Microsoft News Tracker

Yesterday was Facebook’s big debut party for their new platform designed to milk some cash from their faithful members via “social” advertising. Any sarcasm on my part would be superfluous after Nicholas Carr’s application of a flamethrower, but one interesting aspect was that Microsoft, who a year ago was working with Facebook “on future technology and advertising initiatives” and recently bought a slice of the company, was relegated to the position of being merely one of 60 initial advertisers on the new platform.

So where does Microsoft fit into Facebook’s overall advertising plans? Facebook CEO Mark Zuckerberg explains:

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Among the unanswered questions surrounding yesterday’s Microsoft-Facebook deal was whether there were any other investors besides Microsoft in this round of financing. Now rumors are circulating that two hedge funds also chipped in for an additional $500 million.

The early (and possibly incorrect) presumption is that the hedge funds are each getting an equity share equivalent to Microsoft’s %1.6, but of course they aren’t getting any of the ad business. That in turn raises another unanswered question: what kind of advertising revenue share did Microsoft give Facebook? Both parties are taking pains to maintain the fiction of two separate Microsoft-Facebook deals in order to preserve the pristine nature of the $15 billion valuation, but one can’t help but wonder how much Microsoft really paid in total to play with Facebook.

Update 11/1: Facebook board member and investor Jim Breyer says this rumor is incorrect.

The long series of rumors finally came true today as Microsoft won the bidding to acquire a small equity interest in the Facebook social networking site and got the rights to foreign ad sales:

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Microsoft CEO Steve Ballmer’s recent characterization of the Facebook social networking site as “faddish” apparently isn’t keeping him from reaching for his wallet in what is rumored to be a bidding battle with Google for a small but expensive piece of the fad.

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Yesterday, the “Microsoft acquires Facebook” rumors were back according to the Wall Street Journal, with the twist that the unidentified sources say that Microsoft is now only asking for 5% of the hot social networking fad site, but would pay a price that would give Facebook an over $10 billion dollar valuation.

Supposedly Facebook would dearly love the public valuation and could use a little walking around money, while Microsoft would love to demonstrate some trendy credentials and perhaps permanently lock in their Facebook advertising deal.

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