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BizReport : Social Marketing : January 04, 2011

Goldman Sachs, Facebook what it may mean for social

Another investment planned for social network Facebook should tell advertisers and other potential investors that social networking is serious business. This week, word leaked that Goldman Sachs was investing $450 million in the social network; along with a Russian investment firm's cash that brings the total investment to $500 million.

by Kristina Knight

With this latest round of investment rumor, Facebook is now estimated to be worth $50 billion - that is more than online giants eBay, Yahoo and Time Warner. Some suspect this may push Facebook to go public because of stock trading investigations from the Securities and Exchange Commission into not only Facebook but also LinkedIn, Twitter and Zynga.

Rumors or no, the investment is a clear statement that investors are serious about social networking.

"Goldman Sachs, and many other would-be investors realize that Facebook is a true business," said Michael Lazerow, CEO of Buddy Media.

The Buddy Media Platform helps brands and advertising agencies manage Facebook ad campaigns, profiles and the like.

Facebook has been the leading social network for nearly two years now, and for the second year in a row led search engine queries according to Experian Hitwise. Facebook now ranks number one on the Hitwise Top 20 Websites, with an 11% share of online visits. Google is its closest competitor with a 7.38% visit share.

With so much going on why would the company look for outside investors?

"The deal does two primary things for Facebook. First, it gives them cash to continue to grow the business rapidly. That's most important," said Lazerow. "Second, it provides a commitment to buy additional shares from current shareholders of the business. This is important to provide liquidity to existing shareholders, including employees, without adding additional names to the capitalization table."

Tags: Facebook, Goldman Sachs, SEC, social marketing, social networks

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