Microsoft to Buy 5% of Facebook Valuing at $10bn

l-ascorbic writes "The Wall Street Journal is reporting that Microsoft is poised to buy 5% of Facebook for $300 million to $500 million, valuing the company at up to $10 billion. Microsoft already handles advertising for the site."

Comments

wow

[jgarra23]

That's a lot of moolah. I'm surprised with all the FB/MS hugging going on that Facebook is running PHP

Re:wow

[betterunixthanunix]

Probably because it would cost so much for FB to migrate to .NET (or any application server). Think about how much traffic FB gets -- now think about how much extra hardware they would need to aquire to switch from a CGI-esque technology like PHP to a big and heavy AS like .NET, let alone the man hours needed to recode everything.

Re:wow

[Rik Sweeney]

Plus, Facebook uses Java to upload its images and Flash to play the videos.

They'll be replaced with .NET and Silverlight.

Oh, and kiss goodbye to the mail account that you've registered with Facebook. Spam ahoy...

Re:wow

[hellsDisciple]

Facebook runs pretty snappy - begs the question of are many other projects using ASP.NET, JSP or other heavy duty systems where PHP on Commodity hardware would scale well. In any case I will be leaving if MS buys facebook.

Re:wow

[Bill, Shooter of Bul]

Its sort of funny that myspace is so Microsoft loving ( .NET and SQL server), but facebook the Lamp Champ is the one now partially owned by MS.

Re:wow

[jimstapleton]

Odd, I've looked at ASP, from a code perspective, it doesn't seem exceptionally different from PHP. Like someone tried to combine PHP and C# or VB.NET.

Re:wow

[moosesocks]

I know your post was sarcastic, but any mac users dealing with the agonizing slowness of their photo upload applet should be cheering for joy if what you're saying is true.

Flash on Mac isn't all that hot either. Adobe's more or less been shitting all over the platform ever since Apple started directly competing with them. A single Youtube video can easily suck up 80% of the CPU cycles on a modern Core Duo machine.

As long as the number of competitors remains small (ie. 2), I think that Silverlight will actually boost the quality of web applications on ALL platforms.

Java's had its time, and frankly, while it's found niches in other fields, it sucks for web applets. Java applets need to disappear into the ether, resting alongside VRML. (Facebook IS in a pickle, because at the moment, Java probably is the best solution for multiple photo uploads...)

Re:wow

[Anonymous Coward]

In any case I will be leaving if MS buys facebook.

Sure you will. Right after you meet that lass in a pub that wants to be your "friend...." ;-)

Re:wow

[daveschroeder]

I know your post was sarcastic, but any mac users dealing with the agonizing slowness of their photo upload applet should be cheering for joy if what you're saying is true.

Flash on Mac isn't all that hot either. Adobe's more or less been shitting all over the platform ever since Apple started directly competing with them. A single Youtube video can easily suck up 80% of the CPU cycles on a modern Core Duo machine.

You do know about the official Mac OS X-native FaceBook Exporter for iPhoto, don't you? It's that kind of integrated app that makes the user experience with Facebook nice, not things like Silverlight.

Re:wow

[gtall]

Looked at another way, myspace has already been borged, Microsoft is merely corralling more sheep for branding.

Gerry

Re:wow

[Anonymous Coward]

I'm never installing silverlight (moonlight) or CLR; Java is GPL now and I trust SUN not to sue me or make absurd and continuing patent threats.

Microsoft need restraining, who knows one day they may even produce a decent OS.

Re:wow

[betterunixthanunix]

Yes, from a code perspective, PHP and ASP look very similar. But from an execution perspective, they are not. PHP is basically run like a CGI program (I am speaking from an Apache perspective here) -- when you request a PHP page, a process is forked off that executes the PHP program, and STDOUT for that program will be the web page that is returned. This is sped up with mod_php, but the basic model is the same: a process is forked off to handle your request. It is a very lightweight, UNIX-esque model, which is not surprising since the original CGI spec was written well before Java and Windows were relevant in the server world.

Application servers like .NET are different -- heavy, with lots of metadata to make database development easier, and with a focus on object oriented language features (I don't develop much in .NET, but with JEE, pages are basically represented with objects, and data displayed on the page is represented by members of the object). What you aren't told is that decreased development time comes at the expense of decreased server capacity -- on the same hardware, a CGI website can support more concurrent users than an application server. There are scalability arguments for JEE and .NET, although those arguments are shot down with real data (the 2.6 series kernel features very efficient forking, on the order of O(1), and beats thread spawning on Windows!). It isn't very important for development on an intranet, since it is unlikely that you will have hundreds of millions of requests per day on an internal network, but for public websites, this consideration is very important (think Slashdot effect).

Re:wow

[mrdaveb]

Quite impressive that PHP was able to model itself on Microsoft software that didn't exist yet

Re:wow

[Anonymous Coward]

betterunixthanunix: You have no idea what you are talking about. It appears as if you just went about randomly reading bits and pieces on these topics and regurgitated it without any clue as to what it all really means.

Re:wow

[Anonymous Coward]

Um, not really...

Even with the mod PHP processes are hogs. However, no licensing costs. The .NET subsystem is extremely fast, but the $$ builds fast as you add machines.

Re:wow

[booleanoperator]

what about python? it can handle process forking and such to do uploads while displaying output to user... it can also handle all sorts of fun things... yumm...python. (and more importantly can run very efficiently on the same apache that runs php :D)

Re:wow

[timmarhy]

i smell another dot com bubble rising.

there's no way facebook is worth 10billion. they dont' produce anything.

Re:wow

[Nullav]

Because it's an internet pissing contest for ad revenue. You don't have to produce anything as long as you can make your site popular and make the corporate monkeys think that people actually click on ads.
It really looks like another bubble, but I can't help but wonder how long this could go on. After all, most of the people throwing the money around are already rooted deeply into the ground and wouldn't suffer too much if their investments went bust.

Re:wow

[ScrewMaster]

I remember when @Home purchased Blue Mountain Greeting Cards for something like 900 mil. Maybe if they'd kept that money in their own coffers they'd still be around (and maybe I would still have a 4 mbit/sec symmetric connection.)

Re:wow

[ScrewMaster]

Yeah, no kidding. How many Windows servers is Hotmail running, nowadays?

Re:wow

[marafa]

to switch from a CGI-esque technology like PHP to a big and heavy ASS like .NET, let alone the man hours needed to recode everything.
</spelling nazi >

Re:wow

[ehrichweiss]

I would leave if they bought ALL of FB, otherwise I couldn't care less unless they suddenly start making me put up with WGA checks or the like to connect, otherwise it'll probably the same Facebook only with a few hundred million dollars to spend. I've got Firefox and Adblock Plus so I never see any of their adverts so it'll likely be the same experience for me.

Re:wow

[Nasajin]

What facebook produces is a social networking space, where users are convinced to enter information about themselves into a gigantic, glossy, friendly-looking, panoptic database. Those of us who are facebook users become the product - specifically, our attention for advertising becomes the product - and that is sold to advertisers. It's a reversal of traditional commodity based modes of consumption: rather than commodities being sold by a corporation, through a middle man to a consumer, the consumer's personal information and advertising potentialities are instead sold by a middle man to the corporation.

Simple.

Re:wow

[DustyShadow]

Someone please mod this guy "Idiot"

Re:wow

[etnu]

It's perfectly possible to write code that works in the "LAMP" model using MS technologies. Most obviously you could use ASP.Net. Less obviously, you would simply have your application exist as a multi-threaded HTTP server (written in C#), not unlike Apache. People write Apache modules in C, it's not a stretch to see people writing HTTP servers in C# that scale just as well as Apache.

Re:wow

[bytesex]

In mod_php (and mod_perl, and mod_whatever), the process is pre-forked: every apache child has it linked in, but requests are still serialized within one process. In java and .net webservers, you link the code into the webserver, and you run as a thread.

$10 billion

[Anonymous Coward]

$10 billion for a site that has 34 million active users ~= $300 per user. Hmm. I think this site is highly overvalued. But let MS waste their money if they want.

Re:$10 billion

[Freexe]

Didn't people say the same thing about Google, Myspace etc... They are all turning into money earner in this new digital landscape.

The potential of these sites to become long term hubs for people to visit has got to be worth the few million MS is dropping into it.

Re:$10 billion

[Hanners1979]

Microsoft calculated the cost per user of these shares in Excel 2007, and found that every user of Facebook would pay them several thousand dollars.

Re:$10 billion

[Anonymous Coward]

Well...time to clean the coffee off the keyboard. That was funny.

Re:$10 billion

[Chineseyes]

The problem is that sites like myspace and facebook ARE NOT long term hubs for people to visit. They are trendy sites, back in '99 when I was in a freshman in college the place to go was blackplanet, mi gente, Asian Avenue, and livejournal. After these sites it was friendster which was ethnically all inclusive. Now the new trend is myspace and facebook. All of these social networking sites are just fads and when something that looks better comes along everyone will abandon myspace/facebook/whatever and start aggregating friends somewhere else.

