Citing a New York Times article, Webmetricsguru reported Microsoft is going to pay $240 million for a tiny 1.6 percent stake in Facebook, valuing it at $15 billion.
"The astronomical valuation for Facebook is evidence that Microsoft executives believed they could not afford to lose out on the deal," said the Times.
As reported recently on thealphamarketer, Rupert Murdoch contended the valuations of Facebook make no sense, and I agree with him. So what's happening here?
It looks like Microsoft (MSFT) is so on the defensive, and believes Google (GOOG) could make them almost irrelevant if they don't hold on, thus the valuations.
Microsoft reveals through this price that they are in panic mode, even though they'll never admit it.
As part of the deal for them, they'll be able to run ads on the Facebook network outside the U.S. They already have a deal in place to run them in the U.S.
Another part of this is Microsoft, probably rightly, believes display ads will be more the future of Internet ad growth, and this plays to that strength.
» Why I don't like Microsoft Paying $240 Million for Tiny Stake in Facebook from ManagersRealm
The agreement to buy a 1.6 percent stake in Facebook by Microsoft (MSFT) for $240 million, to me, underscores a weakness in Microsoft that they have to come to terms with.They are paying huge amounts of money for companies or... [Read More]
Tracked on: October 24, 2007 6:41 PM | Permalink to Trackback