Microsoft’s Facebook Valuation is a $15 billion smokescreen

Stacey Higginbotham, threw out this question to her readers on GigaOm,

" the time of the Microsoft deal, Facebook had about 50 million users who were valued at $300 each. Readers, care to tell me how Facebook users can achieve that value? "

First of all, let’s be clear on one thing – Microsoft did NOT pay $15 billion for Facebook nor has it ever indicated any desire to buy the company, so any  comparison with the AOL-Bebo deal is just plain wrong and misguided. Microsoft paid $240 million to get a small equity stake, exclusive rights to sell third-party ads on world’s most popular social networking site and get access to Facebook’s 50 million+ (and rapidly growing) user base.

In other words, for  a sliver of the valuation, Microsoft got access to everything that Facebook could possibly offer in terms of ad revenue potential and it didn’t even have to buy the company. Now do the math again, the valuation per user comes to less than $5.00 ($240 million/50 million users), how sweet of a deal is that?! Note: Currently, Facebook has over 68 million active users.

Zuckerberg is a smart guy but he’s no match for Gates/Ballmer negotiating prowess. Gates & Co. have made it impossible for other companies, namely Google to buy Facebook by assigning a value so astronomical that no idiot on planet Silicon Valley would be willing to pay. Not to mention, that they will probably have buy out Microsoft’s stake at that same asinine valuation.

I would suggest that number crunchers in the valley stop getting distracted by the OMG $15billion price tag and take another look at why Microsoft’s laughing all the way to the bank.


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