Unpacking the Microsoft Facebook deal

Well when I heard about the Microsoft Facebook deal last week I wondered what's up. To me it just looked like Microsoft wanted a captive audience for advertising in a market that they knew already used computers - I mean used them as toys, not just used them for work.

But then I read this article by a serious looking dude called John C Dvorak (a serious name too) on Marketwatch, and he says:

Do the math: Microsoft's Facebook deal makes no sense

"Microsoft is going to place ads, sell ads, broker ads and do some sort of revenue split with Facebook. For that, Microsoft pays $240 million and gets 1.6% of the company. When you extrapolate the valuation of Facebook and run the figures against the user base of around 50 million, it means that each and every user is tallied at $300 a head.

I thought valuing registered users of Web sites got expensive back in 1999, when they were as high as $100 a head; $300 is sky-high." Read the whole article.

Techdirt further muddied the waters about the Microsoft and Facebook deal with this story:

Microsoft's Facebook Deal Might Make Sense If It's An Ad Subsidy... But What About The Hedge Funds?

"It's been reported that Facebook had been looking for $750 million, but those hedge funds don't get any of those additional benefits that Microsoft gets. For them, the best has to be on the fact that Facebook is going to be worth a lot more than $15 billion at some point in the relatively near future. That seems like an awful lot of money to bet on a risky situation without that much upside." read the whole story