Blaming the coming 2.0 bubble on Facebook

Some time ago, a social network called Facebook raised 500$ million from Goldman Sachs (450 million) and Russian firm Digital Sky Technologies (50 million). This operation valuated Facebook at an astonishing 50$ billion. This is more than other well-established digital firms like eBay or Yahoo and double the market cap of Sony. Yes, I know Facebook has 600 million users or 'potential clients' (in business terms), but until now it has failed to monetize them. Its main source of revenue is advertising, and according to reports Facebook's success in it is far lower than the rest of the web. Its users have a clear objective in mind, communicating with friends, thus they do not pay attention to banners. Brands however, have found in Facebook the perfect channel to communicate with their clients; but Facebook itself is not seeing any money from this... In marketing, having a large audience and knowing a lot of information about said audience is key for success; but until know Facebook has been unable to use this at full power (conspiracy theories of Facebook selling user's personal data to other companies aside) so the 50$ billion market cap comes basically from estimations of the company's potential.

Valuating a company based just on its potential is a tricky thing to do, as subjectivity comes to play. In the example of Facebook, maybe it has the necessary ingredients to earn lots of money, but nobody is cooking them into an edible product as of now. This takes us to the point where some very risky bets are done based purely on instinct, not real-world results or prospections. But investors around the world, sad with the absence of  'bulls' to ride on the way to market recovery did not mind that. They began to salivate on the thought of being part of the rise of a new giant, the social internet companies (commonly called 2.0). As such, when the invitation to the party appeared in the form of the LinkedIn IPO, and later the Yandex (the leading search engine in Russia) IPO the market was all-in. 

Microsoft's impulse buy. Expect buyer's remorse soon...

The net is still shocked by Microsoft's buyout of Skype for $8.5 billion. The adjectives whopping, astonishing, unbelievable, incredible, crazy and stupid are among the most repeated when describing the price Microsoft paid for the VoIP company. People do not forget that when eBay purchased Skype in 2005 it did so for $2.5 billion. That price also seemed very high at that time, people were still remembering the excesses of the dotcom era. However back in 2005 when eBay bought it, Skype was still a promise, a young and innovative company with lots of room to grow and lots of potential for doing so. 

While Skype is still young and innovative it can not be considered a promise anymore, but a fully mature company. Its earning reports matter like any other company's and the last one showed a $7 million loss. It has a user base of more than 663 million but as of now, Skype is making a slender profit of approximately 1.30$ per user. These are some numbers that do not help justify the price Microsoft has paid.

But Microsoft knows this, its is impossible to justify the price paid based on the numbers, so they are focusing on the intangible instead. Microsoft talks about seamless integration with its Xbox360 network, about the synergies between Skype and Facebook (which was thought to be a bidder for Skype too and has a partnership with Microsoft) and about integrating it with its latest Windows Phone 7 mobile phone OS.

All of these look like legit reasons for Microsoft to buy Skype; but seriously: who does think these synergies are going to compensate the price paid? Not even in the long term... 

For me, the real reason for Microsoft to purchase Skype is mainly: