The big news coming from the Wall Street Journal yesterday was that Microsoft is in talks with Facebook to purchase a 5% chunk of the mammoth social network. While the simple fact that they’re talking is no surprise, what is a surprise is that Microsoft is offering up between $300-$500 million for the 5% share. Microsoft’s offering puts Facebook’s value at an astounding $10 billion at the minimum. The WSJ didn’t name any sources which means for all we know, it could be a rumor, but it’s worth taking a look at.
Facebook has over 39 million members as of late, and in May that number was 24 million. Do the math and you’ll realize that they’ve grown substantially in a very short period of time. While they have millions of users now, that doesn’t mean that those users will be around forever. If something better comes along, users can jump ship at any moment.
Facebook may be the fad now, but 5 years from now? Your guess is as good as mine which leaves me wondering on one hand what Microsoft expects to get out of this deal because 5% isn’t a whole lot in the big scheme of things. On the other hand this move makes complete sense. First of all, Microsoft is already working with Facebook by providing their ads. Their agreement is good until 2011, but if Microsoft gets a stake in the company, that agreement could last much longer. Another reason this makes sense is the saying “get um’ while they’re hot” and Facebook is hot. This deal could potentially give Microsoft stock a boost as well as give them the opportunity they’ve wanted to get involved with a social network.
Now that Microsoft has expressed interest in getting a chunk of Facebook, other companies are likely to follow like Yahoo or even Google. Talks are in the early stage which means nothing is set in stone quite yet and Facebook could easily reject the deal. Microsoft’s offer is a lot of cash that Facebook could use, and the valuation is insane, so it’ll definitely be interesting to see what happens with this one.
As a side note, it’s ironic that both Bill Gates and Mark Zuckerberg (founder of Facebook) are both Harvard drop-outs who left to start successful businesses…
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Tags: Web Sites, Facebook, Microsoft
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No Facebook don’t go to the dark side!
I’m sure they are trying not to, but at the same time they probably need some additional financial backing. By going this route Microsoft would only get a very small portion of the company, which still leaves a bulk of the control in Facebook’s hands.