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Wanna bet, Blaise?   Facebook: What's Going On In There?
Jun 19 2008 3:21PM EDT

Stop with the $15 Billion for Facebook

Russ Mitchell emits: Maybe Facebook isn't worth $15 billion after all. Matt Cohler, Facebook's product guru and one of its earliest employees, announced he's leaving to play golf...er, become a VC.. at Benchmark Capital.

That silly $15 billion figure gets thrown around in the media every time someone invests in a company remotely related to social networking.

On Wednesday, Bain Capital's $53 million stake in LinkedIn supposedly makes the company worth $1 billion. Just like, as it is endlessly repeated, Microsoft's $240 million investment for a 1.6% stake in Facebook values the company at $15 billion.

Fundamentally, there is a huge difference between these two deals, and not just size. Bain is making a financial investment in LinkedIn. It's hoping to earn a huge -- and direct -- financial return on its stake, and as such, it's fair to extrapolate its stake to value LinkedIn, for the time being, at $1 billion.

Microsoft's investment is a strategic investment. Microsoft doesn't make pure financial investments at this scale. Overflowing with cash, Microsoft decided it was worth spending $240 million to get a front row seat, if not a place on the stage, as Facebook works its way through the emerging world of social networking. One likely offshoot for Microsoft: plenty of social networking features  incorporated into its Live Mesh platform, to be unveiled this autumn.

There is as yet no rational basis for concluding that Facebook is worth anywhere near $15 billion to anyone but Microsoft. The revenue just isn't there.

When Bain or its ilk announce a stake in Facebook, we'll begin to get a clearer picture of what sharp financial investors think Facebook is really worth.

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