This week, Russian investor firm Digital Sky Technologies took a $200 million stake in social network Facebook, which CEO Mark Zuckerberg says will make a solid cash “buffer” amidst a rough economic clime.
Zuckerberg declined to estimate a valuation based on the investment figure, arguing the shares are private and thus difficult to quantify, but Facebook’s overall value is nonetheless speculated to be about $10 billion — meaning the $200 million investment reflects a 1.96% stake.
In 2007, Microsoft invested $240 million in Facebook based on a $15 billion valuation, which was later speculated to be too high a figure. Zuckerberg asserted the investment was part of a broader business relationship that included an ad deal and an agreement by which Live Search would power Facebook’s search functionality.
“That was a strategic relationship with a lot of different components,” Zuckerberg stated (via Advertising Age). “It was a year and a half ago, and it was a different world at the time.”
At ad:tech Paris in April, Facebook’s Blake Chandlee, who manages its EMEA (Europe, Middle East and Africa) division, noted that over 70% of the social network’s traffic now comes from outside the US. He hastened to add that this is not because growth on US terrain has slowed; rather, it’s expanded significantly elsewhere.
comScore figures appear to corroborate this claim. In February Facebook logged 275 million global visitors, rising to the #6-ranked online property worldwide, a 75% increase over the same period last year. In 11 major European countries, it took the lead in the social network category.
According to Zuckerberg, Digital Sky Technologies was chosen for its strategic investments in other overseas social networks, which all boast different business models — including direct payments and advertising. It also has a financial claim on a handful of big players in the online Russian ad scene, including portal/search engine Mail.ru and social network Vkontakte.ru, which bears significant similarities to Facebook in appearance.
The company has agreed to buy “at least” another $100 million of Facebook, primarily in stock, from existing and past employees. Zuckerberg says the investment will not affect plans for an IPO, if one ever occurs; and partners from Digital Sky Technologies will not be joining Facebook’s board. On its own, the investment firm is worth about $1 billion and is rumored to be planning its own IPO within the next three years.
Presently, Facebook is testing a payments system for virtual goods. The socnet — which is projected to earn $500 million in revenue this year — aspires to be cashflow positive by 2010.