Microsoft pours $240m in Facebook stake

Microsoft has won one over Google and Yahoo, but at a price.

After being scooped by its rivals in past bidding contests, Microsoft has won a 1.6% stake in social network site Facebook for $240 million.

The deal, announced Wednesday, values the three-and-half-year-old company with $150 million revenue at $15 billion.

Under the terms agreed, Microsoft will become Facebook's exclusive third party advertising channel outside the US. It already has the rights to sell banner ads in the US until 2011.

Kevin Johnson, president of Microsoft's platforms & services division, said the deal was 'a strong statement of our confidence in the long-term economics of this partnership.'

Facebook chief revenue office Owen Van Natta said the expanded relationship 'will allow Facebook to continue to innovate and grow as a technology leader and major player in social computing.'

Across the blogs, the initial response was cautious and aimed at finding out more about the deal.

Reporting the conference call announcing the deal, Silicon Alley Insider noted that the two executives referred repeatedly to 'certain aspects of the agreement that both parties have agreed not to disclose.'

The New York Times said the 'astronomical valuation' was a sign Microsoft believed it couldn't afford to lose out on the deal.

It also notes that Facebook's founder, 23-year-old Harvard dropout Mark Zuckerberg, is now worth $3 billion, while VC firm Accel Partners has turned its $12.7 million investment into $1.65 billion. described the deal as a 'huge boost' for Microsoft's online ad business, while Jim Goldman at CNBC's TechCheck said Microsoft had to be careful 'it doesn't do to Facebook what News did to MySpace', which was fill it with ads that drove users away.