Young Love: Microsoft Wins Share of Facebook
October 25, 2007 9:15 AM
Microsoft has just made a move on one of Silicon Valley's hottest pieces of property.
For weeks, rumors were swirling that Microsoft was wooing Facebook and considering investing in the social networking giant.
True to these rumors, the pair has
finally gone public
about their new partnership. Microsoft has agreed to fork over $240 million USD to gain a minority share in Facebook. The move gives it only a small percentage – approximately 1.6 percent -- of Facebook's net worth. However, even such a small commitment between these two giants will likely have major ramifications in the software and internet industry.
According to accounts
, internet media giant Google was narrowly beat out in intense negotiations by Microsoft.
The move raises Facebook's net worth to approximately 15 billion dollars. Interestingly this means that if each of the 50 million users of the social network had a price attached to them, based on the site's next worth, each would be worth approximately $306.12.
The move grants Microsoft some special benefits. Microsoft gains exclusive rights to sell Facebook advertising. Facebook's advertising reaches an international market of millions, so this is very useful. Microsoft has already begun to sell ads on Facebook, as of yesterday. The deal will last until 2011.
Like any good partnership, there is plenty of sharing -- the revenue from the advertisements will be split between Microsoft and Facebook.
Facebook certainly has its own perks, too -- it gets a large cash infusion, which it can use to hire new developers and expand its resources. Facebook announced it plans to expand from its current 300 employees to nearly 700 within a year. It also gets assistance developing a robust advertising system.
The move is definitely a win-win for both parties. Kevin Johnson, president of Microsoft’s Platforms & Services division discussed the excitement about the new pairing:
The opportunity to further collaborate as advertising partners is a big reason we have decided to take an equity stake, and is a strong statement of our confidence in the long-term economics of this partnership. We’re very pleased with the scope and depth of our partnership. It’s a big industry. The equity stake we’re taking is a strong statement of confidence about this partnership. Just sit back and watch how this partnership develops. There’s a lot we’re going to do together.
Facebook was considered one of the most attractive software companies due to its torrid growth. The network has been doubling its user base every six months. Its growth has dramatically outpaced its chief rival in online social networking, Myspace.com.
Mark Zuckerburg, the creator of the network, and its CEO, often draws comparisons to Bill Gates. He also has been the target of some
from former classmates who claim he stole their idea (which may perhaps further increase comparisons to Gates).
Microsoft is not Facebook's only new interest, though. Facebook has just
entered into a partnership with Blackberry
to make "Faceberry" phones...Blackberry phones preloaded with Facebook access and functionality. Facebook's new software for the Blackberry will make use of its push email system to access user's accounts. Users will even be able to take pictures and create tags for them.
Facebook also recently announced grants of up to $250,000 for software developers who can present new ideas for Facebook applications,
The future is certainly looking bright for Facebook. With its new partnership with Microsoft, the world's largest tech partnership, an exciting world of possibilities opens up to the network and its users.
"Spreading the rumors, it's very easy because the people who write about Apple want that story, and you can claim its credible because you spoke to someone at Apple." -- Investment guru Jim Cramer
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