Microsoft has won a high-profile technology industry battle with Google and Yahoo to invest in the social networking upstart Facebook.
The two companies said on Wednesday that Microsoft would pay US$240 million for a 1.6 percent stake in Facebook.
The investment values Facebook, which is three and a half years old and will bring in about US$150 million in revenue this year, at US$15 billion.
The deal throws the value of the holdings of Facebook investors into the stratosphere. Mark Zuckerberg, the 23-year-old Facebook co-founder who followed the path of Bill Gates by dropping out of Harvard to build a company, owns a 20 percent share that may now be worth as much as US$3 billion.
Accel Partners, the venture capital firm that invested US$12.7 million in May 2005, now holds stock that could be worth U$1.65 billion.
The investment also ends two months of jockeying among three major Internet players for the right to invest in and forge close ties with Facebook.
Microsoft and Facebook executives said they met in several cities over the last month and moved toward consummating the deal by sending cell phone text messages to each other while Steven Ballmer, chief executive of Microsoft, was speaking last week at the Web 2.0 technology conference in San Francisco.
"There were a lot of twists and turns, as there always are in these things," said Owen Van Natta, chief revenue officer of Facebook.
The final negotiations were completed on Wednesday morning in Facebook's offices in Palo Alto.
As part of the deal, Microsoft will sell the graphical banner ads appearing on Facebook outside of the US, splitting the revenue. Microsoft has an existing deal with Facebook to run banner ads on the site in the US through 2011.
The astronomical value placed on Facebook is evidence that Microsoft executives believed they could not afford to lose out on the deal. Google appears to be building a dominant position in the race to serve advertisements online.
Fearing it might lose control over the next generation of computer users, Microsoft has been trying to keep up with and in some cases block Google's moves, even if that effort is costly.
"We are now stepping outside what is typically a business decision," said Rob Enderle, the founder of the strategy concern Enderle Group. "This was almost personal. I wouldn't want to be the executive that's on the losing side at either firm."
On a conference call with journalists and analysts, Kevin Johnson, president of the platforms and services division at Microsoft, described the deal as a "major advertising syndication win for Microsoft."
"The equity stake that we are taking in Facebook is a strong statement of confidence in this partnership," Johnson said.
"It's a statement of confidence in the fact that our advertising platform is going to get stronger and will help monetize Facebook," he said.
On the same call, Van Natta responded to a question about reports that both Yahoo and Google were bidding to invest in Facebook by saying, "We were very fortunate to have a lot of folks interested in a partnership with us around advertising."
Van Natta said the investment would allow the company to more than double its work force to 700 employees by the end of next year.
He also said it would help Facebook expand internationally and buy the technology to help keep up with its rapid growth.
Facebook says it has 50 million active members and is adding 200,000 new ones each day.
MySpace, the site owned by the News Corp that is Facebook's main rival in social networking, has more than twice as many members but is growing more slowly.
DEFENDING DEMOCRACY: Taiwan shares the same values as those that fought in WWII, and nations must unite to halt the expansion of a new authoritarian bloc, Lai said The government yesterday held a commemoration ceremony for Victory in Europe (V-E) Day, joining the rest of the world for the first time to mark the anniversary of the end of World War II in Europe. Taiwan honoring V-E Day signifies “our growing connections with the international community,” President William Lai (賴清德) said at a reception in Taipei on the 80th anniversary of V-E Day. One of the major lessons of World War II is that “authoritarianism and aggression lead only to slaughter, tragedy and greater inequality,” Lai said. Even more importantly, the war also taught people that “those who cherish peace cannot
STEADFAST FRIEND: The bills encourage increased Taiwan-US engagement and address China’s distortion of UN Resolution 2758 to isolate Taiwan internationally The Presidential Office yesterday thanked the US House of Representatives for unanimously passing two Taiwan-related bills highlighting its solid support for Taiwan’s democracy and global participation, and for deepening bilateral relations. One of the bills, the Taiwan Assurance Implementation Act, requires the US Department of State to periodically review its guidelines for engagement with Taiwan, and report to the US Congress on the guidelines and plans to lift self-imposed limitations on US-Taiwan engagement. The other bill is the Taiwan International Solidarity Act, which clarifies that UN Resolution 2758 does not address the issue of the representation of Taiwan or its people in
Taiwanese Olympic badminton men’s doubles gold medalist Wang Chi-lin (王齊麟) and his new partner, Chiu Hsiang-chieh (邱相榤), clinched the men’s doubles title at the Yonex Taipei Open yesterday, becoming the second Taiwanese team to win a title in the tournament. Ranked 19th in the world, the Taiwanese duo defeated Kang Min-hyuk and Ki Dong-ju of South Korea 21-18, 21-15 in a pulsating 43-minute final to clinch their first doubles title after teaming up last year. Wang, the men’s doubles gold medalist at the 2020 and 2024 Olympics, partnered with Chiu in August last year after the retirement of his teammate Lee Yang
The Philippines yesterday criticized a “high-risk” maneuver by a Chinese vessel near the disputed Scarborough Shoal (Huangyan Island, 黃岩島) in a rare incident involving warships from the two navies. The Scarborough Shoal — a triangular chain of reefs and rocks in the contested South China Sea — has been a flash point between the countries since China seized it from the Philippines in 2012. Taiwan also claims the shoal. Monday’s encounter took place approximately 11.8 nautical miles (22km) southeast” of the Scarborough Shoal, the Philippine military said, during ongoing US-Philippine military exercises that Beijing has criticized as destabilizing. “The Chinese frigate BN 554 was
RSS