Microsoft buys into Facebook

Microsoft has bought a 1.6 per cent stake in Facebook worth around $240m (about £117m), based on a valuation that assesses Facebook's worth as $15bn (£7.3bn).

The deal is intended to help both companies expand their advertising revenues, with Microsoft becoming the exclusive third-party advertising platform partner for Facebook.

The two companies have an existing partnership already and rumours have been circulating recently that Microsoft was going to buy the social-networking site.

Facebook was keen to emphasise that the deal would be beneficial to its 50 million users.

"We think this expanded relationship will allow Facebook to continue to innovate and grow as a technology leader and major player in social computing, as well as bring relevant advertising to nearly 50 million active users of Facebook," said Owen Van Natta, chief revenue officer at Facebook.

Comments from Microsoft place more emphasis on the increased advertising opportunities it will give the two companies.

"Making this investment and expanding this partnership will position Microsoft and Facebook to better take advantage of advertising opportunities around the world, and is a great win not only for our two companies, but also our collective users and advertisers," said Kevin Johnson of Microsoft.

The deal will see Microsoft sell advertising not just in the US and UK but internationally as well, though there is some debate as to just how large Facebook's non-English speaking audience is.

Analyst Nate Elliot of Jupiter Research pointed out that "when Facebook stresses that 60 per cent of their traffic comes from outside the US, they're really talking about very strong traffic in the UK and relatively small bits of traffic anywhere else."

Earlier this week, Web User reported Elliot's comments that Facebook was not a major player in non-English-speaking markets.

Another analyst, David Bradshaw from Ovum, said that the partnership could be mutually beneficial for other reasons too.

"Our longer term concerns about Facebook are that it clearly has a way to go in its development, and this is one area that Microsoft may be able to both teach it and learn from it," Bradshaw said.

"Current use of sites like Facebook at work is more like social 'notworking' than networking, yet these tools clearly have a long term role in making organisations of the future get far more from their peoples' skills and knowledge," he continued.

Facebook claims that 200,000 new users register with the site every day.

This is the latest high-profile tie-up between the established giants of the internet, software and media industries with the headline-grabbing Web 2.0 sites - last year, Google bought YouTube for around £880m. MySpace is owned by News Corp and social radio station Last.fm was recently bought by CBS.

However, not all these high-profile buy-outs are successful - eBay recently admitted it had overpayed for VoIP (voice-over internet protocol) telephony company Sykpe, forking out £1.4bn.

www.facebook.com
www.microsoft.com
www.jupiterresearch.com
www.ovum.com

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