For the bargain prize of 117 millions pounds, Microsoft bought a 1.6% stake of Facebook. Other companies such as Yahoo or Google also wanted to invest in one of the most popular social networking websites but Facebook declined their offer.
The aim of this partnership is simply to increase profits through advertising on both sides. Microsoft will sell internet ads for Facebook outside the US. The company already had an agreement with Facebook to provide banner advertising and links to the US version of the social networking site. This was the part of the deal discussed during several weeks. With this acquisition, Microsoft will become the exclusive third party seller of overseas advertising outside the US on Facebook. Knowing that the social networking site currently has 49 millions users, this could be a huge financial opportunity for Microsoft.
The Facebook deal is Microsoft's answer in its battle with Google. Looking one year back in October 2006, Google beat Microsoft with the 1.65bn dollar acquisition of online video sharing website YouTube.
With this partnership Facebook is looking to increase its current audience of nearly 50 million active users by becoming a real magnet for advertiser and also to compete fiercely with its rival MySpace which currently has 100 million users. Facebook also wants to take advantage of existing Microsoft skills. According to Charlene Li, an analyst at Forrester Research, the software group knew better -in comparison to Google- how to work with program developers and build computing environments. She said that “Microsoft is a company that knows how to build platforms, knows how to develop relationships with developers. The social networking site is hoping with Microsoft 's collaboration to struggle less to reach leader position."
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