Microsoft to Take $240M Facebook Stake, Become Exclusive Ad Platform

Microsoft will take a $240 million minority stake in Facebook's next round of financing, at a $15 billion valuation. The companies will also expand their existing advertising partnership, which will see Microsoft becoming Facebook's exclusive third-party advertising platform. Microsoft, which already sells banner ads for Facebook in the U.S., will now sell Facebook ads internationally as Facebook expands to include foreign language social-networks.

Facebook is expected to earn $30 million this year, on revenue of $150 million, the Wall Street Journal says, quoting unnamed sources. Facebook, which boasts more than 49 million active users, and registers a quarter million new users a day, 59% of which are currently outside the U.S., is seen as the next big venue for online ads, especially since most of its users are in the young age group advertisers covet. Microsoft has built up a formidable online advertising sales force in recent years, a factor that will allow Facebook to shift the burden of ad selling to its better-equipped partner. By the end of 2007, 35% of the world's social networking users will be from Asia, 28% from Europe, the Middle East and Africa, 25% from North America, and 12% from the Caribbean and Latin America, according to Datamonitor. "Making this investment and expanding this partnership will position Microsoft and Facebook to better take advantage of advertising opportunities around the world, and is a great win for not only for our two companies, but also our collective users and advertisers," said Kevin Johnson, president of Microsoft's Platforms & Services Division.

Earlier today, the New York Post and Wall Street Journal reported the stake was the subject of a fierce battle between Microsoft and internet giant Google (full story). The $240 million gives Microsoft just a 1.6% stake in Facebook, far less than the 5-10% stake rumored. It also appears there will be no third-party financial partner, as had been rumored. Microsoft shares gained 1.1% in regular trading, and are up 0.7% AH.

Sources: Press release, Wall Street Journal
Commentary: Microsoft, Google Face Off for Facebook - NY Post • A Crazy Idea To Jump Start Facebook's Revenues • What If Facebook Can’t Sell Any Ads?
Stocks to watch: MSFT, GOOG

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Comments

[PC&G:]

Wow, well that is one way to catch up to Google. Microsoft will do anything (anything!) to cut down on the lead Google has. Their Board has been putting their heads together to try and come up with new ideas www.newsvisual.com/new... . Yahoo! has probably been doing the same.

2007 Oct 24 05:26 PM

[Smart Look:]

Facebook will not be using the Microsoft adCenter to push PPC ads to user profiles.
MSFT essentially has arranged to deliver display ads to FB and little more, possibly their search will enter in at some point.
Facebook leased LookSmart's AdCenter in June of 2006 and has not yet put it in play. As we know they are to announce their new ad platform on November 6th.
Since they did not know if Google or Microsoft were to be the suitor of choice until today how could they have been considering MSFT adCenter if they had any ideas on going to Google?
I believe their home grown ad platform will be a form of the leased (private labeled) LookSmart AdCenter. Since AdCenter is leased to scale it appears LookSmart is deeply undervalued currently.
Just a thought from a LOOK shareholder.

2007 Oct 24 09:06 PM

[schwaw:]

Yeah right, Microsoft quashed looksmart once again just like the good old days, Facebook will quietly shun the looksmart spamcenter.

2007 Oct 26 01:46 PM

[Smart Look:]

You may be right, MSFT has been unkind to LookSmart. for instance their VP of Search Christopher Payne said one month before they canned LookSmart, "We will stick with LookSmart."

Whatever their plans for self serve PPC is it was underway before they chose Gates and Co.
As a matter of fact their Flyer Pro ad platform may just be the LookSmart AdCenter in action, disguised well.
As for the term "spamcenter", you sound bitter. Please explain.

2007 Oct 27 12:37 PM

[Mick Weinst...:]

I'm surprised by a) the mile-high valuation and b) Microsoft's willingness to receive such a small % in the investment. FB clearly had tremendous leverage here - you have to hand it to them. Zuckerberg looks to be the real winner.

2007 Oct 25 02:23 AM