Facebook receives $200m funding valuing it at $10b

(By Richard Holway 5.00pm 26th May 09) After widespread rumour over the last week, it has just been announced that Digital Sky Technologies (DST) has taken a 1.96% stake in Facebook valuing the company at $10b. In addition, DST will buy at least $100m of Facebook stock from existing Facebook shareholders.

DST is an internet investment house with considerable interests in internet assets in Russia and Eastern Europe – eg Mail.ru. They claim that these assets “account for over 70% of all page views in the Russian-speaking internet and its social networks are market leaders in 13 countries addressing a combined population of more than 350m people”.

You will recall that Microsoft took a 1.6% stake in Facebook in 2007 which implied a $15b valuation. Such is the power of the calculator, that massive paper valuations can so be achieved! One would doubt that anyone would actually offer anything like this for the whole company.

Facebook needs the money. Despite being (perhaps) the hottest internet property around at the moment with a staggering 200m+ users (70% outside the US), it not only is still loss-making but has still to come up with anything like a viable revenue model. There have been persistent rumours that Facebook is short of cash. Last week Mark Zuckerberg practically admitted that he really needed a cash injection saying "If there's an investment to be done on very good terms, we will consider it if for no other reason than to have more buffer if we want to do something in the future."

I'm a great Facebook fan. Indeed, I have often said that if I was Steve Ballmer at Microsoft I'd buy it and use it as my consumer portal to the (Microsoft) Cloud. Then nobody would have to bother with a direct revenue model - which, for the life of me, I don't think actually exists. Just like our own UKHotViews, Facebook should be a marketing channel feeding users into things that actually can earn you money.