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Microsoft buys into $15 billion Facebook

Microsoft beats off a rival bid from Google to invest $240 million in hit social networking site Facebook, in a deal that values the start-up at $15 billion.

business Updated: Oct 25, 2007 12:58 IST
DPA

Microsoft beat off a rival bid from Google to invest $240 million in hit social networking site Facebook, in a deal that values the start-up at $15 billion.

Microsoft's $240 million payment gives it just a 1.6 percent stake in the Silicon Valley start-up founded three years ago by Mark Zuckerberg, 23.

He dropped out of Harvard to develop the company and his 20 percent stake now makes him worth a cool $3 billion.

As part of the deal, Microsoft will expand its existing pact with the company to sell ads in the US and internationally, the companies announced on Wednesday.

Industry analysts said Microsoft was willing to pay a stiff premium to forge the alliance and keep rival Google from making a similar deal with the popular site.

"Making this investment and expanding this partnership will position Microsoft and Facebook to better take advantage of advertising opportunities around the world," said Kevin Johnson, president of the platforms and services division at Microsoft.

Facebook currently has 42 million members and predicts that it will have 60 million members by the year's end. It is catching up fast with its main rival MySpace and is believed to be more attractive to advertisers because its structure makes people use their real identities, unlike MySpace where members often use false identities.