Re:$10 billion

[psbrogna]

I think think your term/concept "long term hub" is the issue at hand. At any one time there's a whole bunch of "hubs" jockeying to be "the one." As the web evolves I think it's always going to be easier for somebody to jump to the front of the line and leverage cool stuff that older sites (that've already achieved wide spread adoption) will take longer to integrate. The leap frogging phenomena exists in many forms across technology. So the valuation of these critters is a dicey prospect: one component of the value is the "membership mass" but the other is how new the technology is. Given that there can be only a limited number of "hubs" at the top of the food chain and those are the ones with significant value due to membership AND that at any moment, a new player can jump to the top with a new technology- the est. values are bound to be a complete roller coaster. I certainly would be skeptical of throwing cash at one- but perhaps the smarties over in Redmond have crunched the numbers and figured there's a window of opportunity for an ROI; that they can monetize the membership prior to somebody knocking facebook out of their near-the-top slot.

Re:$10 billion

[Anonymous Coward]

Maybe Microsoft sees a lot of value in owning a share of a pedophile network

Re:$10 billion

[neoform]

Sale value != Yearly Income.

It's very possible that over the next 10 years facebook can bring in $300 per user.

Many companies sell for 10 times what their yearly revenue is.

Re:$10 billion

[Silverstrike]

No no no.....

You're making the same mistake as TFA.

There's a declining net aggregate utility in owning share in the company. A sharply declining one too.

The first 5% might cost them $300 million or whatever, the next 5% significantly less, etc.

Its not a linear function, and therefore, you can't make the leap to "Facebook is worth $10 billion, and each user $300"

Now, that said, I agree no matter what, its still wildly overpriced.

Re:$10 billion

[Anonymous Coward]

"now the trend is myspace and facebook"

I don't think any of those sites you mentioned before were ever as popular or had as many users as myspace. Maybe some numbers will help but myspace is the godfather now and none of those other sites ever made mainstream news.

Myspace set the standards on what a social site is supposed to be and even if it was not much there; livejournal was more of a nerdish/power users site and facebook was used more by collage students and lots of South Americans(its the myspace of South America). Everyone has a myspace account and the last couple years everybody has filled out their info; most of the myspace people have begun to set their profiles as private because they have gathered most of their friends or people they knew in high school.

I know the trendy thing around Slashdot is to dismiss/hate places like Myspace as a plague because they cannot enjoy it or it gets too popular; but millions of people do enjoy it just like Microsoft products.

Re:$10 billion

[Cornflake917]

Umm, no.

There is a huge difference between trendy sites back in the 90's and the sites now. I was a frequent internet user as a high school student back in the 90's, and I've never even heard of those sites you mentioned except for livejournal, and I don't think I've ever actually visited it. All that stuff was before the .com bust. Every one and their grandma was trying make trendy websites. And that's why the were just trends. Those websites you mentioned were minuscule compared to myspace and facebook today. FaceBook and MySpace are worth billions of dollars. Something worth that much isn't going to disappear in a few years. They are growing and are continuing to grow. I think most people would rather go to the networking site all their friends are on, even if there is something else better out there. Maybe in a few decades or generations, another website will take over. But most likely, a corporation will just by myspace or facebook and change the name.

Re:$10 billion

[PeelBoy]

Good point. Similar to bars and clubs.

Re:$10 billion

[Anonymous Coward]

Fuck - I just cried a little!

Re:$10 billion

[Tmack]

Umm, no.

There is a huge difference between trendy sites back in the 90's and the sites now. I was a frequent internet user as a high school student back in the 90's, and I've never even heard of those sites you mentioned except for livejournal, and I don't think I've ever actually visited it. All that stuff was before the .com bust. Every one and their grandma was trying make trendy websites. And that's why the were just trends. Those websites you mentioned were minuscule compared to myspace and facebook today. FaceBook and MySpace are worth billions of dollars. Something worth that much isn't going to disappear in a few years. They are growing and are continuing to grow. I think most people would rather go to the networking site all their friends are on, even if there is something else better out there. Maybe in a few decades or generations, another website will take over. But most likely, a corporation will just by myspace or facebook and change the name.

Tell that to friendster....

Tm

Re:$10 billion

[Chineseyes]

There are a few problems with your argument, first a large portion of the users who were on Friendster migrated to Myspace and currently there is a mass migration of users from myspace TO facebook. Googling the growth trends of myspace and facebook currently show myspace is losing users to facebook. In fact there was one article I read that showed myspace growth is slowing at the same rate that facebooks membership is growing. Sometime in the near future it will be another site growing while facebook declines, there is nothing about facebook, myspace, or any other social networking site that is so extraordinary that a few bright college kids with a lot of time on their hands could not duplicate and tailor for the next generation of kids who are going to want a completely different experience. Think of it this way when those of us who are in early to mid twenties get older and have kids what are the chances that our children are going to want to be on facebook WITH us. Not likely, my younger cousins are 11 and 12 and they now avoid Facebook specifically because an old timer like myself (at 26) is on there. It won't be long until someone closer to their age is entering college and comes up with a better social networking site for their peers.

Re:$10 billion

[fistfullast33l]

I'm sure the editors here would disagree.

Re:$10 billion

[zullnero]

All of these social networking sites are just fads and when something that looks better comes along everyone will abandon myspace/facebook/whatever and start aggregating friends somewhere else. Maybe, maybe not. Never underestimate the power of laziness. There are a lot of users on myspace that would need to have their computer physically removed from them before they decide to switch to something else. Even if it's technically inferior, the amount of myspace users is pretty impressive. On top of that, a lot of bands apparently hate hiring web developers...being able to turn out a myspace page in minutes to host their music with nearly no web development skill is something that is very enticing to musicians. And with that, go the kids following said bands. It used the music scene to draw a bunch of people in, and those people drew in most of their friends, etc. I'm from a family of 7 people, and 6 of us have myspace pages. I'm the only one who has a website, and I still have to have a myspace page because my MOM figured it out and only wants to talk to me that way now.

The only people that will move on are 1. kids that think they're too cool for myspace, and 2. child molesters looking for services that are less secured. Well, unless myspace start wiping out a LOT of legit profiles, starts charging cash to keep a page up, they have technical outages for 12 hours a day, or something like that.

That said, Rupert Murdoch turned out to get a pretty good deal after all.

Re:$10 billion

[ketilwaa]

Myspace set the standards on what a social site is supposed to be

Um...No. Myspace has set the standard in bad layout and webdesign.
The majority of pages look like a five year old ramblings, sporting a broken arm in a cast, that were signed by each and every person within 10 ft of a magic marker.
Shudder...

Re:$10 billion

[Anonymous Coward]

This bubble is just so big that it can't pop, right?

Right?

Re:$10 billion

[Timmmm]

I disagree. At least in England, and especially university students, almost no-one has heard of friendster. Everyone has heard of myspace and at least 90% of college students, and a large proportion of non-college students have profiles.

This gives it enormous network value - who's going to leave a site that all their friends are on (unless they screw up badly)?

But I think the most significant thing keeping people on facebook (other than the fact that there's no serious competition), is all their uploaded photos. No-one is going to upload several hundred photos to a different site, tag them again, and get all their friends to upload *their* photos too.

Facebook is going to be around for a while yet. And before you say "But I'm not on it so it must suck", remember that you probably don't have the average social life. Or friends.

Re:$10 billion

[angle_slam]

I disagree. At least in England, and especially university students, almost no-one has heard of friendster.

That's his point. Friendster used to be big. Now no one has heard of it. Who knows if someone will say the same thing about facebook in 5 years?

Re:$10 billion

[TheRistoman]

when something that looks better comes along everyone will abandon myspace/facebook/whatever

I don't want to come across as a FB fanboy, *BUT* I do think that Facebook is the one to rule them all. As a quick number pulled out of my ass, at least 90% of my friends there are people I got to know in college (as in face to face), and a good 30% of that are people that I will want to see in the future, maybe even 10-20 years down the line. I'm not interested in finding those 200 some people again on a new social network. And on the other hand, I've tried looking up grade/middle/high school friends I would like to get in touch with but almost none of them can even bother creating any content that would allow me to google them successfully.

And that's just my personal experience.

The system is pretty quick in searches and updating content - one of my favorites is the photo tagging, even the fact that you can remove your name from pictures that other people take and tag you in. They're adding functionalities on a daily basis now that they opened it up to 3rd party. Most of it is meaningless time wasting material, but some of it was long overdue - mostly media sharing. What I don't like most about apps is that in order to receive functionality you have to install the corresponding app, but most of them are text based and you should get away with it for once (Send a drink, Hug/Kiss/X Me, etc.)

FB's privacy system is well thought out, not a dumb one like MySpace where you can only have your friends see you; the system decides, depending on the networks you're a part of (most likely your college and current location) which profiles you can and cannot see. Sometimes all you have is a face, a first name and a class year - ever tried searching someone using only that info on MySpace? You might as well take a day off of work.

And I've tried looking up random freshies from my college, to no avail - there's a time frame limit (in class years) in which you can browse freely.

The impossibility to change the layout is such a godsend, MySpace is Exhibit A in how giving that power to ALL people is plain wrong - only a few there use it in a useful way, most times people that have a web team behind them.

My only fear is that FB will eventually turn into the bloated system MySpace has become, way too slow and full of obstacles to overcome to get things done. But I think that by not giving in too much to the offers they can still have a say over the look and feel and that's what's keeping them afloat and still thriving.

And btw, $10B is way too much - a quick run of the Y! Stock Screener gives me names like Mattel, Air France, and Sunoco with that kind of Market Cap. Not really the same thing.

Re:$10 billion

[justinlee37]

$10 billion for a site that has 34 million active users ~= $300 per user. Hmm. I think this site is highly overvalued. But let MS waste their money if they want.

