Microsoft Buy Stake In Facebook

Software giant Microsoft has today invested $240 million in a minority stake in the world’s largest social media site, Facebook, valuing the company at in excess of $15 billion just four years after its establishment in accordance with its 1.6% equity stake.

Facebook has taken the Internet by storm as part of the so-called Web2.0 phenomenon, allowing its members to interact on a social level with friends, colleagues and business partners. As a result it has been able to generate significant advertising revenues, which is where Microsoft will realise its return.

Providing a network for social interaction, Facebook has risen to become one of the most significantly trafficked websites online over the last few years, boasting a significant worldwide membership base and growing page views month on month.

Microsoft’s 1.6% holding will see them providing advertising to the Facebook network, despite criticisms from analysts that advertising on social media sites is particularly ineffective as compared to other forms of online advertising as a result of a phenomenon known as ‘advertising blindness’, which results in lower click through rates.

Facebook was started just four years ago by a US university student, Mark Zuckerberg from his academic residences. The valuation today takes the company to a significantly stronger position than had previously been thought, with Google and other potential investors continuing to circle around the company.

Despite the widespread interest Zuckerberg has said he would like to postpone any public offering for several more years, after last year turning down a $1 billion offer from search engine Yahoo.

Facebook is currently on track to realise profits of $30 million by the end of 2007, and has a user base of over 50 million at present, making it one of the biggest networking sites online.

Story link: Microsoft Buy Stake In Facebook