Microsoft in $240m Facebook Friendship

26 October 2007

PALO ALTO, California: The rush by web and media companies to tap the ad revenue potential of social networking has triggered the latest in a raft of multimillion dollar deals - this time between Microsoft and the site du jour, Facebook.

Negotiations between the duo, reported but not confirmed several weeks ago, have now resulted in a $240 million (€167.8m; £117m) handshake which makes Microsoft the proud owner of a 1.6% stake in Facebook after outmanoeuvring archrival Google.

The deal effectively values the privately-owned online firm at $15 billion - not bad for an enterprise begun in 2004 by Harvard roommates Mark Zuckerberg, Dustin Moskovitz and Chris Hughes.

The agreement will allow Microsoft to expand sales of banner ads on Facebook to international markets. Last August it signed a deal to be the exclusive seller of the site's display ads in the US.

For its part, the web firm is building its own ad services, including a system that enables advertisers to visit an automated website to place targeted ads on Facebook and other sites.

Avers Facebook chief operating officer Owen Van Natta: "There's a huge amount of different needs advertisers have. We think a lot of the movement around the socialization of the internet requires a lot of innovation around how to serve advertisers and users."

Facebook currently has around 50 million worldwide users and is said to be growing faster on all counts than News Corporation-owned rival MySpace.

Research also reveals that Facebook users come from wealthier homes and are more likely to be college-educated thus increasing the attraction for advertisers.

Data sourced from Wall Street Journal Online; additional content by WARC staff