All of the recent flirting between Facebook and Microsoft has turned into hot equity action, as the two companies have announced that Microsoft will make a $240 million investment in the social networking site. In addition, Microsoft will begin selling ads for Facebook outside of the US and will become the site's exclusive ad provider in the US.
Facebook's value is not in the software itself—which could be duplicated relatively easily by a small group of programmers—but in the vast social networks the site has gathered, networks that contain information about people's interests and desires that would be invaluable for any marketing company.
Launched in early 2004, Facebook was originally targeted to college students, limiting registrations to those with a .edu e-mail address. The company opened the registration doors to all comers in September 2006, and the move appears to have paid off: the site is drawing an average of 250,000 new registered users every day, according to Facebook. Facebook now has over 49 million active users, according to VP of operations Owen Van Natta.
Just a couple of weeks before removing the college-students-only registration limitation, Facebook and Microsoft inked an advertising pact that made Microsoft the exclusive banner ad provider. The companies extended that agreement through 2011 earlier this year.
Google had also been rumored to be courting Facebook, but Microsoft appeared determined to close the deal. Google already has an exclusive $900 million pact with MySpace to provide that site—and other Fox Interactive Media properties—with contextual ads and search services. Yahoo has also courted Facebook in the past, but the $750 million to $1 billion offers were apparently not enough to scratch Facebook's financial itch.
Microsoft's $240 million investment is part of a new round of financing for Facebook, one that places a $15 billion valuation on the company.
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