There's a glaring hole in your analysis -- you haven't actually analyzed Facebook's revenue. It's possible that, through advertising, Facebook actually is worth ~$300 per user. I wouldn't know, I haven't seen any of the figures.

Of course, whether or not that's a worthy investment on the part of the advertisers is another question entirely, but I think there's probably something to Microsoft's investment, and it probably has something to do with a spreadsheet we haven't seen, with factors we haven't considered.

Re:$10 billion

[mdwh2]

The problem is that sites like myspace and facebook ARE NOT long term hubs for people to visit. They are trendy sites, back in '99 when I was in a freshman in college the place to go was blackplanet, mi gente, Asian Avenue, and livejournal.

I'm still on LiveJournal. Hell, I'm still on Slashdot after god knows how many years. Whilst some sites may be fads, that doesn't mean they all will be.

In some sense, I could say that something as fundamental as personal email and mailing lists (not to mention Usenet) were a fad for me, since that has almost entirely been replaced by sites such as LiveJournal, or various webforums. For me, LiveJournal has lasted longer than the amount of time I used email as a primary means of online communication.

Re:$10 billion

[mdwh2]

That's his point. Friendster used to be big.

But the point is it also depends on your circles of friends. Friendster was never big from my perspective. OTOH, everyone I know was - and still is - on LiveJournal. Facebook seems to be growing rapidly too.

A more accurate measure might be to dig out statistics on number of users.

Depends which 5 percent they're getting

[192939495969798999]

I definitely wouldn't want my money within a thousand miles of that "F*** the Jews" facebook group that got so much negative publicity...

Re:Depends which 5 percent they're getting

[sepluv]

wouldn't want my money within a thousand miles of that "F*** the Jews" facebook group

Well...your money won't be because the evil Jew bankers have it all and they are using it to bring in the New World Order.

Note to Mods: That was supposed to be funny.

Seriously though, you (the parent) might actually have a reputation to tarnish unlike the prospective puchasers of Facebook (Microsoft and Yahoo)...

Re:Depends which 5 percent they're getting

[Kobayashi Maru]

I'm all for low-brow off-color humor, but there comes a point where a joke, even stated "ironically," isn't funny. Yours isn't funny, and it's because it lacks context. Over half your post is devoted to an inappropriate joke that doesn't have anything to do with your point. The fact that you have to throw a disclaimer in there should have been an indication that it isn't funny. Racist humor can be funny (in my opinion), but not when it's delivered like a knock-knock joke.

Re:Depends which 5 percent they're getting

[sepluv]

I'm not saying it was the funniest joke ever but it wasn't that bad for /.. Maybe you just didn't get it. At risk of stating the obvious, the OP was saying that he won't let his money go near anything that was anti-Jewish, and I was, in a parody of anti-Semite conspiracy theorists, saying that he had no worries as the Jews control all the money. Does that help?

I really don't like having to put disclaimers on funny posts but way to many mods on this site evidently just glance at posts before modding them or don't realise when people are being funny/sarcastic.

Re:Depends which 5 percent they're getting

[Anonymous Coward]

I thought it was fine and it's obvious you're too sensitive. Perhaps you need to broaden your base a little.

This feels like 1999 all over again

[Paktu]

How the hell is Facebook worth $10 billion? Less than a year ago, they were estimated to be worth $1 billion...does anyone seriously think this site can bring in real revenue?

Re:This feels like 1999 all over again

[betterunixthanunix]

Well, they have millions of users, who are fed ads with every page request. I'm pretty sure that they are making a lot of money -- or else Google wouldn't be doing so well either.

Re:This feels like 1999 all over again

[monk.e.boy]

How the hell is Facebook worth $10 billion?

Repeat after me: BUBBLE

Next month it will be worth ONE HUNDRED BILLION DOLLARS, and the month after it'll be worthless.

Re:This feels like 1999 all over again

[Anonymous Coward]

targeted ad impressions. not that it makes up for 10b, but it's a start...

gg adblock

Re:This feels like 1999 all over again

[Piata]

Facebook is an advertiser's wet dream. It has the potential to connect everyone on a long enough time line and if Facebook keeps on top of it's game, it most likely will. Obviously it must be bringing in some revenue if they have the bandwidth to handle millions of hits per month and open an office in London: http://blog.facebook.com/

Re:This feels like 1999 all over again

[benmatth]

Looks like it's time to buy some tech stock.

Re:This feels like 1999 all over again

[SatanicPuppy]

Well, you have 34 million users, so theoretically they must be worth something if you can leverage that for advertising or something.

Not 10 billion though. If you started charging your users for special features you could start pushing toward that, but as long as you're relying on ad revenue you're screwed.

It's like cable, or newspapers...The ad revenue is what people talk about, but the bulk of the money comes from subscription fees! Advertising is just the icing on top. The reason you pay 100 bucks a month for your extended basic cable is because ESPN doesn't break even with advertising...That's just reality.

As long as people buy into this fantasy that users of a free service are equal to money, you're going to see this sort of behaviour.

Re:This feels like 1999 all over again

[ShatteredArm]

Yeah, my newspaper that charges something like $15/month and displays all their content online for free is making a killing off of subscription fees.

Re:This feels like 1999 all over again

[Duncan3]

Study after study shows the Facebook demographic completely ignores ads, doesn't even realize they are there, or even run adblock plus.

That means Facebook is worth almost nothing. The advertisers haven't caught on yet tho, they aren't exactly the type that real research studies ;)

Re:This feels like 1999 all over again

[everphilski]

Well, you have 34 million users, so theoretically they must be worth something if you can leverage that for advertising or something.

Yeah, but not all 34 million are active. I'm one of them ... I check it about once a month for 5-15 minutes. Once you are out of college for a few years its really just there to get the contact of a former colleague if you need it. Assuming they kept it up-to-date.

Re:This feels like 1999 all over again

[Anonymous Coward]

Silly. You don't buy stock during its bubble. You buy it before the bubble and sell it during the bubble. Or, you borrow stock during the bubble, short it, and make a shiny profit after the bubble pops.

Re:This feels like 1999 all over again

[minuszero]

...and let us not forget the value of being able to personalise the ads as easily as facebook could allow for (they can arguably know you better than you do if you fill in enough of that info section).
Targeted ads are worth far more than non-targeted, for obvious reasons.

Re:This feels like 1999 all over again

[SatanicPuppy]

Seeing as I'm currently in charge of the financial systems for a medium sized newspaper who puts all their content online as well, I think I'm in a better position to say how much money comes from what.

We get dick from online. I mean, it's like joke money. Maybe a hundred thousand a month...more on a good month. Retail ads are 20 times that, and classified more still. Actual circulation revenue, including single copy which is pretty expensive compared to a subscription, is well into the millions and that is money that comes in every month, like clockwork. Sure, on Thanksgiving you're pulling in enough ads to double your circulation money, and Christmas too, but then there's the rest of the year.

The problem with newspapers is that the actual process of creating and delivering the paper is a huge time and money sink. Despite that we're still running a solid profit, though as many people point out, it's shrinking. Online is obviously the answer to a prayer...we could afford a HUGE drop in ad revenue and still make a profit if we could close down the print product. But as it stands with online advertising, it's still not profitable enough to think about that.

Re:This feels like 1999 all over again

[Dunbal]

That means Facebook is worth almost nothing.

      It's worth whatever someone is willing to pay for it. If Microsoft figures it's worth $10 bn, then it's worth $10bn. Of course, I won't argue that MSFT might be making a huge mistake, but huge mistakes can just be written off anyway... It takes balls to take risk, and risk doesn't always pay off. But when it does, it's well worth it.

Re:This feels like 1999 all over again

[ackthpt]

How the hell is Facebook worth $10 billion? Less than a year ago, they were estimated to be worth $1 billion...does anyone seriously think this site can bring in real revenue?

Just because Microsoft overpaid for 5% does not make Facebook worth 10 billion dollars. Microsoft have overpaid to get a chunk of companies in the past which have since died away. Invest in Facebook at your own peril.

Re:This feels like 1999 all over again

[jollyreaper]

Repeat after me: BUBBLE

Next month it will be worth ONE HUNDRED BILLION DOLLARS, and the month after it'll be worthless. I believe you mean "Bubble 2.0."

Re:This feels like 1999 all over again

[jimmyhat3939]

You are exactly correct.

Re:This feels like 1999 all over again

[Anonymous Coward]

Purely subjective valuation of resources is a naive failing of economic theories that shuffle the externalities of such behavior under the carpet. It would be more amusing if the behavior were projected onto a physical science, such as physics, were you to propose that the work performed in dragging a rock up a hill was whatever someone thought it was.

Re:This feels like 1999 all over again

[Anonymous Coward]

Microsoft isn't investing in Facebook per se: Microsoft is investing in its own ad network. Buying a piece of Facebook is Microsoft paying Facebook's owners to continue advertising with Microsoft. Microsoft, naturally, wants its ad network to rival Ad Sense, since that is what makes Google hot to investors and analysts.

Re:This feels like 1999 all over again

[davidsyes]

Maybe mshaft is going to change the user terms of agreement and grant themselves the "right" to sell our information, profiles, and more. Or, they're trying to angle in on us to make us addicted to their upcoming products/services.

Looks like I'm going to start back editing my postings to be "copyrighted material" and dare fb or ms to remove it from my postings. Looks like I'll have to prepare to find another social networking site and minimize my use of fb... maybe...

