What bubble? Analysts defend $15 billion Facebook valuation

The new $15 billion price tag attached to Facebook was more a reflection of Microsoft's need to do a deal with the company rather than an indication of its true worth, analysts said today.

Fears that the internet industry - which has hosted a string of multi-billion dollar deals in recent months - was entering another bubble similar to the one it experienced seven years ago were also dismissed, with analysts pointing out that in most cases investment had come in areas that showed significant growth potential.

Yesterday Microsoft announced that it would buy a 1.6 per cent stake in Facebook for $240 million, ending a months-long bidding war with Google, its arch rival, which was also keen to share a piece of the lucrative advertising revenues that Facebook is expected to start generating.

As part of the deal, which values Facebook at roughly 100 times its estimated $150 million revenues, Microsoft will have exclusive right to serve ads on Facebook's platform, expanding an agreement which was already in place for ads on the US site.

Microsoft's investment, which makes Facebook's 23-year-old chief executive, Mark Zuckerberg, worth an estimated $3 billion - at least on paper - follows a string of high-value deals in the internet sector, including Google's acquisition of DoubleClick, the advertising platform, for $3.1 billion, and Microsoft's previous purchase of aQuantive, another server of internet ads, for $6 billion.

The deal gave rise to a wave of blog entries with titles like 'Facebook's funny money', and recalled the early valuations of Yahoo!, the search firm, which had a price to earnings multiple of 1,000 in March, 2000.

http://technology.timesonline.co.uk/tol/news/tech_and_web/article2738681.ece’