MS invests in Facebook

Microsoft has purchased a 1.6 percent stake in Facebook for $240, pegging the four-year-old social networking site's value at $15 billion. As part of the deal, Microsoft will sell online ads for Facebook. The funding will help fuel Facebook's expansion plans prior to an expected initial public offering, which founder Mark Zuckerberg, 23, says he would like to put off for at least two more years. Facebook claims nearly 50 million active users, attracting 30.6 million U.S. visitors during September compared with 68.4 million for the other social networking giant, MySpace. The investment is the culmination of a feud between Google and Microsoft, who were both actively seeking to push capital into the young Internet firm.

Competing interest was spurred by Microsoft's intent to beat Google in the advertising space, the insiders explained. After Google declared its intent to buy web ad agency DoubleClick this year, Microsoft promptly responded by purchasing rival group aQuantive in an attempt to gain a similar level of clout. Facebook has reportedly developed its own ad system that would float context-sensitive ads based on a member's profile and habits. According to the Associated Press, in its fiscal year ending in June, Microsoft's online ad revenue rose 21 percent to $1.84 billion; over the same period, Google's ad revenue totaled $13.3 billion.

Google has refused to specifically comment on Facebook negotiations.

By Electronista Staff