Re:This feels like 1999 all over again

[CodeBuster]

I agree completely with the parent, this is most definitely a Bubble. There is no way that the underlying technology of facebook (CSS, HTML, PHP, Apache, and MySQL or Postgresql) or the ad profits that it generates has a present value greater than ten (10) billion dollars. The source code itself, which was leaked a couple months back, appears to be rather mundane stuff (not the best example of quality PHP coding, but then again not the worst either). The only things stopping a potential competitor are new and better features and the capital to fund the startup while the site builds users. In other words, there is seemingly nothing, or very little anyway, to prevent the emergence of a competitor(s) which is almost guaranteed to happen if facebook starts earning a mint on those billion dollar valuations. The entire social networking space is really a commodity business as far as I can see, unless one believes that branding (creating a distinction without a difference in most cases) is a strong defense against competitors, and not a franchise. What does facebook add that nobody or nothing else can? It has all the properties of a bubble company. Is facebook worth something? Probably, is it worth 10 billion? certainly not. Did people learn nothing from the dot bomb era?

Another question which is always in the back of my mind is this. Who in their right mind, after reading the TOS and Privacy Policies (assuming for a moment that one should trust a startup, no matter what they say, and especially when there is money at stake) for these sites, would willing create the sort of profile that governments once had to hire informants and file clerks to obtain? One might as well print a barcode on one's forehead and present oneself to the marketers for punishment as create a profile on one of these sites.

Re:This feels like 1999 all over again

[Anonymous Coward]

BUBBLE

Well, that didn't do anything

Re:This feels like 1999 all over again

[xiang shui]

Is that because all of your customers are reading your paper and not the website, because online ads can't be sold for as much, or both (ie: you don't get a good price for the ads because you're not drawing enough traffic).

I'm not really familiar with the industry, it'd be interesting to hear why online ads are not as profitable.

Re:This feels like 1999 all over again

[SatanicPuppy]

Well, IMHO, since I don't have any actual say in this stuff...

1) They're stupid. They whore out to doubleclick, etc, just like everyone else instead of doing quality chosen local ads that they could pitch to their local advertisers for better rates. They're slowly overcoming this problem, and ad revenue is increasing.

2) Most newspapers are still working their way into the whole "web" idea. I mean, print media produces more actual web-friendly content than most industries, and, even better, it has a short shelf life, so they have nothing to lose by putting it on line. Do they take advantage of this? No. they put it up for a few days, then take it down.

This is hilariously frustrating if you know anything about the web, because you know that it's not whats there right now that's valuable, it's whats there in total. Newspapers in particular are sources for immense amounts of detailed information about things in their coverage area, and while it's utility is pretty limited in the usual archival forms (e.g. Microfiche) it would be astoundingly useful if they just left the content up to be indexed by search engines. Couple that glut of content with some advertising, and you've got an archive of data that costs very little to host and will bring in ad revenue every time someone finds something relevant in your coverage area.

At some point the big media companies (Gannett, McClatchy, Media General, etc) are going to realize that they're sitting on an informational goldmine and start actively leveraging that information to draw people to their sites. Right now it's all the aggregators (like Slashdot, Digg, Fark, etc) who are picking up the burden of providing the relevant information to the interested parties, because print is stuck in the whole, "Barf up a bunch of content and people will come" mentality. That will eventually change.

3) They still think in the back of their minds that if they put together a really good online component, they'll kill their bread and butter print product. This is, at heart, stupid. People thought television would kill print too. We still don't have a good portable disposable medium that will take up the slack, and moreover, there are a lot of people who are just wedded to the idea of the physical paper. That's going to be the case for decades to come, and that's a conservative estimate.

This means that they don't put enough real resources into online. I could give you numbers that would make you laugh your ass off, I mean seriously embarrassing. The people who are doing it are reporters, but not the good reporters...You get Peter Principle crap, so the reporters that end up doing it are people who can be spared to do it, and they have no special training, and no technical competence, and all too often, no fricking IDEA of what they should be doing...Just a very limited idea of what the hell the web is about.

Again it's just incompetence, and industrial blindness. Random example. You pay a professional photographer a daily wage. You send him out to cover a fire, a little league game, and a miss toddler usa pageant. He takes (conservatively) 500 photos. Of those 500 photos, maybe 4 make it into the paper, some probably in black and white. The rest are discarded. On the off chance that any picture will be used in the paper, the photojournalist has secured (in advance) the names of the people in it.

Can you imagine the kind of photo galleries you could create with that sort of information? Cheap to host, simple to index, throw some ads on it...Profit!

Print will die, but the content will live on. They need to transition that content to a digital forum, and then show the world what they really collect. The sheer volume of information has to be trimmed down to fit in the available space...What if there was no space limitation? Take every newspaper website, and, instead of making some ephemeral short term shallow content, make it like the tip of an iceberg, provide what you pay to collect already, and let people dig through it.

Sigh.

This is obviously and old and polished rant. You can guess how seriously they take my opinions...I'm just a techie after all...What do I know about newspapers? =P

Re:This feels like 1999 all over again

[qzulla]

Good points. I wasted my mod points for a post but such is life.

I used to work for a McClatchy paper. This was 10 years ago.

I had a conversation with the publisher of said paper. I had a few ideas to help kickstart their web site.

One was the blogger idea though back then it was not called that. I think they were community billboards or some such. Their first attempt was a bit of a disaster.

My second, and I still think it is a good idea, was to scan all their old copies of the paper from the morgue. I spent some time there looking at 100+ years of history plus the photos they had. Man! I would pay for that.

I suggested they scan, oh, ten years at a time and offer the CDs for around $10 bux a decade. Give them to the libraries. Leave all the ads in. Don't touch them.

Back then they were concerned about searchability. The technology was not there then but now it is.

One employee scanning with a good quality scanner and voila! Good revenue stream.

qz

Re:This feels like 1999 all over again

[Anonymous Coward]

Hint: one stop shopping for data mining and market research. Facebook has data from millions of users on nearly *every* detail of their personal lives, from political and religious beliefs, to what schools they attended (and what campus groups they were affiliated with), what TV shows they like, etc. Most importantly, it's likely to be relatively *honest* data because the whole point is to "network with your friends" and your friends will call you out if you're obviously lying. Practically *every big company in the world* would give a few million to do some data mining on Facebook's data. The amount of personal info Facebook has on its users is something even Google should be jealous of.

Re:This feels like 1999 all over again

[vain gloria]

How the hell is Facebook worth $10 billion?

Repeat after me: BUBBLE

Next month it will be worth ONE HUNDRED BILLION DOLLARS, and the month after it'll be worthless.

"I know not for how many billions of dollars Web 2.0 companies will be sold, but Web 3.0 companies will sell for nickels and dimes." - Albert Einstein

Re:This feels like 1999 all over again

[Fri13]

"I believe you mean "Bubble 2.0.""

Actually it's "BUbble 1.5". Big Corporations has not learned that, that kind simple community sites dont have such big value in money.. mayby we could speak about hundreds of thousands euros here but about billions... no... no way....

When 2.0 Bubble comes, then even big corporations has learned that big money isn't on these sites..

Re:This feels like 1999 all over again

[mdwh2]

I agree completely with the parent, this is most definitely a Bubble. There is no way that the underlying technology of facebook (CSS, HTML, PHP, Apache, and MySQL or Postgresql)

I'm not saying it isn't a bubble - but I suspect it's the userbase and information that is far more important than the technology. If I had a clone of Facebook up and running today, I wouldn't be worth anything, and it would be a lot of work to generate any income.

(Consider also that LiveJournal open source their code - that doesn't mean that you can be worth as much as they are just by setting up your own server).

Who in their right mind, after reading the TOS and Privacy Policies (assuming for a moment that one should trust a startup, no matter what they say, and especially when there is money at stake) for these sites, would willing create the sort of profile that governments once had to hire informants and file clerks to obtain?

Yes it is worrying what some people put on it, but not all. For Facebook, I limit the amount of information I keep on it. For other sites, I don't use my real name.

I mean, the Government could be watching us right now and noting that "CodeBuster (516420) thinks 'this is most definitely a Bubble'", but you probably aren't worried about that.

Re:This feels like 1999 all over again

[mdwh2]

It's worth whatever someone is willing to pay for it. If Microsoft figures it's worth $10 bn, then it's worth $10bn.

Yes - but Microsoft aren't paying $10b, so that doesn't apply.

Re:This feels like 1999 all over again

[fdisk3hs]

"The problem with newspapers is that the actual process of creating and delivering the paper is a huge time and money sink."

Hmm, I'm confused. The problem with Oscar Meyer is that in order to sell hot dogs, you have to make and deliver the hot dogs, which is expensive.

I know! Let's sell a product that doesn't exist! Think how much we would profit if it didn't cost anything to make the product.

But then why would anyone pay for nothing?

Sigh. My head hurts I'm going outside.

Re:This feels like 1999 all over again

[SatanicPuppy]

If they product was paper they'd be selling bumwad not news. That's like saying a software companies' product is computers, or a cable networks' product is TVs.

Newspapers are a vehicle for information, nothing more. That information is the product, and when a better medium shows up, they'll transition to it.

that would make $ 294 / user!

[dermond]

wikipedia reports 34 million users. this would it mean $294 per user... sounds a bit overpriced to me..

Re:that would make $ 294 / user!

