Microsoft this morning announced that it is investing $240 million in Facebook, the popular but thus-far unprofitable social networking services. The deal values Facebook at an astonishing $15 billion. But the biggest news is that Microsoft beat out Internet search and advertising giant Google for the chance to invest in Facebook. As a result, Microsoft will become the exclusive supplier of ads on Facebook's sites around the globe.
"We are pleased to take our Microsoft partnership to the next level," said Facebook chief revenue officer Owen Van Natta. "We think this expanded relationship will allow Facebook to continue to innovate and grow as a technology leader and major player in social computing, as well as bring relevant advertising to nearly 50 million active users."
Founded in 2004 by a Harvard student who allegedly stole the idea from other students, Facebook is designed to let people get in touch with others with shared interests or needs in a virtual environment. Facebook offers an extensible platform so that developers can create applications that run within the site and provide additional functionality. The service is widely viewed as the adult version of MySpace, which has proven incredibly popular with teens and those missing the days of the BLINK HTML tag from the mid-1990s.
Microsoft's $240 million investment buys it a 1.6 percent stake in Facebook which, while financially unsuccessful to this point, is the new Internet darling and is expected to reap huge financial rewards in the near future. Facebook says it will break even within the year. "We're pleased with the economics of this deal," says Microsoft president of platform and services Kevin Johnson.
