johnson, president of the Platforms & Services Division at Microsoft, are on the call. Brandee Barker (spokesperson) and Owen Van Natta, vice president of operations and chief revenue officer at Facebook. are on the call.
* Mark is beyond all these PR things ;-) He got peeps it seems who are handling this!
* There is an error in the press release, and will be reissued.
* Owen is speaking. He is saying stuff which could be spoken by any executive on any conference call.
* Kevin – major win for Microsoft in advertising and strong signal from our biggest partner. Facebook is a strategic win for us. We are very pleased with the depth and the scope of this deal. Seems like Facebook is going to work on newer ads for social environment.
* Kevin says the equity stake is a strong statement of confidence in this partnership. Blah blah! 200 million users is in realm of possibility and combine that with monetization opportunity.
* Kevin – there are certain elements we won’t disclose about this deal. We have strong alignment around technology. Lot more we will do together.
* Owen says: lot of folks wanted to partner with us over advertising, and relationship has been great for us. We are now expanding our relationship beyond U.S. borders.
* Owen says: no restriction on 3rd party developers. I think they can tap into Microsoft ad center and other technologies.
* (Arrington asks) Any other investors in this round? Not announcing any other investors in this round for now. Just Microsoft.
* Kevin says – we are expanding our advertising relationship internationally and that is what we are announcing right now.
* In response to Josh Quittner’s question about who else were they talking to, Owen says not commenting on who were others they were talking to.
* Owen says lot of rumors about financing but this is the best set of terms we came up with this deal.
* Not talking about Facebook IPO.
* Is this deal just for banner ads? Will it be expanding to Internet Search deal and will it be separate deal? We are not announcing anything related to Web Search. This is only about advertising.
* Question Mine: Kevin Johnson (what we are seeing so far) we continue to see monetization which continues to improve. We will drive hire. Continues to improve… both parties are not disclosing the metrics. Part two – in terms of what we are using the capital for, our innovation and growth we are seeing today. Expanding our employee base. 700 employees in 2008 (wow). International growth and there is a lot of technical infrastructure we can build around the. Allow people to experience better Facebook. (I will expand on this point later)
* Building your own (FB) salesforce? Microsoft is an exclusive advertising platform partner. The two companies work together today and going forward – there are different needs advertisers have. Socialization of the Internet needs innovation.
* Does Microsoft have access to Facebook user data? User trust is core to what we focus on and we both are going to provide highly relevant advertising and focus on that. We don’t want to violate user trust…There are certain parts of the partnership we are not announcing. I think they are dodging a very relevant question.

Hitwise just sent me over some data that helps put the deal in perspective. According to the Internet monitoring firm, for the week ended 10/20/07:

*Facebook.com was the 9th most visited web site in the U.S., with .96 percent of all Internet visits.

*U.S traffic to Facebook.com has risen 102 percent year-over-year when compared with the week ended 10/21/06.

*Among a custom category of leading social networking web sites, Facebook.com received 15 percent of U.S. visits, putting it at No. 2 behind MySpace.com, which received 76 percent. Windows Live Spaces received 0.4 percent.

*Facebook.com received 9.9 percent of its U.S. traffic from search engines. Of that traffic, MSN Search and Live Search combined for .46 percent to Facebook.com. Google sent 6.82 percent of U.S. traffic while Yahoo! Search sent 1.34 percent of traffic.

*U.S. visits for Facebook.com among users ages 35 and over have increased 19 percent when compared with the week ended 10/21/06.

  1. Facebook and Microsoft: BFF for $240 Million

    Did you see the post at gigaom.com

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  2. what a joke. 15 billion for a company that has little to no revenue. Also, thats what the web needs another ad network.

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  3. Well. Good deal. Sounds like microsoft made a safe investment, easy recovery with the ads. This way they can also analyze how facebook turns up in a couple of years and will be in a position of more accurate valuation.

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  4. [...] GigaOM (live conference coverage) [...]

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  5. [...] and other Facebook top managers they also laughed and told me I was out of it.  I guess after the Microsoft $240M investment  I wasn´t so out of it.  And I am not surprised that it was Microsoft who paid that [...]

