Microsoft Beats Google For A Minority Stake In Facebook; Buys 1.6% Stake For $240 Million, Valuing It At $15 Billion

Microsoft has finally beaten Google in one thing. The Seattle tech giant has outrivalled the Mountain View, California-headquartered search king in picking up a minority stake in the fast growing social network Facebook. Microsoft would pay $240 million for a 1.6 per cent stake in the social networking website, which values the company at $15 billion. (Remember, in July 2005, Rupert Murdoch's NewsCorp bought Facebook rival MySpace for $580 million.)
Microsoft said that it would be the exclusive third-party advertising platform for Facebook. The site has close to 50 million users currently. It adds about 250,000 new users a day, while a 60 percent of them come from the US. Kevin Johnson, president of Microsoft's platform and services division, has been quoted as saying by
Reuters that the "$15 billion price tag for Facebook is based on Microsoft's belief that the site could eventually reach 300 million users, who can be targeted for advertising".
It further quotes some analysts as saying that "Microsoft has paid a steep price on a bet that the three-year-old company would be able to transform itself into a hub for all sorts of Web activity". It quotes Morningstar analyst Toan Tran: "The only way this works is if Facebook becomes sort of the users' operating system on the Internet -- everyone logs into Facebook every day to get in contact with their friends and use a multitude of future applications that will be developed for it."
Facebook is an online social networking website that lets friends share information, interact, and also play games etc. It recently opened up the platform for outsiders to develop third party applications like games for Facebook users. The company was founded in 2004 by Harvard student Mark Zuckerberg.
In India, Google-owned Orkut has a disproportionately higher market share in the social networking space. A few homegrown websites like Minglebox (funded by Sequoia Capital India), Yaari, and ApnaCircle (backed by Sabeer Bhatia) are also in the market. Although sceptics like Sanjeev Bikhchandani of Naukri.com and Avneesh Bajaj of Matrix Partners India think it's difficult to make money out of social networking businesses in India, it's a fact a lot of young internet users in India are hooked on to Orkut. Probably there is money to be made. But it all depends on the number of users these websites have.