SortiPreneur

Mobile Monday Events are Back!

MoMo's back.  Hope to see you at the October event.

Rumors of Microsoft Buying a Small Stake in Facebook

So it looks like Facebook's hit the $10b mark earlier than many people's predictions.  There was much talk of a $10b+ IPO in 2008 or 2009, but the rumored MSFT move makes that look like an impossibly modest target.

Let me go on the record:  At $10b, Facebook is still a good deal for Microsoft.

Take a look at these numbers from Inside Facebook:

• Facebook now has more than 42 million active users (double the number one year ago when it opened up registration and growing at more than 200,000 per day since January)
• More than half of Facebook users are outside of college (85 percent of US college students still use Facebook)
• More than half of active users return daily (users spend an average of 20 minutes on the site per day)
  
• Facebook is the top photo sharing application on the Web
• There are more than 6 million active user groups on the site
• More than 80% of Facebook members have used at least one application built on the Facebook Platform

The price is $250 per active user.  This is an audience belonging to the weathiest segment in the world, wiy 100% YoY growth. At 20 minutes a day, you have unprecedented attention.  Plus you know who they know and talk to.  At least $20m of those users, share with you more than you they share with Google.  So, you also have intention information.

If the buyer will not know how to generate cash from this trove of potential revenues, it will be due to their own incompetence.

I presume MSFT will try to get some options for enlarging their stake in their deal.  Facebook has been a tough negotiator, but if they do, I'll bet that those options will get exercised.

Finally, Barış is talking about the largest venture deals ever:

1  Chorum Technologies Richardson, TX Communications & Networks: Fiberoptic Equipment & Photonics Out of Business
2  CoSine Communications Redwood City, CA Communications & Networks: Connectivity Products Publicly-held
3  Internet Brands El Segundo, CA Media/Content/Info.: Media, Content & Information  In IPO Registration
4  Tellium Oceanport, NJ Communications & Networks: Fiberoptic Equipment & Photonics Publicly-held
5  TradeOut.com Valhalla, NY Cons/Bus Services: Business Services (Not Financial) Out of Business
6  Zhone Technologies Oakland, CA Communications & Networks: Connectivity Products Acquired/Merged

If we count this prospective Facebook deal a venture deal (I am not sure I would - I think there's much less growth capital needs, and much more strategic direction involved), it easily tops this list. Interestingly, 4 of the 6 deals above are infrastructure deals.  I have always seen Facebook as a true technology company - one that is installing a social infrastructure over the pipes of the internet.

This is really interesting to watch.

IMSG Buys Zap Medya

There's a new acquisiton in the Turkish internet industry - IMSG has acquired Zap Medya for approximately $13m (probably after an earnout).  The announcement also discloses that Zap had 2006 revenues of $12m and pre-tax earnings of $2m.

Zap is an interesting company that it has somewhat cornered the dysfunctional online advertising industry.  I presume that the bulk of the $12m revenues is actually media billings of its customers and, if true, it points to the enormous cuts the middlemen have in the Turkish online advertising market, given the very high net margin indicated by the earnings figure.  One has to wonder how sustainable the current model is, given that the media buying agencies, which previously have outsourced their online work to Zap, have started launching their own online companies and departments.

The acquisition is good news for Turkish internet sector, as more and more international players are taking notice of the opportunities here.  Congratulations to the Zap team.

PS. I am going through a much slower blogging period, largely due to a new baby. :)

UPDATE: Bulent Boytorun, Zap's CEO sent me a message with some corrections, as well as some clarifications on the transaction and Zap's business.  Here are the hightlights:

...the figures that were disclosed were not properly announced. The 2 m is a figure forecast for 2007 at an expected turnover of around 20 m USD, and Zap's sole income is not the media billings [but also from our creative and content management services].
...
Not a majority of our profits are generated from our creative & content management services, but it is still quite sizable.
...
It is the usual practice to have about 10 % media commission on online media billings throughout the world, since the budgets are much smaller than those on TV or newspapers and the work involved is quite extensive. However, especially big networks add to this commission their adserving costs -which may be between 5 to 50 cents per CPM- as well as additional creative and analysis charges or even extra charges for strategic planning.

Here at Zap, we provide all these services free of charge (including at many cases the whole creative work if it is in connection with a sizable campaign) and all is included in the commission we charge.