Ballmer Calls Facebook A Fad

Facebook is steadily growing stronger and stronger as it starts to surpass its rival MySpace in popularity now in the U.K. as well as the U.S. Last week the site was reported to have a valuation of $10 billion and Microsoft was supposedly in talks to invest $500 million for a 5% stake in the company. Now however, the technology company may not be so eager to invest in the social network phenomenon.

Microsoft chief executive Steve Ballmer expressed the concern over the long term staying power of social networks including Facebook. He has stated that the online trend will be seen as a “fad,” which raises controversy over the reported investment Microsoft is looking to make, or at least was.

Ballmer told The Times Online, “I think these things [social networks] are going to have some legs, and yet there’s a faddishness, a faddish nature about anything that basically appeals to young people.”

He continued that there could be value in Facebook and what is called the “network effects.” Facebook has built up a brand consisting of over 40 million users in only three years. Although he would not comment to the press about the investment discussions with the social network, he did say that there was not enough by the way of technology to justify the appraisal of a site which expects revenues of only $150 million for the current fiscal year.

“There can’t be any more deep technology in Facebook than what dozens of people could write in a couple of years. That’s for sure,” Ballmer also said to Times Online.

To prove his point, Ballmer turned to the example of Geocities, an online community that Yahoo bought in 1999 for $3 billion which he said “had most of what Facebook has.” The site is no longer as popular as it once was.

The acquisition frenzy of 2007 has brought incredible valuations unseen since the dot com boom. Preasure seems to be mounting on as a result of the growing success of Google who has cash to burn and is spending it wildly. “No one wants to be left behind while Google dominates and moves towards online world domination,” says Robert Regular, CEO of Kitara Media, Inc. The trend seems to support such unrealistic valuations where like in 1999 the metric of eyeballs rule.

Regardless of the reality and the attempts by many to acquire the social network (Yahoo offered $1 billion), Facebook founder Mark Zuckerberg, has said the site will stay independent and has placed a value on the site of $15 billion. Perhaps no one will get their hands on the newest “fad” after all.