Bill Gates

So it's October of 2007. Microsoft is missing search, and they're realizing social seems to be a wave that's coming five, six years after search. Also a great online advertising business. We now deeply understand and regret not being a bigger player in that business. We can't let it happen again. So what do we do? We're not going to build one of these internally.

So it's October of 2007. Microsoft is missing search, and they're realizing social seems to be a wave that's coming five, six years after search. Also a great online advertising business. We now deeply understand and regret not being a bigger player in that business. We can't let it happen again. So what do we do? We're not going to build one of these internally.

We know better than to do Google+. And so we are not capital constrained. And so we are very willing to try to do large acquisitions because we've got money lying around, but we don't have talent lying around, and we don't have...

We know better than to do Google+. And so we are not capital constrained. And so we are very willing to try to do large acquisitions because we've got money lying around, but we don't have talent lying around, and we don't have...

DNA and brand to be able to do this right exactly so what do you do you try to buy Facebook Microsoft puts an offer on the table it's a very complex deal structure but effectively what it does is it lets Facebook shareholders cash out over a long period of time as the company's value grew so you're not taking all your money off the table today it's

DNA and brand to be able to do this right exactly so what do you do you try to buy Facebook Microsoft puts an offer on the table it's a very complex deal structure but effectively what it does is it lets Facebook shareholders cash out over a long period of time as the company's value grew so you're not taking all your money off the table today it's

And so the important thing to take away, though, is a very big dollar valuation. News outlets reported it to be worth $24 billion. And again, this is way back in 2007, three years after the founding of Facebook.

And so the important thing to take away, though, is a very big dollar valuation. News outlets reported it to be worth $24 billion. And again, this is way back in 2007, three years after the founding of Facebook.

Exactly. Facebook's not interested. I'm pretty sure Zuck doesn't even respond to the offer. Some of Zuck's lieutenants have been meeting with Microsoft people saying, if you get the number in this range, blah, blah, blah, blah, blah.

Exactly. Facebook's not interested. I'm pretty sure Zuck doesn't even respond to the offer. Some of Zuck's lieutenants have been meeting with Microsoft people saying, if you get the number in this range, blah, blah, blah, blah, blah.

We will. No dice. So instead, they work out an investment and a commercial deal. So the terms of the deal are in October 2007, Microsoft invests $240 million for 1.6% of Facebook. So for those trying to do the math at home, that is a $15 billion valuation on the deal. Microsoft... will get the exclusive right to sell banner ads on Facebook internationally until 2011.

We will. No dice. So instead, they work out an investment and a commercial deal. So the terms of the deal are in October 2007, Microsoft invests $240 million for 1.6% of Facebook. So for those trying to do the math at home, that is a $15 billion valuation on the deal. Microsoft... will get the exclusive right to sell banner ads on Facebook internationally until 2011.

So again, Microsoft cleverly is using this as a way to bootstrap the advertiser side of their marketplace now that they have all this inventory to sell. Now, it's interesting to think about, much, David, like your comment about Alibaba. If Microsoft sold all of it at IPO, which I don't think it did, that would be a 7x. Okay.

So again, Microsoft cleverly is using this as a way to bootstrap the advertiser side of their marketplace now that they have all this inventory to sell. Now, it's interesting to think about, much, David, like your comment about Alibaba. If Microsoft sold all of it at IPO, which I don't think it did, that would be a 7x. Okay.

Not bad. Right. From 2007 to Facebook's IPO in 2012. Yeah. Five years, 7x.

Not bad. Right. From 2007 to Facebook's IPO in 2012. Yeah. Five years, 7x.

That's great. I'll take that. If they held for another two years and sold in 2014, that would have been a 14x. Yeah. I actually don't know when they sold, but I feel like these are helpful guardrails to understand what this appreciation could have been. Either way, it's not really relevant to Microsoft.

That's great. I'll take that. If they held for another two years and sold in 2014, that would have been a 14x. Yeah. I actually don't know when they sold, but I feel like these are helpful guardrails to understand what this appreciation could have been. Either way, it's not really relevant to Microsoft.

Right. They're constrained by talent, execution ability, DNA to pull it off, focus, but they're not constrained by cash. So who cares if you 10x your $240 million over five to seven years? So it seems like the actual interesting part of this deal is the fact that they had the right to sell Facebook's international ads for four years. And the companies kind of became friendly.

Right. They're constrained by talent, execution ability, DNA to pull it off, focus, but they're not constrained by cash. So who cares if you 10x your $240 million over five to seven years? So it seems like the actual interesting part of this deal is the fact that they had the right to sell Facebook's international ads for four years. And the companies kind of became friendly.