The Russians are coming… to Facebook
There’s been a lot of head scratching these days about the Russian company DST, backed by oligarch Alisher Usmanov, buying a 1.96% stake in Facebook for $200 million. “With all the $$$ sloshing around the Valley, why did they need Russian investment?” asks a peplexed Andrew Keen on Twitter.
Why, indeed? Well… why not? Why wouldn’t Zuckerberg, Andreessen & crew extend their shareholder base beyond the closely knit circles of the Valley, in fact beyond the US? I could think of at least a few reasons:
1. Valuation – it’s quite likely that the company was able to get more money for less equity (and no board seat) from the Russians / Uzbekhs (Usmanov is from Uzbekhistan) than they could have gotten from recession-depressed American investors. In these tricky times, that’s what any responsible owners / shareholders would at least consider very, very carefull. However, a few fractions of percentage points, I’d guess, were not the major reason. I would put my money on the next point:
2. Marketing – DST claims to own 70% of Russian Web traffic. Now… that’s Russian, not Croatian, Slovenian or Lichtenstein Web traffic. And though the Web is growing everywhere, Central and Eastern Europe is one of the largest and fastest growing regions in the world. Facebook is making money, but needs to make a lot more, and having a partnership giving them strategic access to customers (i.e. ad buyers) in Russia and the region will quite likely give them more added value than “yet another” US partner – presumably they are already quite well connected within the US. This is actually not Facebook’s first international investor – Hong Kong tycoon Li Ka-Shing put in $60 mil back in 2007. So there’s a pretty clear pattern there: powerful connections in fast growing global markets… Sounds logical to me!
3. Ego – with these young, famous, rich Americans like Zuckerberg, you never know how large a part ego might play. The FT reports that Zuckerberg, famous though he might be, couldn’t travel to Russia while visiting Europe last year. “I couldn’t get a visa.” he complained. Can you imagine that? Master of the Universe, CEO of Facebook, banging his head against the closed Russian consulate in Helsinki. I can hear him thinking, even from far away here in Zagreb… “Must… get… back… at… evil… Russians!” Although – I probably wouldn’t put this high on the list of reasons…
Anyway, if a Saudi prince could invest into AOL, Apple, Motorola and News Corp, what’s wrong with an Uzbekh oligarch investing in Facebook? Relax, Valley folk – apparently globalization works both ways.