Lots of ruckus about Microsoft’s $240 million investment, supposedly valuing Facebook at $15 billion.
Microsoft’s original ad deal was for 3 years (ending in 2009). That was their original relationship with Facebook.
So Microsoft spent $240 million and got 1.6% of Facebook. That means $240 million / 0.016 = Facebook valued at $15 billion right?
To rip from Techcrunch (with added emphasis):
It will invest $240 million in Facebook and expand its existing relationship to international markets, according to the WSJ. (The previous advertising relationship was only for the U.S., now Microsoft is Facebookâ€™s exclusive advertising partner both in the U.S. and abroad until 2011)
So not only was there 1.6% of Facebook given up to Microsoft, but (which everyone seems to miss) – the ad relationship was expanded and extended to 2011.
Microsoft doesn’t value Facebook at $15 billion. It values 1.6% of Facebook and an expanded and extended ad deal at $240 million. That’s it. You can’t ignore the ad deal and magically come to a $15 billion valuation.
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