Microsoft pays $240 million for 1.6 percent stake in Facebook

Microsoft Corp., Redmond, Wash., invested in a 1.6 percent stake Facebook Inc. for $240 million, says The Associated Press, and the 3 1/2-year-old Internet hangout was appraised at $15 billion.

The $240 million price Microsoft paid demonstrates how badly the company wanted to deepen its relationship with a startup that doesn't even have $200 million in annual revenue, says the AP. By sealing the deal, Microsoft trumped Google after losing previous high-stakes bidding battles involving a stake in AOL and ownership of online video sharing pioneer YouTube and Internet ad service DoubleClick Inc.

Besides buying a stake in Palo Alto, Calif.-based Facebook, Microsoft also will sell Internet ads for its website outside the United States, broadening a marketing relationship that began last year, says the AP.

"This is a strong statement of confidence in this partnership and in Facebook," Kevin Johnson, president of Microsoft's platforms and services division, said during a Wednesday conference call with reporters and analysts.

Microsoft's investment underscores the skyrocketing value of online communities like Facebook -- a place where Web surfers look for dates, connect with friends and family, and share photos, videos, and music. In 2005, News Corp. paid $580 million for outright ownership of MySpace.com, the only social network larger than Facebook.

With its investment, Microsoft established Facebook's current market value at $15 billion less than 4 years after Mark Zuckerberg started the website in his Harvard University dorm room. Already considered a whiz kid, Zuckerberg now looks even smarter for rebuffing a $1 billion takeover offer from Yahoo Inc. last year, says the AP.

Zuckerberg has indicated he wants to hold off on an initial public offering for at least 2 more years, but in the meantime, Facebook hopes to become an advertising magnet by substantially increasing its current worldwide audience of nearly 50 million active users who connect with friends on the site through messaging, photo-sharing, and other tools it offers.