Microsoft Buy Stake in Social Networking Site

Software giant Microsoft has become the latest company to join the social networking craze. Beating rivals Google, they purchased a 1.6% minority stake in Facebook for $240 million. In total, the huge social networking site has an estimated value of around $15 billion.

Beating Google to this lucrative Facebook coup was seen as a major victory for Microsoft. Facebook is one of the Internet’s most popular social networking sites with 49 million members frequently using the site to maintain personal profiles, communicate with friends and upload photographs. While membership to the site is free, advertising space is lucrative and it is thought that this was one of the major factors in Microsoft’s decision to buy. The company currently own exclusive rights to sell advertising banners and links on profiles in the US and the new deal, which took several weeks to thrash out, is thought to extend this to Facebook profiles throughout the rest of the world.

Microsoft is understandably happy to be involved with Facebook, although many analysts seem less sure about their investment. In fact, critics believe that Microsoft paid too much for the share in a move that echoes Rupert Murdoch’s purchase of similar site, Myspace, in 2005 for a massive $580 million. At the time, Myspace was one of the top social networking sites on the Internet but now Facebook has stolen their crown, many believe Murdoch’s acquisition of the site was an expensive mistake. One analyst, Toan Tran, of Morningstar, believes the only way Facebook can make Microsoft enough revenue to justify its cost is “if Facebook becomes the users’ operating system on the Internet.” That is, if Internet users start to use the site and its associated applications every day, as their primary communication tools.

Facebook’s creator, 23-year-old Mark Zuckerberg, started working on the site as a Harvard student less than four years ago. Since then he has rebuffed a tempting offer from Google and a massive $1 billion bid for the whole site from Yahoo.

Sources:

Guardian
BBC
Times