Digital Trends

Spending $240 million for a 1.6% stake in something might seem like paying over the odds, but when the companies are Microsoft and Facebook, maybe it suddenly begins to make sense.

 

Redmond’s software giant reached into its deep pockets, reportedly beating out Google to invest in the social network. The successful bid means that Facebook is valued at $15 billion – not bad for something that’s only been around for three years.

 

As part of the deal, Microsoft will be the exclusive third-party advertising platform partner for Facebook, and will begin to sell advertising for Facebook internationally, splitting revenue, with the right to have banner ads on the site. It’s been the sole provider of banner ads on Facebook in the US since last year.

 

So why was Microsoft willing to pay so much for such a small stake? It’s gambling that Facebook will become a major Internet hub, offering more services, and a vital daily destination for millions of users. But in a statement, Kevin Johnson, president of the Platforms & Services Division at Microsoft, seemed to view it as an ad opportunity:

 

“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. We have partnered well over the past year and look forward to doing some exciting things together in the future. 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 is adding around 200,000 members a day, with 60% of them outside the US. It currently has around 50 million users. Originally aimed at students, it opened its doors to the general public a little more than a year ago.