Microsoft Wins Well-Publicized Battle for Facebook

Software giant Microsoft won a well publicized battle for a minority share of online social-networking company Facebook.com, boosting its value to a whopping $15 billion.

Microsoft shelled out $240 million for a 1.6 percent share of the Facebook — besting the Internet search-engine giant Google.

Microsoft's investment underscores the skyrocketing value of online communities like Facebook — a place where Web surfers' present a profile that shares details about their demographics, interests, photos, and contact information.

Facebook has 49 million active users between the ages of 18 and 34.

Microsoft needs that audience to keep Google from expanding its lead in online searching as well as billions of dollars in advertising revenue.

Microsoft finally trumped Google after losing previous high-stakes bidding battles involving a stake in AOL and ownership of online video-sharing pioneer YouTube.com and Internet ad service DoubleClick Inc.

Under the deal, signed Wednesday, Microsoft becomes the exclusive advertising partner for Facebook internationally.

It already had the domestic business. Microsoft and MSN previously partnered with Facebook to connect advertisers with their ideal audience.

"This deal represents a major advertising-syndication win for Microsoft," said Kevin Johnson, a senior executive at Microsoft. "This signals an enormous vote of confidence from our largest advertising partner."

Pacific Crest Securities analyst Brendan Barnicle believes Microsoft could benefit substantially from the deal.

"By bringing in Facebook it gives them more content, and with more content that drives more traffic, and with more traffic that's something you can monetize and therefore can sell ads on, which at the end of the day is what this whole strategy is about," Barnicle said.

Facebook attracted 30.6 million U.S. visitors during September compared with 68.4 million at MySpace. Microsoft's entry in the social networking arena via Windows Live Spaces attracted 9.8 million U.S. visitors, according to comScore Inc.

Still, analysts caution, advertising on social-networking sites can be tricky. For example, in 2005 when News Corp. paid $580 million for leading social-networking site, MySpace.com, it increased advertising but many users moved to Facebook.

The same could happen if Microsoft isn't careful either, analysts warn.

From NPR reports and The Associated Press