[tompeach]

Since MS handle advertising for the site they are probably in a pretty good position to judge the growth and future value of said advertising reveneue.

Re:that would make $ 294 / user!

[ivan256]

Either that or they're fairly convinced that owning 5% can give them much more than 5% influence.

Re:that would make $ 294 / user!

[AcidLacedPenguiN]

I think instead they should just buy every user an Xbox 360. . .

Re:that would make $ 294 / user!

[Red Flayer]

Well, there's a handy chart in TFA that shows Facebook as having 69.3MM unique visitors in August 2007... this figure is more relevant to ad impressions and click-throughs than number of users.

Re:that would make $ 294 / user!

[MobileTatsu-NJG]

"wikipedia reports 34 million users. this would it mean $294 per user... sounds a bit overpriced to me.."

If the growth has been rapid, then 34 mil today could be 50 mil in a few months. And even more down the road.

Re:that would make $ 294 / user!

[Loke the Dog]

More specifically, they are convinced that owning 5% will prevent Google from ever getting a part of the Facebook action.

Re:that would make $ 294 / user!

[NickCatal]

Wikipedia reports it as "MIKE IS GAY", what does that make it worth?

Re:that would make $ 294 / user!

[ivan256]

Right.

5% is enough to guarantee that they'll keep using ads from Microsoft, and probably enough to get them to embed some technology that Microsoft wants to embrace and extend. We all know that Microsoft is willing to spend billions to buy into new markets with minimal merit, so getting equity for their buy-in is a bonus.

oh great....

[MarkToronto]

Time to prepare for the Blue Graffiti of death.

Noooooo!!!!

[onosson]

Maybe if we all *poke* Bill Gates, we can get him to stop.

Re:Noooooo!!!!

[teslar]

Well, amusingly enough, he does seem to exist on Facebook. In the Microsoft network, plenty of friends at Microsoft, it might just be the real thing.

Re:Noooooo!!!!

[onosson]

I just friend-requested him!

Re:Noooooo!!!!

[Anonymous Coward]

You are hereby banned from Slashdot.

If you wish to reactivate your account, you must provide us with evidence of vandalism, identity theft, or some other appropriate reason to friend request Bill Gates.

Re:Noooooo!!!!

[onosson]

You are hereby banned from Slashdot. If you wish to reactivate your account, you must provide us with evidence of vandalism, identity theft, or some other appropriate reason to friend request Bill Gates.

That's easy: I use Windows.

Re:Noooooo!!!!

[jahudabudy]

Did you notice the unusual number of high-school aged kids (judging by their networks' names) that are on Bill's friends list? I find that...odd.

Re:Noooooo!!!!

[davidsyes]

Nah... do a Super Poke, then transform it by a Spoonerism...

Pooper Soak..

Re:Noooooo!!!!

[Dr. Evil]

Most of Slashdot uses Windows.

http://adterrasperaspera.com/blog/2006/12/18/statistics-slashdot-and-digg/

Well, that's one way to get Silverlight adopted...

[mad.frog]

...just require 34 million active Facebook users (who are probably mostly young, rabid web users of other sites too) to install it.

How long till we see some cool new site feature -- or, hell, even an existing, basic feature -- reworked ("enhanced") to require Silverlight?

Hopefully not

[Rik Sweeney]

Mark Zuckerberg would like to keep it independent apparently.

In any case, register your complaint by joining this group

http://www.facebook.com/group.php?gid=6197556554

Everyone knows that joining a group on Facebook can move mountains and change the world...

Re:Hopefully not

[sepluv]

You forgot all the copycat groups, because, as everyone knows, even if joining one facebook group on the issue won't help, joining loads, just might!

• Don't sell facebook to Microsoft
• Don't let microsoft buy facebook
• I *WILL* Close My Account if Microsoft buys Facebook!
• Don't sell Facebook!!!
• I'm Leaving Facebook if Microsoft Buy It
• Dont sell 5% of Facebook to Microsoft
• Don't sell out Facebook!

...and, of course, the obligatory:

• FACEBOOK IS A SELLING-OUT!!! DISCUSSION BOARD!!! (with added capitalisation!!!)

Re:Hopefully not

[griffjon]

I zeroed out my MySpace account when Fox bought it, it'd be a shame to have to do the same with Fb.

Re:Well, that's one way to get Silverlight adopted

[betterunixthanunix]

About the same amount of time for them to switch back to their old DHTML code, when the new code stopped working on some browsers (including my browser).

Scrabble

[LordSnooty]

As long as I can still play Scrabble, I don't care!!!1

Actually, this input from Microsoft might help to fix the problems that Scrabulous seems to suffer every day... right, gang?? As you can see, I only use Facebook for Scrabble. There must be a group for me.

Re:Scrabble

[SimonGhent]

> As you can see, I only use Facebook for Scrabble.
> There must be a group for me

yeah, but if you joined a facebook group for people who only use facebook for scrabble, then you would no longer use facebook for scrabble and you'd have to join a facebook group for people who only use facebook for scrabble and being members of facebook groups for people...

Re:Scrabble

[garcia]

Here ya go, Totally Scrabble Tuesday.

Re:Scrabble

[Cowardly Anonym]

Did you know that you can play Scrabble on Scrabulous' website directly, without having to be on Facebook?

http://www.scrabulous.com/

Weak.

[igotmybfg]

Facebook was really cool back when it was just college students. You can call it elitism if you like, but it was nice to have something that was just for us. Now anyone can get on, and all the third party developer apps make it feel like myspace... I don't see the sale to MSFT helping any. Guess it makes sense for Zuckerberg & Co, from a business perspective, to target as many people as possible.

Re:Weak.

[Tophorn]

I'd vote for that. I mean where else to all those people that never graduate college have to call their own. Shame on the graduates for not unregistering their accounts!

Re:Weak.

[Anonymous Coward]

Everyone grows up. Its been about four years since facebook launched, which is the length of college for many. You can't be a college student forever, so why does it make sense to keep it strictly college?

And wanting it exclusive to college people is not just elitism, it's narcissistic, and stupid. Which is precisely what facebook is about. How many friends do you have? Can I be your friend?

Re:Weak.

[smithcl8]

Nice to have something for yourself, but you're only in college for 8 years!

Re:Weak.

[LWATCDR]

I got on with just an email account from college. I haven't been a college student since the Commodore 64 was a good computer and the Amiga was cutting edge.

Re:Weak.

[ShatteredArm]

Though I really despise the ridiculous amount of profile clutter some of the more myspace-y users have, I don't think their opening up is a bad thing at all. Yeah, I was able to connect with a few people at my school and whatnot before, but after opening up, I was able to connect with far more people. Not everybody I know goes to school, and the increased universality seems to have compelled some of my friends who do go to school who hadn't joined previously to join. And thus far, Facebook has avoided some of the biggest plagues of myspace, which are bright backgrounds, music, and blinking text.

Re:Weak.

[Anonymous Coward]

I'm currently working on my 10th year you insensitive clod! (true story, however, i got my first degree in 5 years, and my company is paying for me to get another, however i need 15 classes, and taking 1 a semester and there you go.)

Re:Weak.

[that IT girl]

Exactly what I was telling someone today. I hate the third-party applications. It's making it so messy and cluttered. "You see...this is why we can't have nice things."

Re:Well, that's one way to get Silverlight adopted

[Anonymous Coward]

Well 300$ / user is reasonable with a ~30$/user/year profit or ~2.50$/month/user which might not be that far off.

Bad move

[ZipprHead]

IMHO a bad move for Microsoft as social networking sites continue to grow and become cliche'. First there was friendster, then myspace, now it's facebook. I think they all suck. Give it another year, and they'll be some one else who does it better.

Re:Bad move

[GregariousBoson]

I wouldn't bet on it. You could have said the same thing about search engines in 1998. We had Yahoo! and Excite and then Metacrawler popped up, and Google. At some point, someone becomes king of the mountain and just stays there.

I can't wait to see pictures

[duppyconqueror]

of Ballmer and Gates doing Jello Shooters at a rager.

Re:I can't wait to see pictures

[Dunbal]

No one does Jello shooters anymore. At least not in that tax bracket. You get people to drink them for you, while you smirk at them over cognac and caviar.

This isn't surprising

[diewlasing]

MS is probably going to try to get student info to do more effective market research.

Re:This isn't surprising

[rubenerd]

Why the hell would the need to do that? The Zune and Vista are selling great.

Yahoo predicament for Microsoft?

[rubenerd]

How does this affect their Windows Live Space garbage? If Microsoft really did take an interest could we see the same predicament we see Yahoo in with their "360" and "Mash" offerings? That said, I don't think this really matters. It's like 5% being bought by Google, more of a political move than anything of substance for users. Unless Ballmer starts throwing chairs at people who joined the "Micro$soft is teh evil!!!1!!1111!" groups.

How many real users?

[vux984]

Great. Just another reason not to use facebook.

As for the number of users, I wonder how many of them actually USE facebook, vs simply having registered in order to see someone elses crap. I know a lot of people who've been roped into 'signing' up to these sights in order to see their cousins christmas pictures, or to rsvp to a wedding shower where the idiot hosting it sent out the invitations via facebook.

So far: I don't have a facebook profile; I don't want a facebook profile; and I'm dreading the day where I have to get a facebook profile because I need to see someone elses effing facebook crap. I just know that sooner or later an important client is going to send me a facebook invitation that I'll -have- to register on the site to properly respond to...

