John Dvorak – Bloggers Hanging on Facebook Not Worth $300

Written by Amit Agarwal on Oct 29, 2007

john dvorak facebookMicrosoft acquired a 1.6% stake in Facebook last week for $240 million. This in turn allows Microsoft to sell ads on Facebook web pages and share the ad revenue with Facebook. Some basic calculations:

Total Value of Facebook = $15 billion (since 1.6% = 240 million)

Total Number of Facebook users =~ 50 million

Price Microsoft paid per Facebook member = 15b/50m = $300.

John Dvorak argues that the deal is over-valued – “Microsoft paid $300 a head for what are essentially bloggers, duds, poor students and hangers-on. What are these people constantly buying that makes them worth that much?”

With due respect to Dvorak, I have a difference of opinion here:

1. Facebook is not for students anymore. If you look at various Facebook networks, most working professionals are now on Facebook (including 7,000 Googlers and 20,000 Microsofties). Aren’t this “rich” workforce buying stuff online.

[And these people are spending good amount of time on Facebook if the recent reports on “Productivity Loss Due to Facebook” are true.]

2. I have around 600 friends on Facebook – most of them are quite net savvy, early adapters and very active on Facebook. They may or may not be blogging but they are the ones who’ll always turn to the Internet first for buying products and services.

3. And the most important part – Facebook (and Microsoft) may not need people to “constantly buy” anything for the deal to work – the enormous base of Facebook and the user data would be so attractive for companies who want to spread buzz or get feedback about their products or run polls among a selected group of users.

No other social platform has the kind of advantage that Facebook has. The ads can be targeted so well that Facebook may command much higher CPM rates from advertisers. And since Facebook is a closed environment (only members can log-in), factors like “Click Fraud” won’t worry prospective advertisers.

Related: Adverting with Facebook Flyers

Subscribe to our Email Newsletter