Microsoft to Invest $240M in Facebook in Google Lockout

by , 9:05 AM EDT, October 25th, 2007

Microsoft and Facebook struck a deal on Wednesday that will give the Redmond-based company a 1.6 percent stake in the social networking Web site. The $240 million deal will bring Microsoft and Facebook even closer together and at the same time blocks competitors like Google and Yahoo! from snatching a piece of the popular Web site, according to The New York Times.

As part of the agreement, Microsoft will sell banner ads that appear of Facebook's site outside of the United States, and then share part of the revenue with the company.

What may be more important for Microsoft, however, is the fact that Google and Yahoo! -- both companies that were showing an interest in Facebook -- have been shut out of the Facebook game. Facebook's $15 billion value and high-profile popularity was an enticing draw for all three companies.

Microsoft previously had a deal with Facebook through 2011 to run ads in the company's U.S. Web site. This new deal will help the Redmond company shore up its position as an online advertisement server and better compete with Google.

Facebook plans to use the money it gets from Microsoft to hire new employees, expand overseas, and develop an advertising system that custom matches ads to user preferences.