Goldman Invests $450m In Facebook

An anonymous reader writes "The news that Goldman has taken a stake in Facebook, the white-hot social networking giant, has tongues wagging from Wall Street to Silicon Valley. As first reported by DealBook, Goldman has invested $450 million in a deal that values Facebook at $50 billion. As part of the deal, Goldman is looking to raise as much as $1.5 billion from its wealthy clients to invest in Facebook alongside the firm."

Comments

Demographic Data

[MoonBuggy]

Why the hell does an investment bank, who normally act as a "service provider" want to take a direct stake in a Social networking company ?

Well theoretically Facebook's "product" is demographic data for marketing purposes - Goldman Sachs obviously think this is a profitable segment. What I've said before, and will say again, is that I'll never truly believe that marketing data can provide that much value. Obviously some very successful people think differently, so it may well be that I'm just outright wrong, but when I look at the value of Google and Facebook, who might provide slightly better ways to convince people to buy your product, and compare those valuations to those of the companies who actually make popular, profitable and tangible products, it just seems like there's something not quite right here. Bubble 2.0, perhaps?

Re:Demographic Data

[div_2n]

If FB can figure out how properly utilize the data it has to properly send target advertisements in an unobtrusive way, they will be able to do what nobody has to date -- compete with Google on the advertising front.

This makes them supremely poised to be the ultimate competitor to Google for advertising dollars (which last I heard is the bulk of Google's profits). Note this doesn't make them a direct competitor to Google per se, but certainly it makes them capable of putting one heck of a dent in Google's bottom line.

Re:Demographic Data

[al0ha]

Everyone *thinks* Facebook's product is demographic data for marketing purposes, and at this point in history perhaps that is only what it is used for; however I would not personally feel comfortable believing this will continue to be the only use for all of the connections and information gleaned via Facebook, Google and myriad other data mining enterprises.

The main point almost everyone is missing is that all data put in the *cloud* is there until the end of time, never to be reclaimed. That is a freaking long time peeps; and just as people could not comprehend the ability to land on the moon at the turn of the 20th century; we can not begin to comprehend the future uses, good or bad, for all the data people are currently freely giving up without a second thought. Goldman is obviously betting the payoff will be substantial; far more than mere marketing alone.

In my lifetime we've gone from being upset when a person stood to close to the phone booth (with a closed door) while we were having a conversation, to loudly conversing and putting personal facts out there for anyone to use however they choose.

Re:Demographic Data

[Anonymous Coward]

People still don't get it. That massive global derivatives trade that is larger than world GDP? Guess what's backing it. It's not just your savings. It's not your retirement account. It's not your mortgage. Not even your tax dollars.

It's you.

And anyone who can know all about you, can gain an incredible edge in the new order of global trade. In the new reality, that the world is a closed system. That the economy operates on knowable variables. And that it can be solved. They are building the Google of global finance.

And, to do that, they've put a bullseye on your most intimate details. They want to know your business contacts. They want to know your friends. They want to know who influences your decisions. They are building a map. Forming connections. They want to know what you eat. They want to know how often you exercise. They want to know what drugs you take. What television shows you watch. They want to know how the dominos fit together. They want to know how a random person can say something to a secretary who says it to her boss which influences his perspective and brings down a major corporation, like a house of cards.

Then they can make it happen. Bet against it. And profit. Checkmate.

So there's quite a bit of money on the line. And somehow insurance companies aren't as useful as they once were. Somehow, the entire concept of random, evenly distributed risk probability curves has been replaced with a much more insidious, and manipulable, model. And you're right at the center. So, now, reliably modeling the global economy hinges upon controlling it's most unpredictable part: you.

Reasons Why This Might Be a Bad Move

[eldavojohn]

The reasons this is a great move are pretty obvious but there's some articles floating around out there that point out this might be a gamble. Reasons include:

• We have no real idea if Facebook revenues are actually near $2 billion. The company is private and doesn't have to report numbers to anyone.
• Groupon and its clones buy lots of Facebook ads, and we don't know if group-buying is a sustainable advertising model. Some local merchants say it kills their margins.
• Zynga and the other social game companies are desperate to find a way to live off Facebook. Google is supposedly building an alternative.

Regardless, it sounds like more of these privately traded shares in auctions from Sharespost will be conducted in the near future. Expect to see Facebook get a serious cash infusion if they all go as well as this one.