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Goldman Invests $450m In Facebook

Posted by ryuzaki0 on from the super-poke-me dept.

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."

9 of 228 comments (clear)

  1. Goldman Sachs .... Facebook .... Wall Street ... by unity100 · · Score: 5, Funny

    What could POSSIBLY go wrong ...

    --
    Read radical news here
  2. Demographic Data by MoonBuggy · · Score: 5, Interesting

    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?

    1. Re:Demographic Data by durrr · · Score: 5, Insightful

      Some very sucessful people crashed the worlds economy, while getting filthy filthy rich at the same time.
      One mans poison is another mans profit.

    2. Re:Demographic Data by MoonBuggy · · Score: 5, Insightful

      That still hinges on the assumption that targeted marketing is so beneficial that it's worth all these billions of dollars. Maybe it is, maybe I'm wrong - I'm just some guy and I'm arguing with billionaires here, after all - but it looks to me like they're building something of a house of cards that'll come tumbling down if the companies purchasing the ads ever manage to quantitatively assess their impact.

    3. Re:Demographic Data by Anonymous Coward · · Score: 5, Interesting

      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.

  3. Re:Fools and their money.. by Seumas · · Score: 5, Insightful

    Only the American tax-payer is the fool, here. This is a can't-lose wager, for everyone else. You invest and get rich or you invest and get re-imbursed by the American tax-payer next time the government decides to save the speculators by handing them a few trillion.

    Remember, the current president and last president decided that speculation should no longer have any risk and backed that up with seven or eight trillion dollars in handouts. Hurrah!

  4. Man, they never listen to me by Daniel+Dvorkin · · Score: 5, Funny

    Tulip bulbs, I tried to tell them. Tulip bulbs! That's the future of finance, right there!

    --
    The correlation between ignorance of statistics and using "correlation is not causation" as an argument is close to 1.
  5. Re:So each user is worth about $100? by vlm · · Score: 5, Insightful

    Somehow that does not seem right in any shape way or form. I know at least a handful users that have way more than a couple of accounts (pets, hiders and other stuff.)

    Maybe 25 cents/user on a good day but $100?!?

    Take all your physical paper junk mail and toss it into MULTIPLE trash bags for about a year. Make an intelligent estimate on paper, printing, and postage costs and multiply by the number of envelopes / catalogs / postcards / phone books. I was easily exceeding $1000/yr a couple years ago.

    Realize that my yearly junk mail is a yearly cost for an entire industry, that shows up on the P+L and cash flow statements not the balance sheet. On the other hand you're talking about ownership of a future advertising industry merely being $100 per victim. Frankly, $100 ownership cost per victim is cheap.

    Compare to the cost of buying the SuperBowel in order to sell millions per minute TV commercials.

    Another fun cost comparison is a realistic estimate of the sum of all local TV stations, at least a hundred million industry wide total to reach a million or so viewers, not so far out of line.

    Advertising is big business.

    --
    "Science flies us to the moon. Religion flies us into buildings." - Victor Stenger
  6. Re:Can't resist ... by dachshund · · Score: 5, Insightful

    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 ?

    Two words: regulatory arbitrage.

    US law currently prevents Facebook from taking on more than 499 investors unless it discloses its financial results to the public. Facebook does not want to do this, but it certainly wants investment money. Plus there's a lot of dumb money out there that would love to invest in Facebook. How to get around this?

    The answer is, apparently, to take on a single investor --- Goldman Sachs. G-S will then sell "shares" of their stake to their own investors, collecting a handsome commission along the way. Most likely the investment house won't even wind up with too much exposure of its own, so when Facebook inevitably dot-bombs they'll just be sitting on a pile of cash. Plus there are opportunities here to make and return profits to their preferred clients (as the stock goes up), making sure that only the fools get stuck when it plummets.

    Normally it wouldn't bother me too much to see rich people getting fleeced, but how much do you want to bet that somehow your money will wind up in that pool, even if it's indirectly through mutual funds and third-party companies?