Facebook & Microsoft

Today, at 2PM PST, Microsoft and Facebook announced that the first one invested $240,000,000 in the second one, on a valuation of $15,000,000,000. This is a very big move for Microsoft that had been fighting with Google for this deal. One might smile if he recalls Steve Ballmer’s sentences about Facebook earlier this month : “I think these things [social networks] are going to have some legs, and yet there’s a faddishness, a faddish nature about anything that basically appeals to younger people,” or “There can’t be any more deep technology in Facebook than what dozens of people could write in a couple of years. That’s for sure!” Business is definitely all about bargain!

On the numbers, Microsoft is now a very small owner of Facebook, with less than 1.6% of the Company, which is really not enough to be an important decision maker. This percentage will not prevent Facebook to perform an IPO next year, or even beeing acquired by any other giant. However, we also learnt that the two companies have renewed and extended (in time -2011- and geography -globally-) their partnership for advertisement. The traditional ratio valuation/user gives us a whooping $300 per user, an average price during the Bubble.

I personally think that it is a very good move for both Companies : Facebook is getting enough cash to continue its growth with no fear, whereas microsoft gets an amazing ad deal and a small stake for little : $15Bn is not what was paid! Today, Internet ad is $Bn40 and Facebook represents more or less 10% of all internet traffic, hence Facebook should make 10% of Internet Ads : $4.0Bn. Microsoft is actually betting that both figures will grow : internet Ads will double within 5 years, and Facebook might also reach 15% of all internet traffic, which gives Ads revenues for Facebook at $Bn12!