Facebook Won't Help Microsoft

But unlike YouTube, which recently introduced a clever and widely well-received way to monetize its site through discreet ads on some videos, Facebook is still struggling to find a revenue model, and advertisers remain skeptical about placing their ads next to the kind of user-generated content available on sites like Facebook.

Another issue is the flood of this kind of advertising inventory through the rapid growth of other popular social-networking sites such as Hi5, LinkedIn and Bebo -- among others. This will likely result in Facebook only charging dismally low rates for ads on its site.

Most published estimates of Facebook's revenue put the figure at $150 million for 2007. A $15 billion valuation means that Microsoft is willing to value the company at 100 times the current year's revenue.

Growth in traffic aside, it's next to impossible to justify that valuation after a more careful evaluation of key metrics. The average stay per visitor on Facebook grew only 8.9% year over year to 14 minutes, according to Compete. For YouTube, the average stay was up 79.7% to almost 18 minutes over the same time frame.

This suggests that YouTube users keep watching more and more videos; this bodes well for a company that has finally found a way to make money in tandem with how many videos are watched. Facebook, which is already struggling to find a way to make money, is having a hard time even getting its users more interested.

And keep in mind that Google paid $1.6 billion to acquire all of YouTube, about one-tenth of what Microsoft might value Facebook just for a 5% taste.

Far from a thrust at Google, a Microsoft investment in Facebook would just be the latest sign of panic as the software giant struggles to make sense of the Internet.