I hate social^H^H^H^H^H^H viral networking sites.

Re:How many real users?

[HarvardAce]

As for the number of users, I wonder how many of them actually USE facebook, vs simply having registered in order to see someone elses crap. According to Wikipedia, 60% of users log in at least once per day. This number is probably a little old (my guess is the number has decreased as more and more people have joined), but even at half that number it is still impressive.

Micro$oft? Facebook?

[Mr.Fork]

Hey! If I add Gates and the rest of the MS staff, I can start using my Star Wars Jedi plugin and start using the force on them! Maybe even recruit some of them to the Jedi Linux side! I think Darth Gates might be a tough opponent though his minions will be very easy to manipulate..

"These are not the code bugs in Vista you are looking for" could have a whole new meaning... :)

Re:Micro$oft? Facebook?

[neildiamond]

Does that mean he's your father?

They must have asked Rupert Murdoch's advice

[Random BedHead Ed]

I'm sure Steve Ballmer discussed this with Rupert Murdoch over drinks.

"So how are profits from your MySpace purchase, Rupe?"

"Oh, well ..." said Murdoch, looking nervous. "Actually, great. Great! It's going to be worth billions real soon now." He laughed icily at his own irony.

"Really? Because we were thinking of buying a stake in Facebook at Microsoft."

"Oh, you should totally do it," said Murdoch, grinning wildly.

"Yeah, we thought the developers would love using it on a sort-of group connection to MSDN."

"Do it! There's nowhere for these social sites to go but up."

"And we're thinking of extending the Welcome to the Social campaign to include it."

But Murdoch was laughing to hard to hear the rest.

Re:They must have asked Rupert Murdoch's advice

[Anonymous Coward]

Murdoch's already made $300,000,000 out of the MySpace purchase, article in Forbes lists:

Doubters said he overpaid for MySpace, too ($630 million in 2005); a year later Google agreed to pay $900 million for 3 years of access to MySpace

Google is already poking him

[Julie188]

Here's a story also that adds that Google is talking about investing in Facebook. Makes it sound like Microsoft's move is just another way to get back at Google. (Did you know Microsoft has started a "consortium" to try and block the Google/Doubleclick merger -- only no other companies will join so far?) Another tug-o-war between the two and Facebook developers wind up rich? The reports sound like nothing more than rumors, even if they do come from the WSJ.
--
Microsoft Subnet -- the independent voice

Re:Google is already poking him

[mpapet]

I would add to your argument the magic number is probably some small amount of cash and lots of software licensing. Companies love to do this kind of deal and make the numbers look really big.

Re:Well, that's one way to get Silverlight adopted

[LWATCDR]

You forget. Microsoft can just push silverlight as a update for IE.
Unlike Slashdot only 5 or 10 percent of Facebook users use firefox.

nope

[Quadraginta]

TFA itself says that Facebook themselves expect to rake in a piddling $30 million profit on $150 million revenue this year.

Who are these people familiar with the matter?

[slinq]

During this article I count 14 uses of the phrase "said people familiar with the matter". After the 10th time I started wondering who these familiar people were. Is this some kind of WSJ in-joke that I'm not party to, or is the journalist just not very good?

Re:Who are these people familiar with the matter?

[Anonymous Coward]

Most likely it's the journalist trying to protect the anonymity of the source(s)

Typical Financing

[mpapet]

This kind of financing is the ultimate pyramid scheme. Totally legal too.

Step 1: Sell the first tiny bit of a company to someone for $100.
Step 2: Sell the next tiny bit of a company to someone else for $1000. You can casually drop impressive phrases like, "My investors..."

Rinse and repeat minimizing losing control of the company.

Given the amount of wealth held by the top 2% in the U.S., this kind of private placement financing will be quite the norm going forward. Another reason why income and wealth distribution is so important in any given society. With wealth being concentrated in so few individuals, there is no consequence for bad investment decisions. Microsoft can make a whole string of bad investments with no repercussions whatsoever. It simply won't affect their stock price.

Tax write off

[ThirdPrize]

When you earn that much you have to find bigger ways of avoiding tax. They probably did their charitable bit for this year anyway.

buy people

[kurtis25]

Face it we are being bought and sold like cattle. In this case MSFT is buying a place to plug in their future office live apps. A few updates down the road you will see the edit interface look like office live. This will mean that thousands of people are getting used to a MSFT product on Facebook and will use office live when they have to decide where to type their next document. Let's say Google buys Slashdot and changes the Post Comment screen to a docs.Google style screen (with awesome presentation style comment ability) then when it comes time to choosing a Word Processor in 3 years I'm going to choose docs.Google since I've already been using it on Slashdot and you will make the same choice. So this 5$ share is nothing more then MSFT buying future customers. They didn't buy the farm for the land they bought it for the cattle. ---- Mooooo....

Re:buy people

[nuzak]

I want the minute of my life that it took to read that back.

Hell!

[thatskinnyguy]

Mark Zuckerberg is the Steve Jobs of our time! He's 23 years old and worth billions! Same as Jobs back when he was Zuckerberg's age. It just goes to show, if you're enthusiastic and driven, and you have an idea to satisfy a need people don't already know exists, you stand to make billions!

Re:Hell!

[Anonymous Coward]

Unlike Zuckerberg, Jobs actually innovated and evangelized real technology. Facebook rehashed a viral formula in a niche market and grew it successfully. Facebook is valuable because the site is popular, but this can change on the whims of a user-base. Facebook has made no significant technological contribution to the internet and overvaluing popularity is a huge mistake for long-term investments---it's almost like we don't remember 1994-2001 anymore.

Re:Hell!

[Anonymous Coward]

Mark Zuckerberg is the Steve Jobs of our time! Actually, Dr. Evil, Steve Jobs is the Steve Jobs of our time.

Re:Hell!

[Anonymous Coward]

Not to troll, but what did Jobs actually innovate? PowerPC architecture was IBM, not Apple. MP3 players existed well before Jobs picked up on them. Umm, he built a computer business by doing things a little bit different than the competition. Also pretty much on par with Zuckerburg.

Alright...now at least we've got him on an equal footing with Michael Dell. What am I missing here?

Frankly, I'm not overly enamored with any of them. They built successful companies, but none of them were really that disruptive in the grand scheme of things.

Oh, goodie ...

[the bluebrain]

... then we can expect similar groundbreaking, innovative improvements as we saw when hotmail was microwashed.

valuation credits

[psbrogna]

So... Dr. Evil is doing due diligence for MS? Who knew.

Re:Well, that's one way to get Silverlight adopted

[GregariousBoson]

I don't see it happening. 5% is a far cry from majority shareholder. Especially if Google and other companies are buying in, as other folks have written. My (optimistic) guess is that there's no hidden agenda. Can't a company just invest in another company that looks promising?

Now you've done it

[Bloke down the pub]

Shhhhh!

P.S. I've got some shares in Northern Rock - sounds like a solid investment, eh - now I would hang on to them but my daughter's getting married and I need the cash in a hurry...

Re:Well, that's one way to get Silverlight adopted

[19thNervousBreakdown]

Can't a company just invest in another company that looks promising?

Yeah! And can't a crackhead just admire your car stereo?

Facebook is nicely done

[hey]

Facebook is nicely done. They keep everything lowkey. No blinking, no spam, etc. They appear to respect user's privacy.
Its what users who aren't children want. That is one of the reasons it got so many users. Well, that and the network effect. But niceness certianly helps. Of course, Microsoft knows nothing about making an application low key and pleasant to use.

Re:Facebook is nicely done

[Burz]

Yeah, which is why they encourage their users to enter the email addresses of all their friends and family.

Did you know that I have a facebook profile, without ever previously visiting their site? So now I have to sign up myself to find out what this profile says about me!

It's like automated blackmail.

Re:Facebook is nicely done

[onosson]

Yeah, which is why they encourage their users to enter the email addresses of all their friends and family. Did you know that I have a facebook profile, without ever previously visiting their site? So now I have to sign up myself to find out what this profile says about me! It's like automated blackmail.

He said they respect users' privacy. He didn't say anything about non-users.

Re:Facebook is nicely done

[Burz]

It doesn't matter to me whether a users' privacy is invaded before or after they give in and sign up.

Re:Facebook is nicely done

[onosson]

You're right, and I was merely being sarcastic. Now excuse me while I go and check my facebook page!

How are you gentlemen?

[Moderatbastard]

All of your face are belong to us.

20002 called.

[C10H14N2]

Sun was actively discouraging the use of applets over five years ago. The use of Java on the web has since been almost entirely server-side. There's no reason an applet is necessary to perform a binary upload. See Google's file attachment method as an example and Jakarta Commons FileUpload as the likely back-end to what is little more than a standard multipart form submission.

Just because the people implementing the technology suck doesn't mean the technology itself does.

Re:20002 called.

[k1980pc]

Re:20002 called. Whoa.. back to the future?

Re:20002 called.

[Xtravar]

There's no reason an applet is necessary to perform a binary upload. Facebook resizes the photos before uploading them.

1. They are saving a ton on storage and bandwidth by doing this.
2. They are saving a ton of Sally's bandwidth by doing so (since she has 800 pictures of her and her friends drunk on Facebook).
3. They are saving a ton of Sally's stalker's bandwidth (who would inevitably download all of her photos in hi-res).
3. UI: Users can easily browse to and check off which photos to upload, with thumbnail previews, which is much nicer than any other non-Java upload system out there.

