Microsoft wins Facebook stake for $240 million
By Erina Lin, Thursday 25 October 2007 at 22:22 :: Media Ownership :: #754 :: rss
Microsoft Corp. Wednesday announced its $240 million investment in a 1.6 percent stake in Facebook, a deal which places a $15 billion valuation on the three-year-old social network. By beating out Google after lengthy lobbying, Microsoft won exclusive global rights to sell third-party banner advertisings on the social networking site.
Microsoft has been able to sell ads on Facebook in the United States since August 2006. This move to expand to global market, however, is critical because 60 percent of Facebook’s 50 million registered users are overseas.
Microsoft believes that Facebook’s user base will exceed 200 million and eventually reach 300 million, said Kevin Johnson, president of Microsoft's platforms and services division.
Johnson refuted the idea that Facebook is just a fad. "Figured with Facebook's monetization opportunities, you could very quickly get to the valuation of $15 billion,” added Johnson.
Johnson said he was “pleased with Microsoft's ability to monetize Facebook’s network thus far,” but there are still "many initiatives underway to drive that higher." He did not reveal any details regarding these initiatives.
He added that the partnership with Facebook was a strategic decision. "You can sit back and watch how this partnership is going to develop," he told one analyst.
In spite of this latest win, however, Microsoft still has a fierce battle against Google in terms of online ad dollars. In this fiscal year ending in June, Microsoft's online ad revenue was up 21 percent to $1.84 billion. During the same period, Google's ad revenue reached $13.3 billion.
According to Owen Van Natta, Facebook's vice president of operations and chief revenue officer, the investment would be used to fund further "innovation and growth." Van Natta added that due to a high demand for more Web developers, Facebook will have over 700 employees by next year.
Facebook is reportedly expecting a $30-million profit on $150-million income this year.
Compared with the top social networking site MySpace, Facebook has grown much faster over the past year. Facebook attracted 30.6 million U.S. visitors during September, while 68.4 million were at MySpace.
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