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:
Facebook and Microsoft Corp. today announced that the two companies would expand their advertising partnership and that Microsoft will take a $240 million equity stake in Facebook’s next round of financing at a $15 billion valuation. Under the expanded strategic alliance, Microsoft will be the exclusive third-party advertising platform partner for Facebook, and will begin to sell advertising for Facebook internationally in addition to the United States.
Facebook continues to experience strong growth both in the U.S. and international markets; almost 60 percent of Facebook’s users are outside the U.S. With an average of 200,000 new users registering each day, Facebook continues to be one of the most-trafficked sites on the Internet.
That would be 1.6% of Facebook which is quite a bit less than the 5-10% predicted by recent rumors, but it was at the highest rumored Facebook valuation of $15 billion. Microsoft’s original advertising alliance with Facebook was apparently US only although that wasn’t spelled out at the time. Predictably, there are also some features of this new deal which haven’t been revealed.
I’m sure there will be a lot of gnashing of teeth over the huge valuation for a nearly revenue-free Facebook, but for Microsoft the best way to look at it is to ignore the equity and figure that they made an insurance bet of $240 million to lock in the Facebook eyeballs on their ad platform. It’s just another eyeball auction with the twist that Facebook’s financial backers needed an extra perk.