Ad agency takes stake in Facebook

This one seems to have been overlooked by everyone on techmeme.com, and even Rafat Ali at PaidContent missed it on Friday, but picked it up today: Interpublic Group, the global advertising conglomerate, has done a deal with Facebook — the social networking site aimed at university students that is the hottest thing next to MySpace.com.

Earlier this year there was an article in Business Week magazine that said Facebook’s frat-boy founders had turned down offers of $750-million for their company, and were looking for future offers in the $2-billion range.

This number was scoffed at by many, including former tech analyst and blogger Paul Kedrosky and some observers said that the Facebook guys were either trying to get publicity or their initial investors were trying to ramp the price up. The company later said that it had no intention of selling, and that the $2-billion figure didn’t come from Facebook.

The Interpublic deal, however, tends to support that rather large valuation (at least in theory). According to an article in Mediaweek magazine, the agency has agreed to buy advertising worth $10-million on the site, in return for one-half of one per cent of the company.

If you do the math, that would imply a valuation for all of Facebook right around the $2-billion mark. Crazy? Perhaps. But then, no one thought Rupert Murdoch would ever pay almost $600-million for MySpace, or that eBay would buy a money-losing Internet phone company for somewhere between $2.4-billion and $4.1-billion.

Update:

Josh of FeelingBullish.com makes a good point in the comments about the true value of this deal, since Interpublic gets advertising for their $10-million as well as a stake in the company. And a commenter over at PaidContent made a similar point at greater length, which Rafat posted in full, and it is well worth reading — the idea being that the deal actually seems kind of desperate, and perhaps designed to bolster the $2-billion valuation idea.

Update 2:

SiliconBeat has more info here — it seems the advertising deal and the ownership stake were two separate deals, not related at all, and npoo monetary figure was given for the purchase of the .5 per cent share, so no extrapolations can be made about valuation. Darn.

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