They do, however, have a HTML form fall-back in case you don't want to use Java. But frankly, it is the most convenient, transparent, and well-designed Java applet I've ever run into. In fact, I'd hypothesize that Facebook's photo system is a success precisely because of the Java applet.

Re:20002 called.

[moosesocks]

Unless I'm missing something, uploading multiple files in google isn't exactly a Shift-Click sort of affair. Each file needs to be selected separately -- 4 clicks minimum per file, probably more.

When you're uploading 60 files like you would frequently do on Facebook, this becomes a HUGE hassle. Plus the thumbnails and check-marks are nice for users who have Operating systems that don't make thumbnails available in their file-chooser (or for those who do, but don't know how to use it)

Re:20002 called.

[x_Curious_x]

Those Java applets make great voice recorders too....Audio Messages Online

Re:20002 called.

[Anonymous Coward]

3) They are also making Sally's stalker upset because he WANTS the hi-resolution photos. Sally's stalkers lose out completely, and considering a large amount of us on slashdot stalk Sally, it hurts expecially bad.

Revenue Multiples

[sjbe]

Many companies sell for 10 times what their yearly revenue is.

Only if they are highly prospective ventures with a large potential upside, little/no earnings and possibly purchased during a speculative bubble. Most firms are purchased for between 1X and 2.5X revenue, or 5X to 8X EBITDA. Any multiple over 3X revenue is a very rich valuation. 10X is purely speculative and the buyer had better hope they have the next google on their hands if they want to get any profit from the investment. Last time we saw 10X multiples was during the dotcom bubble in 1999/2000.

Microsoft has a lot of smart people working for them but they are offering a LOT of money for this company. Might be worth it but I'd be surprised,... no shocked, if they aren't overpaying.

Re:Revenue Multiples

[bloobloo]

Let's look through the DJIA, easily seen on finance.yahoo.com:

Alcoa's price:earnings ratio over the trailing twelve months is 14.27
AIG is 10.93
American Express is 17.89
Boeing is 22.45
Citigroup 10.53
CAT 15.5
DuPont 14.04

Microsoft's own ratio is 20.67

It goes on like this. Now obviously this is only one aspect of valuation: the industrial majors are likely to have a much lower price to book assets ratio than facebook has, but a 10:1 P:E ratio is far from unlikely.

Hate to spill the beans, but...

[weston]

There's already a few companies who've realized that social promotion is a significant under/untapped advertising/marketing opportunity, and it's going to get bigger. It may not always be MySpace and Facebook where it happens, but the companies that build tools and gain expertise in it are going to see some real success.

I think it took a media guy to understand this. MySpace is actually a "social channel" of sorts... a kind of new entertainment media all its own. Like Fox or NBC it may not always be on top, but for the moment, it has value and that value can be shaped, invested in, increased or decreased... and used to exert or peddle influence.

How right Mr Murdoch is and how well he manages this remains to be seen, and I think it's possible MySpace was overvalued. But I don't think he made a fundamental mistake.

10 Billion Dollars Sounds LIke A Mde up Number

[illectro]

34 Million users => each user is worth 300$???

Re:10 Billion Dollars Sounds LIke A Mde up Number

[Anonymous Coward]

Speak for yourself, I'm worth at least a G.

The reason is simple: Microsoft uses Excel 2007

[Anonymous Coward]

I did the same calculations using Microsoft Excel 2007 and came up with an answer of $200... wait... $240... no, $280...hmmm... 65535... %%%DIVIDE BY ZERO%%%.....ARGGH!

Oh, a social bubble. We should call it Bubblr.

[Glytch]

Maybe this time around we can crowdsource a Web 2.0 revenue model to capture all those eyeballs, and implement it on a scalable platform using best-of-breed licensed and open source technologies.

Re:Oh, a social bubble. We should call it Bubblr.

[jollyreaper]

Maybe this time around we can crowdsource a Web 2.0 revenue model to capture all those eyeballs, and implement it on a scalable platform using best-of-breed licensed and open source technologies. I feel like slapping you. Well done, sir, well done.

This usually means MSFT broke a law

[WillAffleckUW]

or infringed a patent or other IP - they tend to pay off by buying shares - when you have a small firm "potentially" worth billions, it's hard to get cash sometimes.

Remember Borland and other such "investments"?

The "White Pages" for eMail

[willy_me]

I've come to see Facebook as being the "white pages" for eMail. People change their eMail addresses constantly - usually due to changes in employment or SPAM overload. What is needed is a way to find your friends current eMail address. This is the role that Facebook serves. If I need to send a message to a friend I can just use Facebook and it matters not how they have changed their eMail.

I'm not suggesting that this is a perfect solution but it does help explain the popularity of these sites. It is the reason why I joined Facebook.

Willy

Re:The "White Pages" for eMail

[Anonymous Coward]

It's "email" or "e-mail", not "eMail".

Earnings are not the same thing as Revenue

[sjbe]

...a 10:1 P:E ratio is far from unlikely

Earnings are not Revenue. Earnings are profit. Revenue is total sales. It's VERY important that you understand the difference. Companies are not valued based on their P/E ratio. The only real use of a P/E ratio is to determine if a stock price is relatively high compared to similar companies. It tells you nothing about how much the company is actually worth. The market capitalization can be important (if the company is publicly traded) but the P/E does not give you a value of the company in any meaningful way.

P/E ratios also have NOTHING to do with revenue multiples and aren't used directly for acquisitions. When one company buys another they rarely are looking at the P/E ratio. In fact if the earnings are negative the company will not have a P/E ratio! Typically the buyer will offer some price based on some multiple of the annual revenue (usually 1-2X) or preferably the EBITDA if the company is profitable (typically 5-8X). For example if the company has annual revenue of $1,000,000 and EBITDA of $150,000, the buyer might offer between $1,000,000 (1X revenue) and $1,200,000 (8X EBIDTA). In cases where only a portion of the company is purchased you get an implied value (how much the buyer thinks the company is worth) based on their offer. If you were to offer $100,000 for 10% of the company you are implicitly putting a value of $1,000,000 on the company.

Right now we're in a bit of a speculative mergers and acquisitions bubble so valuations have been rather high lately. But make no mistake, offering 10X revenue for a company is a VERY generous offer. If someone offered me 10X revenue for a company I owned I'd sell faster than you could say "generous multiple".

Re:Earnings are not the same thing as Revenue

[bloobloo]

The gp talked about "revenue" of $300 per user over 10 years. I interpreted this as in fact referring to earnings, given the context. Obviously price:turnover would be much lower than P:E.

As it is, I also would not invest in tech stocks such as these (except where they fall in my tracker, but as most are US rather than British I don't have as much exposure there)

Looking at your figures, with $150k EBITDA, let's allow say 50% tax, interest etc for a profit of $75k. Discounting at say 7% per annum real value would give me a quick and dirty valuation of $75k/7%, or around $1.1 million.

Basically we are saying the same thing but your correct use of revenue vs my use in the gp's terms got in the way!

Re:Earnings are not the same thing as Revenue

[sjbe]

Basically we are saying the same thing but your correct use of revenue vs my use in the gp's terms got in the way!

Fair enough. It's an unfortunate reality that in general in the finance world people are too loose with definitions. Drove me nuts when I was first learning about all this in school. You seem to have the concept down but there are a LOT of people who really just don't grasp the difference between revenue and profit. I try to educate where I can to help.

Re:Earnings are not the same thing as Revenue

[bloobloo]

Yep. It's like units in chemical engineering. Are these moles kilogram or gram basis? Is this viscosity dynamic or kinematic? Also mad-driving.

Facebook is the future

[rinkjustice]

According to the latest ish of Wired magazine, Facebook has 40 million active users (real people and not sock puppet accounts, thanks to the fact users can only view other's profiles upon confirming relationships) who generate more than a billion page views a day. Lately, Facebook has also been signing up 1 million new users a week.

Facebook also has that supercool Newsfeed feature which aggregates the latest activities on friends, family and associates, and manages to connect people who haven't seen each other in twenty years. Admit it, it's like nothing we've ever seen before (Myspace shouldn't even be in the same category).

I'm not a Facebook fanboy (alright, maybe I am), but I marvel at how well its connecting people in meaningful ways. It's a social universe within the internet. It's going to be bigger than money, because of it's worth and usefulness to you and I.

I don't like Microsoft one ioda, but they made a smart move here.

Re:Facebook is the future

[bondjamesbond]

You are kidding, right? Imagine if you could have all of the time you wasted on a social networking site or video games - what could you accomplish? You could probably have another degree (JD, PhD, undergrad). You would probably be a helluva cook or probably have your private pilot's license. You could've restored an old car back to factory. Social networking sites and games ARE the opiate of the people.

Nuff said - I'm going to go mow the lawn, or something.

Re:Facebook is the future

[WillAffleckUW]

Have to agree. I had a ClassMates account (or whatever that thing is) and let it lapse when I found out how pushy they were.

I also technically "moderate" three tribes on Tribe.net but don't use it to post much. MySpace is sometimes way too noisy.

But on Facebook I've been hanging out with my classmates from the small town in BC that I used to live with, some friends who are over in Singapore, a former colleague whose doing TB trials in Zambia, and local film, arts, politics, and general friends who are near. It just feels better.

Plus, when I add a friend from Trail BC, another friend from Trail BC notices and says "oh wow! there she is!" and it's really groovy.

