Microsoft Clinches Facebook Deal

Microsoft Corp., a company which needs no introduction, beat out rival Google Inc. on Wednesday in a battle to invest in socializing Web site Facebook, agreeing to pay $240 million for a roughly 1.6 percent stake in the Web phenomenon and expand a deal to sell advertising. Microsoft and Facebook stated that the $240 million investment valued Facebook at $15 billion, which analysts said was a steep price and a bet the young company would be able to transform itself into a hub for all sorts of Web activity. "The only way this works is if Facebook becomes sort of the users' operating system on the Internet -- everyone logs into Facebook every day to get in contact with their friends and use a multitude of future applications that will be developed for it," said Morningstar analyst Toan Tran.

Microsoft said it would be the exclusive third-party advertising platform for Facebook, which has more than 49 million Internet users. That extends a previous deal into Facebook sites outside the United States. Forrester Research analyst Charlene Li said that Microsoft was a better strategic fit for Facebook, since it knew how to work with software developers and build computing environments -- such as its Windows operating system. "Microsoft is a company that knows how to build platforms, knows how to develop relationships with developers. Microsoft developed the network that is the biggest, most vibrant one out there," she said. "Frankly, Google didn't bring as much to the deal."

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