Microsoft to buy stake in Facebook?

25-09-2007

by Stephen Errity

Microsoft is believed to be considering the purchase of a 5 percent stake in social networking site Facebook in a deal that could value the company at up to USD10 billion.

Sources close to negotiations say Microsoft is willing to pay between USD300 million and USD500 million to "get its foot in the door" of the social networking phenomenon. The valuation is being seen by analysts as indicative of Facebook's potential for future growth, particularly in terms of advertising revenue. Microsoft currently serves up the banner adverts that appear on Facebook pages, under the terms of a separate deal signed last year.

Facebook has already raised USD41 million in funding from venture capitalists and is also believed to be considering raising up to an additional USD500 million to fund acquisitions and invest in infrastructure.

The company's 23-year-old founder Mark Zuckerberg would become one of Silicon Valley's richest men if the Microsoft deal goes ahead. The Harvard dropout first developed the site in his college dorm room three years ago and initially made it available only to other students. It has been open to anyone since last September and currently has 42 million user accounts, with new members joining at the rate of 200,000 per day.

Microsoft is not the first technology giant to look into buying Facebook. A USD1 billion bid for the site from Yahoo last year was turned down and Google is also thought to have expressed an interest. Facebook's main rival in the social networking sector, MySpace, was purchased by media magnate Rupert Murdoch last year for USD580 million.