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Microsoft Beats Out Google in Battle for Facebook Deal
[October 25, 2007]

Microsoft Beats Out Google in Battle for Facebook Deal


TMCnet Contributing Editor
 
In the battle between Microsoft and Google over partial stake in Facebook (News - Alert), and a lucrative deal with the company for international ad placement, Microsoft emerged the winner. Not only is Microsoft now the proud owner of a 1.6 percent stake in Facebook’s operations, but the company also now has exclusive rights to sell ads on Facebook outside the U.S.


 
Microsoft (News - Alert) is paying $240 million for its stake in Facebook, which analysts consider a very steep price for such a small piece of ownership in a company that’s just three years old. But this deal could prove very valuable to Microsoft, which is likely why the company was willing to pay so much.
 
“We are pleased to take our Microsoft partnership to the next level,” said Owen Van Natta, Chief Revenue Officer at Facebook, in a statement. “We think this expanded relationship will allow Facebook to continue to innovate and grow as a technology leader and major player in social computing, as well as bring relevant advertising to nearly 50 million active users of Facebook.”
 
Kevin Johnson, president of Microsoft’s platforms and services division, said the deal helps both companies take better advantage of advertising opportunities around the world, and is also a win for users and advertisers.
 
“We have partnered well over the past year and look forward to doing some exciting things together in the future,” Johnson said in a statement. “The opportunity to further collaborate as advertising partners is a big reason we have decided to take an equity stake, and is a strong statement of our confidence in the long-term economics of this partnership.” 
 
Facebook, a social network founded in 2004 by Harvard student Mark Zuckerberg, lets friends share information and allows outside developers to create games and other applications. More than 20,000 new users register on Facebook every day, and 60 percent of them are outside the U.S. Microsoft is betting that the deal with Facebook will enable it to reach 300 million users.
 
On Aug. 22, 2006, Microsoft and Facebook  announced a U.S.-only strategic alliance that named Microsoft the exclusive provider of standard banner advertising on Facebook  Earlier this year, the contract was extended to 2011.
 
With this latest deal, Google (News - Alert) and Microsoft, now became stronger rivals for other players in the online advertising space, where deals and acquisitions have come fast and thick. For example, last year Google beat out Microsoft with a $1.65 billion acquisition of YouTube (News - Alert).
 

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P.R. Sai  is a contributing editor for TMCnet.
 


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