Friday, 26 October 2007

Microsoft claims stake in Facebook

The New York Times, along with many other sources, report on the move by Microsoft to buy a stake in the social networking favourite, Facebook. Microsoft is paying $240 million for just a 1.6 % stake in Facebook, but this gives them a lead against Yahoo! and Google who were also interested in gaining a foothold in this increasingly popular website. The investment values Facebook at an incredible at $15 billion, despite it being only three and a half years old and generating about $150 million in revenue this year.

The article reports that as part of the deal, Microsoft will sell the banner ads appearing on Facebook outside of the United States, splitting the revenue. Microsoft also has an existing deal with Facebook to run banner ads on the site in the United States until 2011.

The enormous value being placed on Facebook shows that Microsoft believed they could not afford to lose out on the deal, especially as Google appears to be building a dominant position in the race to serve advertisements online through their acquisition of DoubleClick. Microsoft is concerned that it might lose control over the next generation of computer users, so has been trying to keep up with - and in some cases block - Google’s moves, even if that effort comes at a price.

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