Re:Facebook is the future

[troicstar]

if facebook is the future then the future is shit. What is the point of this social online activity if mimics what happens irl already ? Facebook has no social inovation or vision for the future; and its success depends on these two factors.

hmm, since when have twitter-enabled vanity pages been of any consequence ?

What is more, I assume microsoft's interest is not alturistic. The percieved high value of facebook is nothing but a warning of the intellectual rape of a user base which already has serious issues with cognitive and creative autonomy.

Re:Facebook is the future

[rinkjustice]

I assume microsoft's interest is not alturistic

You got that right. Microsoft looks at those gi-normous numbers Facebook is generating, and they think they can convert that to ching. We'll see.

Naaah

[Anonymous Coward]

MS buys the worthwhile 5% for 300-500 million, the remaining 95% is pure dross and worthless

Comment removed

[account_deleted]

Comment removed based on user account deletion

15% of 5% of All Americans

[Anonymous Coward]

I don't think any of those sites you mentioned before were ever as popular or had as many users as myspace. Maybe some numbers will help but myspace is the godfather now and none of those other sites ever made mainstream news.

The problem with three of those sites he mentionned was that they cattered to specific ethnicities. AsianAvenue was VERY big in the Asian-American community but Asian-Americans represent only 5% of all Americans. Then AsianAvenue's members were mostly aged 14 to 25; that probably makes the size of AsianAvenue's demographic to be 15% of 5% of Americans plus a few Canadians. MiGente and BlackPlanet (owned by the same company as AsianAvenue) faced the same problems. It's no wonder that most people never heard about those sites and they made headlines like MySpace did. But believe me, I was a member when they were big, and those sites had everything MySpace has today (including annoying user created layouts and animated GIF signatures). It's interesting to note that Tila Tequilla who's said to have the most friends on MySpace also had that title on AsianAvenue.

Plenty of innovation left

[polarbeer]

There is plenty of innovation left to be done in social networking. First of all, it is kind of bizarre that people let their social relationships be handled by a third party. It should be done in a p2p way, with social clients right on people's computers or mobile phones and directly built on top of their phone numbers or email accounts.
And listen Microsoft: for $10bn you can pay 10 million people $1000 each to move all their friends over to your social network. Most impoverished college students, the core FB audience, would do it in a minute. If you're ready to spend that kind of money, why not give everyone free cellphone plans with built-in social network functions that works equally well on both the computer and the phone.
FB is not the endgame in social networking. In a few years, there will be another king of the hill. Network effects work both ways. So the $10bn valuation is just ridiculous.

Feels wrong

[felix9x]

Does anyone else feel the nostalgia of this insignificant conquer nothing investment?

what exactly does that 5% get them?

[Anonymous Coward]

is that the minimum required bid to get hold of all the private data for facebook's users?

social networking sites are looking more and more like aggregated marketing data...

34 million active users is Bull Pucky

[HeavyDevelopment]

The population of the US, of which has to be at least 98% of the users of Facebook (as they were primarily a social networking site for US Colleges, is around 300 million. That would imply that about 11% of Americans are ACTIVE Facebook users. This is just not possible. I mean where do this statistics come from? Wikipedia? Yeah, that's credible. Or even better yet, from Facebook itself? The is no way in hell that Facebook has that many active users. I'd say that eVite has more active users than Facebook. Seriously, the whole thing is a farce. Web-2.0-dot-com-bubble-mumbo-jumbo. Kudos to Facebook for a true fleecing. If you keep stating something is true (ie that FB is worth $1Bn) then I guess IT IS true.

Re:34 million active users is Bull Pucky

[Dan Hayes]

Actually the London network is the largest in the world with over 1 million users, and the UK is just behind Canada with 5.5 billion users. From here at least 12 billion users are outside the US.

Re:34 million active users is Bull Pucky

[HeavyDevelopment]

From here at least 12 billion users are outside the US. You must be counting the virtual second lifers because as far as I know there are only 6.6 billion people on the this planet. But I'm assuming you meant millions. Which is fine and well, but again where do these user numbers come from? And what defines an active user? And since there is no way of independently auditing numbers, like Neilsen ratings (which is it's own statistical ball of wax), how can numbers like these ever be trusted? I've been in professional media all my career, and let me tell you EVERYONE twists the numbers. I still fail to believe that there are 22 million men, women, elderly, and children in the United States (by your calculation) that use Facebook on a regular basis.

Re:34 million active users is Bull Pucky

[Dan Hayes]

Yes, millions, my mistake :)

Facebook claim 60% of their users log in at least once per day. That wouldn't surprise me, I only joined relatively recently and only about 3 out of approx 150 of my friends are from uni, the rest are people I've met over the years since, and of those about half seem to update their status at least regularly. The Newsfeed is a genuine innovation which hooks people into checking back regularly.

The numbers can be twisted, obviously, but I'd imagine potential investors/partners would want to see something more concrete than self-reported stats. Not to mention services like Netcraft et al which provide at least some level of independent reporting.

I get it...

[AngryDill]

...After Vista, their just trying to "save face".

-a.d.-

amazing growth ... but I must be getting old

[Lazy Jones]

It's simply amazing how fast they managed to grow both the site and the company since 2004, congratulations on getting such a valuation within 3 years(!).

That said, I feel a bit old when I look at Facebook, since I do not understand at all why it appeals to so many people. Perhaps they managed to pull in all those who never made their own homepage/myspace profile/yahoo account etc. ...

doesn't support standard email address

[dwater]

I've refused to use Facebook (despite some pressure from friends) since they won't allow me to use my chosen email address, despite it being perfectly standard.

The problem is that I use 'plus addressing' (eg me+facebook@home.com) and their email validation scripts has a bug that claims it is invalid. It's not uncommon for validation scripts to have this bug, but most web sites are happy to find the bug and fix it. Not so with facebook - my impression is that they're just a little bit arrogant. So be it.

Yeah, I could not use plus addressing, or use some other account, but it hasn't got to the point where I want to bother yet. It's still annoying though.

Re:doesn't support standard email address

[nostriluu]

I use that feature too (using postfix), but I changed the + default to _ waaaaay back.

Re:doesn't support standard email address

[dwater]

Hrm. I wonder if I can do that too - I'm using fastmail.fm. I guess I'll just have to have a look :)

Thanks for the tip.

Raw deal

[rastoboy29]

Didn't Newscorp pay $10 billion for MySpace..and get the whole damn thing?

Re:Raw deal

[Anonymous Coward]

way less. take some old press releases from 1999, delete the names, plug in new names...you'll see no difference in claims and metrics, as well as faithful leaps in the apogee of online advertising

http://cognitivelabs.com/games_bloxorz.htm

tough it out

Datamining

[pbaer]

Wrong, facebook has enormous potential for datamining and I suspect they are all ready doing so although crudely. Imagine the wealth of info a company with a good algorithm and access to all of facebook's data could do. Really I'm surprised ads aren't personalized based on users' likes/dislikes.

Re:Datamining

[yada21]

Imagine the wealth of info a company with a good algorithm and access to all of facebook's data could do.

So your saying google should have bought facebook?

Exactly!

[SatanicPuppy]

You get these papers who have archives back to the 1800s! Can you imagine the value of that on the internet? All these people looking up their family trees, everyone who's trying to research something that happened more than 15 years ago...This doesn't have the issues of Wikipedia and other internet content in terms of citations, it's a solid primary source. Throw an ad banner on the top of the page, and you're good to go.

Do a full text scan, and use the text to index the pdfs, and you've solved the searchability problem...And we know that's doable, because Google is doing whole libraries at a time.

But we've got a long way to go. I'm still having trouble getting them to keep their goddamn restaurant reviews online...One would think this is exactly the kind of information that would draw readers to your site, and they cite to me goddamn SPACE concerns. SPACE...A year of those reviews might be a megabyte...If you kept the images. It's enough to make you spit blood. Until they get some people who understand that CONTENT is what makes you money online, they are going to continue floundering around like idiots.

facebook pwned

[Anonymous Coward]

Looks like they just sold all of facebook for a few hundred million. That is the oldest trick in the book - buy a minority stake in something and then the rest of it becomes worth a lot less to anyone but you.

Think about it - who is going to buy the rest of Facebook, now that MS has a seat on the board and can look at the books, the product plans, veto plans etc.

Say for example that Facebook wanted to sell out the rest to say Google or Yahoo. Will those companies want it knowing that MS would be able to mess with their plans to integrate Facebook into Yahoo or Google? That MS would end up finding out about the detail of plans to extend Google and Yahoo? No.

Facebook basically just gave itself terminal buyout cancer. Thats what you get when your CEO is 23.

Re:Well, that's one way to get Silverlight adopted

[dylan_-]

Unlike Slashdot only 5 or 10 percent of Facebook users use firefox.

Yeah, if it's just 10% you'd only be pissing off 3.4 million of your customers. Where could the harm be in that?

Facebooks offers $250k each to app developers

[PSdiE]

As I just posted to the Firehose, Facebook are now offering grants of $25k - $250k to developers with promising ideas for new Facebook applications.

I guess that $10bn is going to a good home! Do you have an app idea good enough to justify a $250k grant?

Try plaxo.com

[Webapprentice]

Plaxo is a virtual address book. If users are Plaxo users and have each others' contact, the information gets updated.

I personally don't need Facebook to manage that kind of updating.