Facebook > WSJ + Chicago Tribune + LA Times + Chicago Cubs + YouTube

facebook microsoft deal
So you still don’t think Facebook is a big deal? Today’s Wall Street Journal reports that Microsoft (MSFT) has agreed to purchase a 1.6 percent stake in Facebook for $240 million. That pegs the overall value of Facebook at $15 billion.

In the real estate world, when setting a market price for a house my friends Ben Martin (or at least the people in his Virginia Association of Realtors) and Daniel Rothamel look at what they call “comparables.” They ask, “What price have similar houses in the neighborhood brought recently?” Let’s look at the comparables for Facebook. In roughly the last year:

  • Rupert Murdoch’s Newscorp paid $5 billion for the venerable Wall Street Journal
  • Sam Zell bought the Chicago Tribune (which owns the Chicago Cubs and had earlier purchased the Los Angeles Times), for $8 billion
  • Google (GOOG) gobbled YouTube for $1.65 billion
  • Avista Capital acquired the Minneapolis-St. Paul Star Tribune (and a few blocks of prime downtown real estate) for $530 million.

Add them all together, and they’re barely equal to the valuation Microsoft placed on Facebook.

Which just shows that for Facebook there really aren’t any comparables. Why?

  • Facebook has 85 percent of college students in its network, and a similar percentage of recent graduates. At a conference I attended earlier this year, I heard that David’s Bridal has found that people spend more money in the five years after they get married than they do in any five-year period. Facebook has the ability to help advertisers reach these people in their golden spending years. If, as David Walker said about Medicare, “Demographics are destiny,” Facebook’s future is bright indeed.
  • Facebook’s growth in other demographics is similarly astonishing. In adding 200,000 new users per day, Facebook ran out of college students to bring in a long time ago. The great majority of the growth this year has been in older adults and internationally. Shel Israel said yesterday that in Israel, where the primary language is Hebrew, Facebook now has nearly 100,000 users, which is up 33 percent in the last 9 days.
  • Facebook users don’t (mostly) just sign up for an account and forget it. Over half of its users visit the site at least once a day, and the average time spent on Facebook is 20 minutes per day.

I will confess that when it was reported last year that Mark Zuckerberg had turned down $1 billion or more for Facebook, I thought he would regret it.

That was before I actually tried Facebook. If you haven’t tried it, you should. Shel Israel says it’s the most beneficial professional networking tool he has ever used. My other friend Shel, Shel Holtz, and his partner (in the podcasting sense) Neville Hobson, in their For Immediate Release podcast for PR professionals, talk about Facebook in every program. They’ve joked that they have a rule that they have to mention Facebook at least once in each of their twice-weekly podcasts, but the reality is Facebook is that important.

Steve Ballmer obviously thinks so. And if you’re in sales, marketing, PR or have any need for professional networking, so should you.

Lest Shel Israel take me to task for that last line, I want to emphasize that you need to understand Facebook and social networking, and not see it as just another channel to force-feed your marketing messages to a captive audience. They (we) are not an audience. We’re creating content, too. Markets are conversations, and that involves both speaking and listening.

Microsoft is betting big that Facebook is where a lot of those conversations will be happening.

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Author: Lee Aase

Husband of one, father of six, grandfather of 15. Chancellor Emeritus, SMUG. Emeritus staff of Mayo Clinic. Founder of HELPcare and Administrator for HELPcare Clinic.

7 thoughts on “Facebook > WSJ + Chicago Tribune + LA Times + Chicago Cubs + YouTube”

  1. Lee:

    I think Facebook is a great tool. But I also think it’s being greatly overvalued. In a few years social networking functions will be commonplace among all web sites, networks and applications.

    I’m currently pruning my list of groups. At least half of the groups I’ve added over the past few months have very little activity.

    Granted, I’m an undesirable demographic — baby boomer — but next year at this time we may very well be knee-deep in “the next big thing.”

    Dennis McDonald

  2. Dennis – You may be right about the valuation. It’s pretty mind-boggling. Microsoft didn’t pay that price for the rest of the 98.4 percent of the shares, and Facebook wasn’t willing to part with them.

    I thought $1.5 billion was high when Zuckerberg turned it down last year, so I’m not in position to argue to hard against $15 billion now.

    I think I’m going to be pruning some groups, too. But I’m going to be starting some, too. I still think that with the momentum Facebook has, it has potential to be the hub for a great deal of activity.

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