Microsoft may buy stake in Facebook
By Erina Lin, Tuesday 25 September 2007 at 22:51 :: Media Ownership :: #612 :: rss
Microsoft Corp. is looking to invest in Facebook Inc., which would value the online hotshot at $10 billion or more, according to a report published Monday.
Microsoft is holding preliminary discussions that could culminate in a $300 million to $500 million investment in the social-networking site, the Wall Street Journal reported, citing unnamed sources who are familiar with the matter.
In exchange for the investment, Microsoft would receive up to a five percent stake in privately-held Facebook, which has previously raised about $41 million from venture capitalists and other individual investors.
Facebook refused to comment on the news, and said the report is merely "rumor and speculation."
An outright sale of Facebook also seems unlikely. Mark Zuckerberg, Facebook's 23-year-old co-founder and chief executive, has many times expressed his desire to remain independent. He turned down a $1 billion acquisition offer from Yahoo Inc. last year.
Facebook has been exploring whether to raise more money from venture capitalists to help expand its current payroll of roughly 300 employees and finance other parts of its ambitious expansion plans.
With annual revenues over $100 million, Facebook is believed to be a strong candidate for an initial public offering in 2008 or 2009.
Analysts said if the talks with Microsoft heat up, it could draw Google Inc. onto the negotiating table, too.
"Google would love to keep it out of the hands of Microsoft or at least drive up the price," Josh Bernoff, a Forrester Research analyst told the Wall Street Journal.
Two years ago, Microsoft and Google competed against each other to buy a five percent stake in AOL. Eventually Google won by agreeing to invest $1 billion into the company as part of an advertising partnership.
Microsoft already is delivering online ads to Facebook in the United States as part of an agreement that expires in 2011. The Journal also reported Microsoft and Facebook may extend the contract and expand the advertising to other parts of the world.
Originally only available to college students, Facebook has broadened its service in the past year to people of all ages, and made it easier for other Internet companies to run their applications on its users' pages.
By building its own computing platform, Facebook has become a threat to Microsoft. Investing in Facebook is one way for Microsoft to hedge its bets, Bernoff said.
With about 42 million active users, Facebook is ranked as the second most trafficked social network only behind News Corporation's MySpace.com.
Having been rebuffed by Facebook, Yahoo is testing its new social service called "Mash" and recently struck a deal with Bebo to deliver ads in England and Ireland. Meanwhile, the blogosphere is buzzing that Google may introduce new social networking products later this year.
"We're always looking for new ways to help our users connect with each other, share information, and express themselves, but we don't have any new details to share at this time," according to a Google statement Monday.
In other news, Facebook has overtaken MySpace as the highest-traffic social networking site in the United Kingdom, according to Nielsen//NetRatings data published Tuesday, the Guardian reported Tuesday.
In October 2006, Facebook had 448,000 unique users in the United Kingdom. By August 2007, that number grew to a whopping 6,506,000. MySpace had 6,379,000 uniques in August, while Bebo had 4,449,000.
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