Facebook gets funding offer from Russian private equity firm
The debate over the value of social networks will go on for months and perhaps longer. Operations like Google's (GOOG) YouTube, News Corp.'s (NWS) MySpace, Twitter, and Facebook have huge numbers of users. Facebook now has over 200 million users world wide.
But the websites have done poorly finding revenue models. Industry experts say that Facebook will bring in only $500 million in revenue this year and will probably lose money. That sales figure is remarkably low for a business with such a large audience.
The valuation debate heated up as a Russian private equity firm, Digital Sky Technologies, offered to put $200 million into Facebook in a complex deal that would value the firm's preferred shares at $10 billion and its common shares somewhat lower. According toThe Wall Street Journal, "Under the terms of DST's two-part offer, the Russian investment group would also offer to buy between $100 million and $150 million in Facebook common stock at a $6.5 billion valuation." Some of this capital would be used to buy stocks from exiting employees.
One of the reasons that experts are skeptical about the value of social networks is that two years ago Facebook raised money using a total valuation of $15 billion. If the company is growing so fast why is it worth so much less now?
Douglas A. McIntyre is an editor at 24/7 Wall St.