Microsoft announced it has bought a 1.6% stake in social networking site Facebook with an investment of $240 million. The agreement between the firms gives Microsoft exclusive advertising rights to versions of Facebook outside the United States. The companies had already struck an agreement giving Microsoft third party advertising rights in August 2006 in the US which continues until 2011.
Valued at approximately $15 billion, Facebook was the fastest growing social networking application last year attracting over 200,00 new users each day. The site saw 30.6 million US visitors in September according to comScore.
In a conference call held earlier today with reporters and analysts, Facebook Chief Revenue Officer, Owen Van Natta suggested the investment will allow ambitious expansion plans at Facebook. Facebook is expected to introduce their own ad-network tailored to personal preferences set by users at the Ad-Tech show in New York next month.
Facebook is an interesting buy-in for Microsoft. Partly driven by need and partly driven by technological interest, the investment represents a badly needed foothold in a social networking space where rapid evolution tends to be user-driven. Case in point, since allowing third-party developers to create widgets, games and tools for Facebook users, over 4,000 unique applications have been introduced and adopted.
Social networking is changing the way we use computers for finding information and communicating with each other. For many, Facebook or social spaces like it have become entry portals for the wider Internet by providing personal places people are actually interested in hanging out around (while presenting volumes of personal information to the outside world). Solidifying a place in the networking space is clearly in Microsoft’s best interests going forward in its fight for a greater share of online advertising revenues.
Last week, Microsoft Sr. VP Brian McAndrews told Bloomberg News that “Search has been a significant driver of growth. In the next several years, it will not be as much of a driver. Some of the emphasis will shift more toward display ads, toward video, toward rich media.”
Facebook, and applications like it provide the perfect platform.
Have a question and need quick answers? 
