Worth more than Facebook value
Microsoft paid $250 million for a small stake in Facebook, winning out over websites like Google. But while Facebook expects $150 million in revenue this year, Google projects the site's value at $15 billion. Renita Jablonski tells us why.
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Scott Jagow: The social networking website Facebook had plenty of suitors. Yahoo was thinking about it. Google made an offer. But in the end, Microsoft won out. It's paying $240 million for a small stake in Facebook.
A little surprising here that Google got snubbed here. But what's more surprising is that Microsoft values Facebook at $15 billion. Really? More now from Renita Jablonski.
Renita Jablonski: It's hard not to wonder about that whopping $15 billion, since reports say Facebook will only bring in $150 million in revenue this year.
Ken Wilbur: It's a little tough to explain.
Ken Wilbur is a professor of marketing at USC's Marshall School of Business:
Wilbur: If Facebook continues to be the dominant platform for social networking, and social networking continues to grow at the pace it has been growing, then it could end up being profitable for Microsoft. But you know, there's an awful lot of "ifs" in there.
So why would Microsoft take the risk? Wilbur says that's a lot easier to answer:
Wilbur: I think what it's really about is the rivalry between Microsoft and Google.
Wilbur says it all comes down to the fight for online advertising. Google's a big player in that ring, and Microsoft doesn't want to risk losing a chance to bulk up its online ad muscle. Facebook had more than 73 million visitors in September.
I'm Renita Jablonski for Marketplace.
