What Microsoft wants from Facebook



I have posted an analysis on BusinessGeek my analysis of whether Facebook is worth $15B, and whether Microsoft cares.  As previously, I will give you the summary and let you decide if you are interested in the detail.

Considering it is already making a good profit (or any profit) of $30M, a $15B valuation is not too much of a stretch mathematically.  If we take a risk adverse pay-back period of 15 years, then a 44%pa growth rate is required.  This is not difficult to achieve in technology.  What is missing to make this valuation valid, is a track record of profit growth and proof that Facebook is sustainable and not just a brief fad.

Microsoft don’t care though.  If they buy a stake in Facebook they are almost certain to win their ads away from whoever they use now, which could easily pay for their investment in a relatively short time.  It also allows them to block other companies from getting involved by giving Facebook a high value.  If Facebook turns out to be the next Google, Microsoft already have a piece.  For the potential benefits, $500M is a low risk figure for Microsoft.