Call is beginning at 2:07 pm
Viveck Varma, MS, Owen Van Natta, Facebook, Kevin Johnson, Facebook, Brandee Barker, Facebook are on the call.
Viveck is saying the press release below has minor errors and will be re-issued. We will update it as it becomes available. He’s actually reading the entire release to the call participants.
200,000 new users register for Facebook every day.
Microsoft ad deal was extended to 2011 early this year.
Owen and Kevin:
Owen is saying this investment will help Facebook grow. They have nearly 50 million active users. This alliance will help them create the best user experience.
Kevin – “this deal signals a major advertising syndication win for Microsoft.” This is a “win-win-win.”
Now taking questions
Q: How do you support valuation?
Viveck: Online advertising is $40b/year, will grow to $80b per year. Equity stake in facebook is a strong statement of confidence in MS’ ad platform and in facebook. If you look at FB growth and think that they will get to 200 million users in future, combine that with monetization opportunity along with modest rev/user/year, the valuation is supported.
Q: Signal a bigger partnership around other products?
A: Nothing specific, but the partners will be doing a lot more together over time.
Q: Why Microsoft over Google?
A: (Owen) We were fortunate to choose from partners. We have existing relationship with MS and we had the opportunity to expand it.
Q: Any new restrictions on platform developers?
A: No new restrictions
Q: (mine) Any other investors in this round?
A: No comment, not saying one way or the other (JMA note: this suggests there may be other investors even beyond existing ones).
Q: Will we see any reciprocity? Any FB apps integrated into any MS properties?
A: Not announcing anything right now.
Q: Josh Quitner – who else was interested in investing?
A: Not announcing anything.
Q: Why did MS only take a 1.6% stake? Does this money affect FB IPO plans?
A: No real answer. Investment was the best fit for both companies.
Q: Is this deal just for banner ads?
A: partnership extends across adcenter platform for MS, not disclosing anything around web search advertising. Deal does not include web search ads like Google/Myspace deal.
Q: Any minimum payment that is guaranteed under ad deal? If so, will it be disclosed?
A: Kevin is saying they are very pleased with current deal, but strategic deal, way collaborating together, equity position provides economic and strategic value of overall partnership. “We feel very good about the deal.” Owen is saying that they want to focus on innovation and user experience, and this deal allows them to do this.
Q: (Om Malik) What kind of performance on FB from previous ad efforts? What will FB use the money for?
A: Kevin: we continue to see monetization improve, many initiatives underway to drive it higher. We’re seeing great progress on deal so far. Won’t discuss specifics on click throughs, etc., both parties have agreed to keep that confidential. At a high level, both parties see monetization on an eCPM basis improve. Owen: We’ll use the capital to continue to fund innovation and growth; we plan to expand employee base dramatically next year to 700 employees; doubling user base every six months; international growth is very important.
Q: How did deal come together? Also, what kind of collaboration between two companies? How deep will it be?
A: Owen: we’ve been working with MS for over a year, constantly talking about evolving partnership. MS is doing a huge amount of building around adcenter.
MS is Facebook’s exclusive advertising partner, expanding from U.S. to global in today’s announcement.
Q: Does adcenter have access to profile data in serving ads?
A: user trust is core, as is providing highly relevant ads. want users to feel like trust is not violated in any way.
Call is ending at 2:38 pm PST.
Press Release On The Investment:
Facebook and Microsoft Expand Strategic Alliance
Microsoft to take equity stake in Facebook; companies expand advertising deal to cover international markets.
PALO ALTO, Calif., and REDMOND, Wash. — Oct. 24, 2007 — Facebook and Microsoft Corp. today announced that Microsoft will take a $240 million equity stake in Facebook’s next round of financing at a $15 billion valuation, and the companies will expand their existing advertising partnership. Under the expanded strategic alliance, Microsoft will be the exclusive third-party advertising platform partner for Facebook, and will begin to sell advertising for Facebook internationally in addition to the United States. Financial terms were not disclosed.
“We are pleased to take our Microsoft partnership to the next level,” said Owen Van Natta, vice president of operations and chief revenue officer at Facebook. “We think this expanded relationship will allow Facebook to continue to innovate and grow as a technology leader and major player in social computing, as well as bring relevant advertising to the more than 49 million active users of Facebook.”
“Making this investment and expanding this partnership will position Microsoft and Facebook to better take advantage of advertising opportunities around the world, and is a great win for not only for our two companies, but also our collective users and advertisers,” said Kevin Johnson, president of the Platforms & Services Division at Microsoft. “We have partnered well over the past year and look forward to doing some exciting things together in the future. The opportunity to further collaborate as advertising partners is a big reason we have decided to take an equity stake, and is a strong statement of our confidence in the long-term economics of this partnership.”
Facebook continues to experience strong growth both in the U.S. and international markets; 59 percent of Facebook’s users are outside the U.S. With an average of 250,000 new users registering each day, Facebook continues to be one of the most-trafficked sites on the Internet.
On Aug. 22, 2006, the companies announced a U.S.-only strategic alliance that named Microsoft the exclusive provider of standard banner advertising on Facebook using Microsoft’s digital advertising solutions and the Microsoft® adCenter platform. In early 2007, the terms were extended to 2011.
Founded in February 2004, Facebook is a social utility that helps people communicate more efficiently with their friends, family and coworkers. The company develops technologies that facilitate the sharing of information through the social graph, the digital mapping of people’s real-world social connections. Anyone can sign up for Facebook and interact with the people they know in a trusted environment. Facebook is a part of millions of people’s lives and half of the users return daily. Facebook is a privately-held company and is headquartered in Palo Alto, Calif.
Founded in 1975, Microsoft (Nasdaq “MSFT”) is the worldwide leader in software, services and solutions that help people and businesses realize their full potential.