Facebook's value has been debated since late 2007 when Microsoft (MSFT
) bought a 1.6% stake in the social network, which valued it at $15 billion. The quickly growing firm had almost no revenue back then. Now, Facebook's value has shot to more than three times that as Goldman Sachs (GS
) and Russian investment firm Digital Sky Technologies put money into the company based on a $50 billion valuation. Goldman will take a $450 million stake, and Digital Sky, which already holds a position, will invest $50 million, according to The New York Times.
The new valuation of Facebook is less than five times that of Microsoft, which reported $63 billion in revenue in its last fiscal year and $19 billion in net profit. Microsoft also has $36 billion in cash and short-term investments on its balance sheet. Facebook's revenue is estimated at between $1 billion and $2 billion, and is said to be very modestly profitable.
The valuation reflects the future expectations for a company that already has 500 million users worldwide and has barely tapped huge markets like China and Russia. Facebook will almost certainly use the money for expansion into new markets. The social network's audience is roughly the size of Google's in the U.S. It carries over 25% of all online display ads available in its home market.
However, one threat to the valuation is that Facebook might find its growth stymied in some foreign markets. It is, for example, not allowed to operate in China at all. Without a Chinese presence, it may not take long for the $50 billion valuation to be reconsidered.
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