Facebook & Microsoft - Bedfellows

by Sachin Balagopalan on October 25, 2007 · Comments

Techmeme is abuzz today with news that the big behemoth in Redmond is going to infuse some cash into FaceBook , $240 million to be precise or a 1.6% stake thus valuing the company at $15 billion. In this post about a month ago, I said that it was not a good idea for the ZMiester to go to bed with Microsoft or for that matter with Google. I was being slightly sarcastic in suggesting Warren Buffet as a possible investor but my point was if Mark Zuckerberg needs cash to grow the company he should seek outside investors who are simply looking for a ROI rather than Microsoft, Google or Yahoo who are simply trying to gain competitive advantage over one another.

According to the New York times article ….

As part of the deal, Microsoft will sell the banner ads appearing on Facebook outside of the United States, splitting the revenue with it. Last year, Microsoft struck a deal with Facebook to run banner ads on the site in the United States through 2011.

It’s pretty clear that FaceBook was looking to monetize the ad traffic it generates from its now 42 million users and growing and this deal is going to give them that. Microsoft on the other hand does not want Google to own that ad traffic.

In any case it’s sad that FaceBook put itself in a position to be part of this game between Google and Microsoft who basically hate each other.


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