We wrote earlier this morning that Google and Microsoft were competing for a stake in Facebook, the super-hot social networking platform. Earlier, the NY Post was reporting that Google was the frontrunner. But a WSJ report has now confirmed that Microsoft won out:
"Microsoft Corp. agreed to invest $240 million for a minority stake in Facebook Inc. that values the social-networking site at $15 billion. As part of the deal, the two companies expanded their advertising agreement."
The amount invested is lower than expectations, which were around $500M. Microsoft's new deal with Facebook is all about bolstering their existing advertising arrangement - Microsoft will now sell Facebook's international display ads, in addition to the banner ads it already sells on the US site. However this deal leaves room for Facebook to run its own advertising network, which we have been discussing on Read/WriteWeb. Facebook's ad system will likely use social profiling to target ads, given the wealth of such data that Facebook has.
UPDATE: Hitwise just sent this data, which shows Facebook's growth in the US market over the past year:
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Wow, what an incredible act of desperation on Microsoft's part. Facebook is not worth that much money and it feels like more of a play not to be the exec that got fired for letting Google snag the deal.
Posted by: Justin Kistner | October 24, 2007 3:25 PMMicrosoft is going to f*cking ruin Facebook.
Posted by: Dan Ackerman Greenberg | October 24, 2007 4:02 PMDan
Sorry, but I think this was a brilliant and gutsy move on the part of Microsoft's Directors http://www.newsvisual.com/newsvisual/2007/10/microsoft-diver.html . The potential online ad revenue is worth more than the measly sum Microsoft just paid out. Plus, if things pan out Microsoft might just gain ground on Google, their ultimate mission. This move actually is pretty aggressive for Microsoft and probably caught Google off-guard a bit and put them on the offensive.
Posted by: Pete | October 24, 2007 4:42 PMMicrosoft's had a nice long peek under Facebook's skirt for awhile now. I guess they must see some sort of potential. I wonder how much of it was simply trying to cut off Google though . . .
Somebody better figure out a way to monetize Facebook or we're all going to be laughing hysterically at the current valuation hype a few years from now.
From an advertiser's perspective, there's no current (or emerging) behavioral targeting ad technologies that I'm aware of to DRAMATICALLY ramp up their ad revenue in a way that will scale well beyond just simple user growth. Google's search-based advertising model scaled beautifully (and also performed exceedingly well) which is why their ad revenues are about 100x Facebook's and still growing strong. I just have a hard time seeing anything that's going to scale the same way for Facebook, especially if they continue to try to just play behind their own walls without branching out.
Posted by: RS | October 25, 2007 7:42 AMQuite interesting situation here. I don't really thing that this move will get result in this 5 years. Lets see...
Posted by: Nico | October 25, 2007 8:17 PM