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  6. Om:

    I don’t think that MSFT expects to make money on the $250MM at a $15B valuation. Internally for them it is a $250MM investment to get an exclusive advertisement deal over the next 4 years. The 2% stake is only icing on the cake. Had they announced that they have given $250MM to Facebook for a 4 year exclusive ad deal, no one would have flinched, this is cheaper than the Google/MySpace deal.

    I think it would be naive of us to think that MSFT is looking at doubling its $250MM investment. Locking in a potential ad platform on the other hand is lucrative.

    On that note, I doubt that there will be other investors, because the returns on a $15B valuation is probably none to negative.

    All this is great PR for Facebook though.

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  7. [...] Το Facebook είναι κάτι σαν το iphone για Web 2.0: κλέβει όλο το hype. Τελευταία ακουγόντουσαν κάποιες κριτικές φωνές για την αξία που έχει, για το ότι ακόμα δεν είναι ξεκάθαρο το business model του, για το ότι υπήρξε μια κάμψη στην επισκεψιμότητα κτλ, αλλά σήμερα, το Facebook περνάει από το ταμείο, αφού διαπραγματευτεί με δ…!! [...]

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  8. The title of your post is incorrect — it says they made a “$250″ investment. You left out the “million”.

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  9. [...] That would be 1.6% of Facebook which is quite a bit less than the 5-10% predicted by recent rumors, but at the highest rumored Facebook valuation of $15 billion. Microsoft’s original advertising alliance with Facebook was apparently US only although that wasn’t spelled out at the time. Predictably, there are also some features of this new deal which haven’t been revealed. [...]

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  10. Hi Om,

    I have been more often that not seeing these weird comments on almost all of your threads. Is it some spam or it actually signofies something.
    For eg:
    […] GigaOM (live conference coverage) […]

    PolkaRobot » Facebook entscheidet sich für Microsoft on October 24th, 2007 at 3:05 pm – #
    on this article.

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  11. dhiren those are trackbacks.

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  12. paul,

    good catch. fixed and sorry about that.

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  13. Nothing against Microsoft but they have this tendency to pretty much f*** things up that they acquire and haven’t build themselves. Just hoping that the same thing doesn’t happen to facebook

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  14. $15billion valuation interesting. What is Facebook’s yearly revenue? Mark Zuckerberg is definitely the man. Poor Google! http://www.mediaoutrage.com

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  15. [...] at the Seattle Times, at PaidContent and by Adam Ostrow at Mashable, and my pal Om Malik did some as well. It seems as though any competitive advantage that listening to conference calls might once have [...]

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  16. i hate microsoft. google is my baby.

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  17. Sachin Balagopalan Wednesday, October 24, 2007

    They should have gone to warren buffet instead

    http://tinyurl.com/ypww4x

    http://tinyurl.com/2boltz

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  18. OM, what was your question? i could see only
    “Question mine”. kevin seems to answer some point, i couldnt follow him. Maybe your question should throw some light here

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  19. Bubble bubble pop!

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  20. Eek Facesoft is watching you! All this talk of contextual ads based on my social stream is Minority Report creepy, so I’m talking about Paris Hilton’s recent morale boosting visit to Baghdad in my Facebook news feed and an ad for The Hilton Hotel, Tikrit pops up, boy that $9 as much as you can eat, suite and hooker deal sure looks tempting… er no.

    Facesoft is watching you and when did we all think we could get everything for free? How about we all paid $1 per week for Facebook, so that’s $1 x 40 million per week, a tidy income… I vent my spleen and discuss my dreams being interpreted by a virtual psychotherapist serving me real life pop-up ads for lady shavers over at Fat Man.

    Great article Om, thank you.

    Adam

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  21. Now if only I could get $240 million for http://www.HostBarracks.com I could Rule the World! Muahahahahahahahahahaha!!!!

    (P.S. Great article I was just reading Wireds (or was it Fast Company’s) I guess that’s the problem with print – it’s not dynamic like the net)

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  22. Wholly Cr*p! 15 BILLION???

