Internet advertising is invaluable as Microsoft buy stake in $15 billion Facebook.

On Wednesday (24/10/07) Mark Zuckerberg sold a 1.6% stake in his social networking site Facebook to Microsoft for $240million setting the value of the company at $15billion. Details of the deal were not published but analysts predict that the deal has made Microsoft the "exclusive third-party advertising platform partner for Facebook". This means that Microsoft will now sell advertising for Facebook.

The Vice President of operations for Facebook, Owen Van Natta, has said that the expanded relationship between the company and Microsoft will help "bring relevant advertising to the 49million active users of Facebook". He also stated that the deal will "allow Facebook to continue to innovate and grow as technology leader in social computing".
Many Facebook members have criticised the move. Facebook members the "Anti-Microsoft group" have said, "Microsoft have a dismal record in protecting the privacy of users" and fear that the information they post on the site will be accessed for advertising purposes. The group "If Facebook sells to Microsoft we're leaving" cite the amount of spam on email server Hotmail as an example of Microsoft being both "negligent and complicit" in security breaches.

The deal strikes a blow to Google. Analysts note that the deal represents Microsoft's determination to claim a handle on the online advertising market without having to befriend Google. It is not known whether the deal includes search engine advertising as well as display advertising but if the deal does not include search advertising Microsoft will be well placed to provide this service. If not we can expect to see Google attempting a separate deal.

Facebook has demonstrated a 6% percent growth in membership in September bringing it closer to the most popular social networking site MySpace who received 68.4million visitors in the US during September. The valuation of the company is one of the highest valuations of any private equity deal in history. Facebook has taken just $100m-$150m in sales this year and is expected to make a relatively meagre profit of $30million this year. Analysts have been quick to note that the $15billion valuation is reminiscent of the dotcom bubble in the late 1990s.
Facebook is expected to reveal a new ad system complete with improved targeting next month.