Facebook Deal - Winners and Losers

The final terms of the Facebook deal - it's a $240 million investment by Microsoft for a 1.6% stake in the company.

So, who are the biggest winners and losers in the Facebook deal?

Winners
Well, Microsoft is clearly a winner.  The ultimate investment of $240 million is modest from a cash standpoint and allows Microsoft to sell Facebook's European traffic (which today is largely UK) in addition to the current U.S. traffic.  It also helps them retain their relevancy in the Internet advertising market and keeps Google from displacing them from their advertising partnership.

Facebook, of course, is the big winner.  The company, who turned down a rumored $1.5 billion deal for the entire company now gets a valuation of $15 billion placed on them.  Meanwhile, the $240 million investment should be more than adequate to cover their growth until an anticipated 2009 IPO.

Accel Partners is a big winner as their initial $12.7 million investment now goes on their books with a $1.65 billion valuation.

Mark Zuckerberg, of course, sees his 20% share of the Company now worth about $3 billion.  That's about $300,000 for each day that the 23-year old founder has been alive.

Losers
Google should be considered a loser, though only slightly.  I don't think that this is a significant loss for them, but it's rare to see them lose out on a deal.  It will be interesting to see their strategy for the social networking market in the coming year. 

Yahoo may be the biggest loser of all.  They had pursued Facebook long before the others got involved and had made what at the time, seemed a significant offer.  Social networks like Facebook pose the greatest threat to the traffic of portals like Yahoo, so this has to be considered a huge loss to them.

Comments

[Martin De Saulles]

Barry,
I generally agree with your analysis as to winners and losers - certainly your point about Yahoo. They really seem to be struggling on a number of fronts. My concern is the valuation it puts on Facebook - with the right projections as to future users and revenues, almost any valuation can be justified. However, I am far from convinced that Facebook has the staying power and is in the right market to justify $15 billion. There are too many competitors and the barriers to entry are too low for it to achieve dominance of the social media space.