Archive notice: This article was originally published on January 16, 2008. Links and embedded videos are preserved as part of the historical record.
The Samwer brothers intend to invest up to US$15 million in the U.S. online social-networking platform Facebook http://www.facebook.com, thereby resolutely continuing their previous investment strategy in the internet business segment. As the Wall Street Journal reported on Wednesday, the founders of online auction house Alando.de and international ringtone distributor Jamba intend to further pursue their interest in social-network portals through additional share purchases. However, despite the investment commitments, no contracts have yet been signed, according to sources familiar with the negotiations.
“Although Facebook’s revenues are not that high, this prospective investment by the Samwer brothers once again confirms the arms race between Microsoft, Google and others for dominance in internet networking,” Erste Bank analyst Ronald-Peter Stöferle told pressetext. According to the industry expert, Facebook is growing very strongly in user numbers, yet the current valuation of internet companies of this kind bears “no economic relation whatsoever.” “There is no danger of another burst of the internet bubble as in 2000, but current company valuations do include a great deal of speculation,” Stöferle emphasized.
Insiders view the investment, within a trend of equity stakes, as a logical step that is worthwhile against the backdrop of disproportionate company valuations and revenues. However, the Samwer brothers’ proposed investment in the social-networking portal also falls within a series of large transactions by interested competitors. U.S. software giant Microsoft http://www.microsoft.com has already invested US$240 million in Facebook, while the head of conglomerate Hutchison Whampoa http://www.hutchison-whampoa.com invested around US$60 million. Oliver Samwer told the Financial Times Deutschland that the investment was “important” and would be used to support Facebook’s forthcoming launch in Europe, particularly Germany.
After selling Alando.de to online auction house eBay and exiting Jamba, the investor duo increasingly focused on the Web 2.0 trend. They founded video portal MyVideo http://www.myvideo.de and implemented investment plans in social networks LinkedIn and StudiVZ. The subsequently founded European Founders Fund also works with German internet service provider United Internet. With this business strategy, the company aims to compete with renowned social-networking platforms such as Xing http://www.xing.com and further intensify European competition. Microsoft currently values Facebook at a market capitalization of around US$15 billion.
