If Facebook is worth $2 billion ... (Tech Confidential

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If Facebook is worth $2 billion ...

[Posted on June 21, 2006 - 1:50 PM]

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Then why is it selling equity in exchange for advertising revenue?

The rumored deal calls for Interpublic Group of Cos. to spend $10 million to advertise on the Facebook site in exchange for 0.5% of online social network's privately held stock. The deal is just rumor at this point, and I find it impossible to believe Facebook's shareholders would agree to it as stated above. A partnership with Interpublic would be valuable, but it's hard to believe it takes stock to make it happen.

If the rumor is true, it's good for Facebook that it achieved a $2 billion valuation in the negotiations.

Yet, it's bad for Facebook that it must give up its stock to draw major-league advertisers onto its site. Very bad. As a PaidContent commenter notes, if that's what it takes to get the big boys on board, then a few zeroes are going to be lopped off that supposed $2 billion valuation in no time.

For more on the Facebook-Interpublic rumors, see:
MediaWeek
PaidContent
GenDigital

Technorati tags: microsoft, facebook, ballmer, bittorrent, youtube, vc, venture capital.

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