Social networking remains headline news as Facebook got a $200 million infusion from a Russian based company while at the same time Iran changed its blocking policy and unblocked Facebook in the midst of a heated June 12th election. Both of these reports demonstrate important messages about social networking in spite of the fact that Facebook, Myspace, and YouTube are not generating the revenue expected given their size and evolution. But at the same time reports of phishers harvesting Facebook passwords for profit should be a sobering reminder that social network users are very vulnerable since they trust their friends, who may be taking personal identities and passwords.

$200 Million = 1.96% Equity

When you do the math and see that Digital Sky Technologies (DST) paid $200 million for 1.96% of equity of Facebook that translates to a $10 billion valuation, which is a third less than Microsoft’s October 2007 $240 million invest for 1.6%. These numbers can make anyone dizzy, notwithstanding that Facebook doubled in size between August 2008 and April 2009 to 200 million friends. Since Facebook reports that more than 70% of its users are outside the US it makes lots of sense for DST as it invests mostly in Internet companies in Russia and Eastern Europe.

A World Message

DST’s Eastern Europe reach reinforces social networking’s power, but Iran’s concern about Facebook influencing an election is an even bigger message. Since the Facebook ban in Iran lasted only a few days the social pressure forced the change. Surely Iran will not be the only country to limit access to social networks which was worried that anti-government groups could band together on Facebook to impact the June 12th election.

You would have to live on Mars to not be aware that President Obama maximized the use of social networks to raise funds, support, and ultimately election. No wonder the White House has a YouTube page. We should all keep an eye on political uses of social networks as we watch the evolution of the Internet.

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