An interesting take on Microsoft’s recent purchase of 1.6% of Facebook.

FTA:

Microsoft doesn’t value Facebook at $15 billion. It values 1.6% of Facebook and an expanded and extended ad deal at $240 million. That’s it. You can’t ignore the ad deal and magically come to a $15 billion valuation.

My take on this:

Microsoft placed itself in a great position. 3+ years is a long time and Facebook has a lot of room to grow compared to, say, MySpace which may be close to reaching its saturation point.

Also one factor to consider is Facebook’s target audience. Having a young target market has some great advantages:

First, there are more young people than old ones.

Second young people has the potential to consume a product much longer, once they are hooked.

Third, they get more chances to socialize with their peers.

Finally, this means that there is still a huge chuck of untapped resource outside that main target market that, if managed properly, should translate to a large portion of the company’s revenue.

Still, this is a very high valuation to make at this point in time. Facebook’s potential is nothing but pure speculation for now. Are we seeing a second dot-com bubble? Who will emerge victorious and who will be left crying in the dust in the end? Who will rise from the ashes, or even from the grave? Only time will tell.

More about this deal can be found at WSJ.

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