After much negotiation, and a tussle with Google , Microsoft snagged a new deal with Facebook. MSFT already handles Facebook's ad sales in the U.S., for the next few years at least. This extends the contract to Facebook's international business--already over half its ad business is overseas, and this is the area that has the biggest growth potential.
Perhaps most importantly this gives Microsoft a small stake in the hot company--its $240 million investment valuing Facebook at 15 billion.
Facebook CEO Mark Zuckerberg, himself a Harvard dropout just like Bill Gates, has always had a special affinity for Microsoft, describing his company and its applications in the same terms that Microsoft describes its software Today at the Forbes Media and Entertainment conference here in Beverly Hills, David Siminoff, the head of VC fund Venrock put it simply- Microsoft needs Facebook more than Google.
It would have been a nice addition for Google, but it's crucial for Microsoft--key, necessary to help Microsoft to compete with ad giant Google. It also fits with their other recent acquisitions, like Massive, which does in-video game advertising. It allows them to expand the footprint of the Xbox 360, and even its HD DVD format in this battle for the living room, if only because of its access to the Facebook demographic.
Now, is it worth it? I'm writing this from a panel "Jostling for Ad Dollars" and there's debate about how useful social networking ads are. The CEO of Glam Media just said that more than 50 percent of page views are useless from an advertising perspective. Google's director of Industry Development and Marketing just said that now it's about monetizing those social network users--a challenge yet to be realized by anyone in the space.
This may be a crucial partnership, but it seems the valuation is considered super high, based on the sneers I'm hearing in this panel and the joke Barry Diller just cracked about valuing a company without a significant revenue stream.
Now, all eyes will be on what Facebook announces about its new ad strategy in the next couple of weeks: there's a presentation on November 6.
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