Word: facebooked
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...other people on the same computer), these businesses are frantically scrambling to reinvent themselves. EastEnders must now fight for an audience not just with other terrestrial channels but with cable and satellite stations, while younger Brits spend more and more of their time trawling online sites like YouTube and Facebook. Mark Byford, the BBC's deputy director general and the Corporation's head of journalism, says there's a noticeable "falling away" of large swathes of TV viewers who are "under 35 and especially under 25." The BBC derives 78.5% of its $8.5 billion income from an annual license...
...first blush, it may seem like Microsoft got the short end of the deal when it paid $240 million on Wednesday for a puny 1.6% stake in the social-networking site Facebook. While Facebook is probably the most talked about destination on the Web today, the company will be lucky to clear $30 million in profit (on an estimated $140 million in revenues) this year. So what exactly was Microsoft buying, other than a lot of hope and, quite possibly, a lot of hype...
With $23 billion in cash reserves, the Redmond, Wash.-based software giant can afford to part with a little cash - even if it never earns a penny of it back. And Facebook could use the money - to hire more employees and build out the site, whose traffic is currently growing at over 100% per year, according to comScore Media Metrix, which tracks internet-user demographics. But what Microsoft chief Steve Ballmer and company desperately need these days is cachet in the burgeoning internet economy. And that is exactly what their investment just bought them...
Microsoft's partnership with Facebook, which also buys it the rights to broker all international ads, puts the company back in a game that it was struggling to keep up with. By partnering with Facebook, it has also kept key competitors at bay. "The investment Microsoft made was in keeping Google out," says analyst Rob Enderle. Not only will Microsoft garner more revenues by serving up ads for Facebook (the exact revenue split has not been disclosed, but is probably about 20% going to Microsoft) but it also has a great shot at getting its search engine built into Facebook...
...while Facebook's shiny new $15 billion valuation (up from $10 billion just a month ago) may seem out of this world, it pays to keep in mind that it's still just "Monopoly money," notes Khan. With hardly any profits to date, the company's actual valuation is all just speculation at the moment. That should become much clearer, once Facebook goes public sometime in the next year or so. One thing's for sure, however: the dotcom bubble just got bigger than ever. Get ready for another wild ride...