• John Battelle's Searchblog, Thursday, July 12, 2007 12 PM

Unnamed sources on Tuesday told Internet Outsider Henry Blodgett that Microsoft is eyeing a $6 billion takeover of Facebook--an unconfirmed rumor the former Internet industry analyst says makes sense. He writes: "Steve Ballmer, desperate and furious, sick of sucking wind in the Internet game, sick of losing every Internet in-play company and much of the future to You Know Who ... should ... scoop up "the hottest company on earth."

But $6 billion? Surely Michael Zuckerberg and co. have bigger plans than to sell out for $6 billion, which Blodgett notes is about 1/25 of Google's valuation. Battelle doesn't see the logic of the move, since the company doesn't need anyone else right now.

That said, Battelle notes that $6 billion, at 200 times expected earnings, is quite a valuation, when the company is on pace to generate just $30 million this year. So maybe, if Facebook is approaching its peak demand -- usage and innovation are great, but where's the money coming from? -- this might be the right time to sell. What sets Facebook apart from other social networks? There's no easy answer.

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