Date: Thursday, October 25, 2007
Microsoft Buys Minority Share in Facebook
Following a close battle with Google, it has emerged that Microsoft has purchased a minority share in social networking site, Facebook. The 1.6% share cost the software giant around $240 million – a snip compared to the site’s estimated total value of $15 billion.
Facebook is a social networking phenomenon, boasting around 49 million members. It allows members to communicate with friends, maintain a personal profile page and upload photographs. While the site is free for members to join, the potential advertising revenue available is thought to be massive. Indeed, Microsoft’s deal – which was negotiated over several weeks – is thought to give them exclusive rights to sell the advertising space on Facebook profiles outside the US. Under a current deal, they are already responsible for supplying links and advertising banners for profiles within the United States.
The question is, did Microsoft pay too much for the site? A number of analysts certainly seem to think so. An analyst with Morningstar, Toan Tran, believes the only way this deal could work is if people start using the site as their primary Internet operating system. He said: “The only way that this works is if everyone logs into Facebook every day to get in contact with friends and (then) uses a multitude of future applications that will be developed for it.”
Alarm bells are ringing for many critics, as Microsoft’s move so closely resembles Rupert Murdoch’s 2005 takeover of similar site, Myspace. The media mogul purchased the social networking site during the height of its popularity for a whopping $580 million, only to see it lose users to rival Facebook. Now, many analysts believe Murdoch’s acquisition of Myspace was a costly mistake.
Mark Zuckerberg began Facebook less than four years ago at Harvard University. Since then, he has refused a £1 billion takeover bid from Yahoo and a lucrative offer from Google.
Sources:
Guardian
BBC
Times
This article is the intellectual property of Pan European Consulting Limited and any unauthorised reprinting or publishing on other websites is an infringement of copyright.