Digital Sky Technologies Takes $200m Stake in Facebook

Russian internet company Digital Sky Technologies (DST) has snapped up a small stake in Facebook for $200m (£125.5m) in a deal that values the five-year-old social networking site at $10bn.

The deal, however, represents something of a comedown for Facebook's founder, Mark Zuckerberg: the last time the Harvard drop-out raised any cash for his business was with software group Microsoft which placed a $15bn valuation on Facebook.

DST, which is run by Russian entrepreneur Yuri Milner, owns a clutch of online assets including Russia's largest own-language website, Mail.ru. Its websites account for over 70% of all page views on the Russian-speaking web.

As part of the deal, DST has also indicated that it is willing to spend at least another $100m buying out existing Facebook shareholders as part of a plan that would allow current and former staff to sell some of their shares.

"This investment demonstrates Facebook's ongoing success at creating a global network for people to share and connect," said Zuckerberg. "We've worked hard to bring more than 200 million people – 70% outside of the US – onto Facebook to share with friends, family and co-workers. A number of firms approached us, but DST stood out because of the global perspective they bring, backed up by the impressive growth and financial achievements of their internet investments. We're looking forward to working with the DST team."

Several private equity firms are understood to have approached Facebook over the last few weeks, but the valuation placed on the firm by DST was by far the largest. DST's $200m investment in Facebook's preferred stock will give the company a 1.96% stake and values the business at $10bn. When Microsoft picked up a 1.6% stake in October 2007 for $240m, however, that deal valued Facebook at $15bn.

Since then, the recession has taken its toll on the online advertising market and some of Facebook's shine has been lost as Twitter has grabbed the headlines, and traffic, in recent months.

But Milner said Facebook still has a lot to offer. "Our investment experience in other regions reveals the tremendous value social networking companies create as they redefine how people communicate and interact," he said. "By every important metric – user growth and engagement, technological innovation and financial performance – Facebook is on a similar trajectory, though on a much more global scale. We're delighted to invest in Facebook, Mark and his management team as they make the world more open and connected."