Microsoft buys piece of Facebook

25 Oct 2007

There is no smoke without fire. After weeks of rumours that Microsoft was looking to buy a stake in increasingly popular social networking site Facebook, the deal has been done for US$240m.

Beating off competition from both Google and Yahoo!, Microsoft managed to buy a 1.6pc share, somewhat less than the expected 5pc.

It is hard to believe but just over one month ago the relatively new social networking site was only valued in total at US$525m which now counts for only a few percent of its overall worth.

The Microsoft buy now leaves Facebook valued at around US$15bn, unheard of for such a young site which has been up and running for only three and half years now and has been a closed university networking tool until a year ago when it was opened up to the general public.

In comparison, MySpace which is not the fastest growing but certainly the largest social networking site by far at present, was bought outright by News Corp for US$580m in 2005.

Last year Google offered to buy Facebook for US$1bn but having held out and fought off Google’s further advances recently, the networking site is making a savvy move choosing Microsoft as a bedfellow.

Social news site, who chose Microsoft as an advertising partner in favour if Google, referred to Microsoft’s online advertising sector as a young, innovative ad service “willing to work with us on the cutting edge”.

Facebook already use Microsoft for banner advertising and links but this new deal means that Microsoft will now sell ads outside of the US.

The question now is: Could Microsoft become the new Google?

By Marie Boran