Facebook scores $200 million
Russian investment group Digital Sky gets 2% stake in Facebook. Investment values social networking site at $10 billion.
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.
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.