    I think the net has turned into an electronic Coney Island. Where the hawkers are yelling from site to site, “Come on in, step right up…”. There’s a sucker born every minute. Here…click on this banner NOW!

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  23. bingo – thats where Mr Murdoch missed the trick — took to long to open MySpace for other vendors!

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  24. This is crap. But Mark is winning. Thats what everyone want. Winning always matters. It doesn’t matter whether its holy water or holy shit!

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  25. Facebook is a waste of time. Today I deactivated my account. Good that Google stayed away.

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  26. Going mobile on .mobi is the key. MS is already laying the ground @ blocking Firefox from mobile units.

    This sets the domino effect of validation of other social ntwk cites. Is LinkedIn next?

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  27. Microsoft investment is creating too much hype. It is good for Microsoft but going to be bad for general investors as I feel $15B valuation is insane!. Media is contributing to it. I doubt even half of the Facebook users are actively using Facebook. All media talks about Facebook but very few talks about what added benefit they provide which other sites like Yahoo do not provide. I believe Yahoo already has many of the social networking features in place and they will keep adding to it.

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  28. I am astounded at the valuation. Now that they have managed to validate the valuation number, it is time to make a few acquisitions:

    http://sramanamitra.com/2007/07/25/facebooks-monetization-strategy-part-1/

    Sramana

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  29. [...] Microsoft is investing $240 million into Facebook in exchange for 3rd party application development rights and advertising. [...]

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  30. Where’s the justification for that valuation? How many users do they have now? 50m? 100m? That valuation puts a $150-300 price tag on each account in their app. How many of those are even active or semi-active?

    This is just hilarious without some sort of number justification to back it up and even if they could play the numbers right, it would still be extremely excessive in my opinion.

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  31. [...] company seems to be roaring back. And it has nothing to do with its overpriced, over-hyped 1.6% stake in [...]

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  32. Even Microsoft doesn’t value Facebook at $15 billion

    Lots of ruckus about Microsoft’s $240 million investment, supposedly valuing Facebook at $15 billion.
    Microsoft’s original ad deal was for 3 years (ending in 2009). That was their original relationship with Facebook.
    So Microsoft spent $240…

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  33. [...] Google and Microsoft who will provide 3rd party ads, and drop a chunk of cash for a minority stake. GigaOm reports on how Microsoft secured a 2% percent share of Facebook for a price of $240 million. So let’s [...]

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  34. [...] podéis ampliar la información sobre esta noticia en numerosas fuentes como Mashable, Read/Write, GigaOM, Techcrunch, BusinessWeek o VentureBeat y comprobar si tras la lectura tenéis, como yo, la [...]

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  35. Facebook is very wise to take that money from Microsoft.

    They are too rich and don’t know what else to do with their billions of dollars.

    But all the social networking portals should be cautious about how much ads from third parties they display because most of their users are really averse to advertising.

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  36. The saying keep your friends close, and your enemies closer is so true when it comes to Microsoft. I for one love most of the technology they come up with, its definetely made my lifestyle/career/everything possible. And I think its creations bring innovation in its competitors. This minor investment allows them to stay close to a potential rival/investment which may have gone to one of its biggest enemies Google. But beware Facebook lovers/members, history has shown that companies acquired in whole or part by Microsoft, tend to disappear or become so unrecognizable that they seem to disappear. That would really blow, because although I don’t subscribe to Facebook (I MySpace!) I think its important to have competition, or frankly $h!t don’t change and we are doomed to an eventual demise of complacency. So please Microsoft try to learn from your past mistakes, let Facebook be Facebook, and you might still make the money you want without assimilation.

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  37. [...] Malik gives the skinny on the deal and, like me, seems OK with Microsoft’s bid. In fact, they might have [...]

