Microsoft Drops $240 Million for 1.6% of Facebook

Microsoft has agreed to invest $240 million in Facebook for a 1.6 percent stake in the company. This values the social networking site at $15 billion, $5 billion higher than previous estimates.

The sealed deal leaves Yahoo and Google, who’ve also been courting Facebook for the past two months, in the dust, reports the New York Times (via MarketingVOX).

Competition amongst the three longtime search contenders was reportedly part of the reason why Microsoft bid so high.

Facebook is perceived as a goldmine for advertisers because users have done an exceptional job of completing their profiles in a curiously honest fashion.

Conversely, investors say MySpace’s 110 million users are rarely honest about their identities.

Under the deal, Microsoft will sell all banner ads that appear outside of the US on the 42 million-member social network.

Having availed portions of its back-end code to developers in May, Facebook touts some 4,000 apps and expects its userbase to jump to 60 million by year’s end.

Down the road, analysts see Facebook becoming an independent operating system that exists entirely online instead of on personal computers.

Investors also imagine the social network becoming a “national language,” pointing to the way Google’s Orkut overtook Brazil, and Friendster won the Philippines.

According to Hitwise, Facebook was the ninth most-visited site in US, receiving 0.96 percent of all visits for the week ending 10/20/07.

Since this time last year, traffic has risen 102 percent and US visits from users aged 35 and over have leaped about 19 percent.

On November 6th, Facebook is expected to make a major announcement regarding its plans for the online advertising market.