Why microsoft should not buy facebook!

by ian on May 25, 2008

I have seen figures around the place of US$10 billion, $15 billion and even $20 billion as a possible value of facebook. Now microsoft is already serving ads on facebook, so it must have an idea of how good the ads are. The articles that I have read, this one being the most recent one, suggests that the ads on social networks are not all that lucrative.
Also consider the fact that this article suggests that Facebook may make a loss. Now it is not uncommon for sites that are making a loss to sell for millions and sometimes billions of dollars, but seriously, I think Bill Gates needs to intervene and not let Steve Ballmer get all caught up in the hype and make a stupid business decision. I heard somewhere that Microsoft’s cash reserves were somewhere around the $50 billion mark. They should be investing in internet companies that are profitable and that will add to their cash reserves in the future, not ones that will further deplete their cash reserves over time.
Also social media sites are fickle, friendster, use to be the leader before it slipped into obscurity. According to alexa, myspace.com is ranked at No 6, facebook.com is ranked at number 8. Myspace.com was sold for US$580 million, one would have to think that a facebook valuation over $1 billion does not look like good value.
Bill Gates appears to have a fairly close relationship with Warren Buffett. I think he should step in and make it mandatory that any deal over a billion dollars needs to be analysed and approved by Warren Buffet first.
It is not all that hard to spend a lot of cash and build sites that are immensely popular, the real challenge and value is in sites that are profitable.

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