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  38. Looking for an Illiterate Maid in India on Facebook Lite

    The New York Times today has a very interesting article on how technology innovation is being used to help the poor. This time, its social networking. Here is an excerpt:Mr. Krishna found that many po…

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  39. [...] GigaOM hat noch ein paar aktuelle Zahlen zu Facebook: *U.S traffic to Facebook.com has risen 102 percent year-over-year when compared with the week ended 10/21/06. [...]

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  40. [...] groot. De vraag die nu gerechtvaardigd is: wat is Facebook nu nog waard (na vorige week nog op 15 miljard te zijn geschaald na de deal met Microsoft) nu iedereen massaal openSocial ondersteunt? | Tags: facebook, google, [...]

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  42. [...] nu inteleg nebunia generata de Facebook si mai ales valoarea companiei, absolut dementa, estimata prin intrarea Microsoft in actionariatul acestei companii. E [...]

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  43. [...] Monday, November 26, 2007 at 11:00 PM PT Comments (0) It just might be sheer coincidence, but Silicon Valley’s Facebook lovefest has brought a certain feistiness to Fox Interactive and its flagship property, MySpace. The largest [...]

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  44. [...] what Newsweek predicted. If anything, it was the Year of Facebook, as the social networking site won a $240 million investment from Microsoft for a mere 1.6 percent stake (plus the right to sell third-party ads on the Facebook network), [...]

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  45. [...] Dün yapılan açıklamaya göre Microsoft , Facebook‘un %1,6’sını 240milyon USD’a  satın aldı. Böylece Facebook’un toplam değeri 15milyar USD’a ulaştı. [...]

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  46. [...] the crazy high valuations and talk about all of this social networking stuff, people literally forget to talk about the the [...]

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  47. [...] Haack joins Microsoft. Halo 3 launches to near riots. October – Rob Conery joins Microsoft. MSFT invests $240 million in Facebook. The first Alt.Net conference is held. November – Zune 2 updates hit the [...]

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  48. [...] Facebook has 60 million members and is valued at $15 billion, but it is still the No. 2 social network. To defend its lofty valuation, Facebook [...]

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  49. [...] Haack joins Microsoft. Halo 3 launches to near riots. October – Rob Conery joins Microsoft. MSFT invests $240 million in Facebook. The first Alt.Net conference is held. November – Zune 2 updates hit the [...]

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  50. [...] Higginbotham, Thursday, March 13, 2008 at 9:49 AM PT Comments (0) Some quick math on the makes Facebook’s $15 billion valuation look even crazier. Apparently the guys over at Silicon Valley Insider also bothered to do the [...]

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  51. [...] לא? הרשת החברתית הכי פופולארית היום, לאחרונה קיבלה השקעה של 240 מיליון דולר ממיקרוסופט בתמורה ל 1.6 מהמנייה. ערכה של החברה כיום מוערך בכ-15 [...]

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  52. [...] Microsoft, which will end if Google buys Digg.  With Microsoft often over paying for deals with social sites, and with a slowing economy, it is safe to assume that the ad space probably isn’t worth that [...]

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  53. [...] of its stock, or roughly 3 percent of the company based on an inflated $15 billion in valuation. In October 2007, when Microsoft invested $240 million in Facebook, it valued the social network at $15 billion. [...]

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  54. [...] Facebook worth $15 billion? Give me a break. [...]

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  55. [...] company, according to VCExperts.com Inc., not to mention Microsofts contribution to the party at a valuation of $15 billion. Eventually investors will force this exit event to occur. As the IPO markets starts to turn [...]

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  56. [...] The delay was especially mystifying in light of the software maker’s financial backing of Facebook. In 2007, Microsoft poured $240 million into the social-networking service, helping to push Facebook’s valuation to an estimated $15 billion. [...]

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  57. [...] valuing the Palo Alto, Calif.-based company at $10 billion, significantly less than it was in 2007 after an investment made by Microsoft valued it at $15 billion. In a conference call discussing today’s news, Facebook CEO Mark [...]

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  58. [...] to outside observers. And what about the sale of stock to companies like Microsoft — which bought 2 percent of Facebook for $240 million in 2007 — or Russian venture fund Digital Sky Technologies, which also bought a stake last year. [...]

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