Microsoft, previously having an exclusive advertisement deal with Facebook in the United States, seized another opportunity for exclusive global advertisement rights over Facebook. The exclusive global deal with the social networking giant for the next four years came at a hefty price tag. In fact, Microsoft invested $240 million to acquire a 1.6% piece of Facebook real estate equity. This amount reflects a valuation of the company at a grandiose $15 billion and also illustrates the amount of confidence Microsoft has in the company and the scope for social networking as a whole. This deal is definitely the sort of aggressive action needed to challenge Google in its own domain. Apparently, Google, who made a similar deal with MySpace last year, lost the deal to Microsoft probably due to the fact that Micosoft already had strong ties with Facebook.
However, it is yet unknown whether the amount spent by consumers as a direct result of advertising really justifies the sort of investment made by Microsoft. Microsoft must have a definite business plan to monetize Facebook’s rapidly growing user base, which is even greater than MySpace traffic. Perhaps the collaboration could lead to Microsoft developing a new Microsoft Office catered towards the Facebook platform. Nevertheless, it will be interesting to see if Microsoft can target advertisements towards successful monetization, which is based on personal information disclosed by users. Regardless, we will have to wait and see if the duo is as competitive in the realm of ad based revenue generation as Google.
Click here for the announcement on the Wall Street Journal