The value of a premiere social networking site became clearer this week after a media report said Microsoft has held talks with Facebook about investing between $300 million and $500 million for as much as a 5% stake in the startup. That would value Facebook at up to $10 billion, although CEO Mark Zuckerberg and his advisers may hold out for a valuation as high as $15 billion, according to the report on WSJ.com.
As lofty as that valuation range is, it's in the same ballpark as the roughly $12 billion that News Corp. Chairman Rupert Murdoch thought his MySpace unit was worth when the media mogul reportedly offered to swap it for a 25% stake in Yahoo earlier this year. That makes the $580 million News Corp. paid for MySpace in 2005 a steal.
Facebook's investors may soon get their own home run valuation. While MySpace is still larger as measured by unique users and page views, Facebook is growing faster and has gained a lot of momentum after opening up its platform to application developers.
The WSJ.com reported that Google might also be interested in Facebook. If true, it wouldn't be the first time it's competed with Microsoft for a hot Internet property. Microsoft paid $6 billion for Web ad firm aQuantive earlier this year after losing a $3.1 billion bidding war for DoubleClick to Google. Microsoft and Facebook -- both founded by Harvard drop-outs -- have an existing agreement under which Microsoft is paying around $200 million over three years to place ads on Facebook's site.
All this illustrates the rich valuations investors are applying to Web sites that have no profits but are parlaying user-generated content into explosive growth.
The fun question now is whether Zuckerberg will soon join Microsoft's Bill Gates as a dropout-turned-billionaire tech entrepreneur.
Question: Who do you think is worth more, Facebook or MySpace?