Microsoft and Facebook unite

It has finally been announced, Microsoft has won another advertising battle against Google when it purchased 1.5% of Facebook for $240 million in cash. In addition to this, it is now being suggested that Facebook is raising $500 million more from hedge funds, using the same $15 billion valuation. This will give Facebook enough money to pay its increasingly large staff and make acquisitions of its own- maybe even some of the applications it has let outside developers create.

Facebook does not have the revenues to to justify the price tag of $15 billion. It will not continue to grow as fast and has already shown moments of stagnation. It will continue to be successful and is something that will last, but the return on investment expected from the current finance round are not realistic. I believe the hedge fund guys are just waiting for the Facebook IPO to happen; just as soon as Facebook burns through the $750 million. The IPO will be successful, but we are only blowing more air into an already large bubble.

Now that Microsoft has a stake in Facebook, will Google want its share of Myspace? Google could probably get a good price, in comparison to the Facebook valuation, for a stake in Myspace. Closer ties with Myspace and News Corp could ease Google’s expansion to TV and also offer YouTube a chance to redeem itself with the big studios. At the same time there are clearly advantages for News Corp as well as it has been clear that Rupert Murdoch is interested in internet properties, but more importantly could use Google’s leverage and resources in advertising to shape up the Wall Street Journal…

Tags: facebook, google, microsoft, myspace, news corp