Microsoft buys stake in Facebook

, Thursday, November 8th, 2007

Microsoft’s $240 million purchase for a 1.6% equity stake in Facebook had everyone buzzing recently (read more). While that’s a lot of money to you and I, it’s probably a drop in the bucket for Microsoft and well worth keeping Google out of the picture (if you’re Microsoft anyway). Microsoft had already struck a deal with Facebook (in 2006) to sell display ads on Facebook. With the new deal, Microsoft has also won the rights to sell ads on international versions of Facebook through 2011. While the international advertising spend online isn’t as high as the US, it’s not insignificant either. Research firm eMarketer reports that advertisers plan to spend $900 million advertising on social-networking sites in the U.S., compared with $335 million overseas. So Microsoft also stands to gain some piece of that pie.

While the deal represents a nice infusion of capital to invest in technology and people, it’s a double-edge sword on the people side. The Wall Street Journal expects the deal to raise the valuation on Facebook stock options, which may make it more difficult to recruit new key talent. Given that Facebook wants to double their workforce in the next year, how much of a hurdle will this turn out to be?

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