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April 3, 2011 11:16 pm
Interpublic, the advertising group, has emerged as an unlikely beneficiary of the surging value of Facebook.
The company owns a stake in the social network that is today valued at somewhere between $200m and $300m, depending on Facebook’s valuation and the actual size of the stake.
The exact figures have not been disclosed, but people close to Interpublic say it owns slightly less than a half per cent of Facebook, and paid less than $5m for it in 2006.
Interpublic, which owns McCann Erickson and other agencies and is led by chief executive Michael Roth, secured shares in what was then an emerging site mostly popular with university students.
Investments by an advertising group in a social network are rare, but Interpublic won the privilege by committing to spend $10m for its clients on Facebook, an early win for a social network seeking to bolster its image with advertisers.
The position in Facebook is not that substantial compared with Interpublic’s overall revenues, which totalled $6.53bn last year. But the value of the stake is welcome for the group, which is recovering from a tough few years during the recession, and has become large enough for Interpublic for the first time to report it in a filing with the US Securities and Exchange Commission.
“From time to time, we make investments in privately held companies that we believe may be of interest to the advertising and marketing sectors,” the company wrote in its annual report for December.
“Certain of these investments, the most significant of which is Facebook, have significantly appreciated compared to their cost, but there can be no assurance as to the terms on which we would be able to dispose of any such investments.”
When Interpublic took its stake in Facebook, the social network was valued at between $1bn and $2bn. Just a year later, however, Microsoft invested $240m in Facebook at a $15bn valuation.
But as Facebook’s valuation soared last year, thanks to robust trading on the secondary market, Interpublic realised it was sitting on a substantial stake, and was compelled to disclose it to the SEC.
Based on a valuation of $50bn, an Interpublic stake of 0.4 per cent would be worth $200m. In recent weeks, however, Facebook has been valued at up to $85bn on the secondary market.
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