Facebook Partnership Expanded

Under an expanded partnership announced in Oct. 2007, Microsoft will invest US$240 million for a 1.6% stake in Facebook, a privately held company that operates a fast-growing social networking site. Microsoft will become the exclusive provider of advertising platform technology to Facebook and will begin to sell advertising on Facebook sites worldwide, extending a previous agreement that covered the United States only. The deal will increase Microsoft’s online advertising revenue and blocks Google from entering into a similar partnership.

The Social Networking Craze

Facebook was founded in Feb. 2004 as a way for college students to post personal information and establish online connections with others from their schools. Although it was one of the first social-networking sites, Facebook was initially eclipsed by other sites, particularly MySpace. In Aug. 2006, MySpace had more than 100 million registered users, while Facebook had less than 8 million. MySpace was also first with revenue-generating business deals: its founders sold the company to News Corp. for US$580 million in mid-2005, then News Corp. sold the rights to place advertising on the site to Google for US$900 million in Aug. 2006.