Facebook scores $200 million

Russian investment group Digital Sky gets 2% stake in Facebook. Investment values social networking site at $10 billion.

EMAIL  |   PRINT  |   SHARE  |   RSS
google my aol my msn my yahoo! netvibes
Paste this link into your favorite RSS desktop reader
See all CNNMoney.com RSS FEEDS (close)
By David Goldman, CNNMoney.com staff writer

Facebook Chief Mark Zuckerberg said revenue numbers are rising.
Would you buy a home now?
  • Yes, housing prices have hit bottom.
  • No, the real estate market still has further to drop.

NEW YORK (CNNMoney.com) -- Facebook said Tuesday that it received $200 million from Russian investment group Digital Sky Technologies in exchange for a 2% stake.

The deal puts a $10 billion valuation on privately-held Facebook, according to a company statement.

The agreement also calls for DST to eventually buy at least $100 million of Facebook's common stock, which the company estimates will happen during the coming months.

Microsoft paid $240 million for a 1.6% stake in Facebook in October 2007. That deal placed a $15 billion valuation on the social networking site. Just about one year ago, the company's internal valuation was $3.7 billion. (Full story)

"This is good and bad news for Facebook," said Ray Valdes, social networking analyst at Gartner. "The good news is that they can still get a pretty good valuation in a down economy. The bad news is it's nowhere near the value of the Microsoft valuation."

Experts say the credit crisis has hurt Facebook's ability to raise capital from investors. "Facebook had to look far and wide to get that kind of investment," said Valdes. "There are a lot of willing investors in Silicon Valley, but not at that number."

Facebook Chief Executive Mark Zuckerberg would not comment outright about the valuation figures. When asked during a conference call if the company is worth less now than it was during the Microsoft (MSFT, Fortune 500) valuation, he said, "I wouldn't say that," explaining that the deals are not identical.

Microsoft's deal involved a direct investment and the expansion of a pre-existing advertising partnership. DST brings a different type of partnership to the table. The Russian firm says on its Web site that it has raised and invested more than $1 billion in over 30 companies since it was founded in 2005.

"Our investment experience in other regions reveals the tremendous value social networking companies create as they redefine how people communicate and interact," said DST Chief Executive Yuri Milner. "Facebook has a chance to be one of the most successful Internet companies globally."

Most analysts do not believe that five-year-old Facebook has yet turned a profit due to the high volume of new usership and its apparent inability to monetize advertising on a social platform.

While not direct rivals in terms of social networking, big tech companies like Yahoo (YHOO, Fortune 500) and Google (GOOG, Fortune 500) rely heavily on advertising to make money.

Despite a "tough" economic environment, Zuckerberg said Facebook's revenue numbers are up, the company is "on a track towards creating a self sustaining business."

As a result, Zuckerberg said Facebook has been approached by "a number" of firms. The company chose to team up with DST because of the firm's "global perspective." Facebook last month surpassed 200 million users, 70% of which the company says are from outside of the United States. To top of page

They're hiring!These Fortune 100 employers have at least 350 openings each. What are they looking for in a new hire? More
If the Fortune 500 were a country...It would be the world's second-biggest economy. See how big companies' sales stack up against GDP over the past decade. More
Sponsored By:
More Galleries
5 radical technologies that will change how you get to work From Uber's flying cars to the Hyperloop, these are some of the neatest transportation concepts in the works today. More
Royal wedding: How much will it cost? Meghan Markle's wedding to Prince Harry could cost millions once security is included in the bill. See how the costs break down. More
Robot co-workers? 7 cool technologies changing the way we work Experts believe humans and machines will work much more closely together. More
Worry about the hackers you don't know 
Crime syndicates and government organizations pose a much greater cyber threat than renegade hacker groups like Anonymous. Play
GE CEO: Bringing jobs back to the U.S. 
Jeff Immelt says the U.S. is a cost competitive market for advanced manufacturing and that GE is bringing jobs back from Mexico. Play
Hamster wheel and wedgie-powered transit 
Red Bull Creation challenges hackers and engineers to invent new modes of transportation. Play