Microsoft buys into Facebook

The mystery is over. Microsoft has bought a 1.6% stake in Facebook for $240 million valuing the company at a $15 billion. It is hard to tell what it will mean for the users of Facebook. Probably little if anything at all. It seems to primarily an advertising defensive play. Microsoft did not want Google to form a relationship with Facebook. A key reason why Facebook went with Microsoft was their existing advertising relationship. The deal allows Microsoft to target more advertising at the Facebook 49 million users.

With the deal, Microsoft will be the exclusive third-party advertising partner for the social networking site. The ads will expand beyond the US to Facebook's international presence as well. No Microsoft technologies will be integrated into the Facebook platform. That's good. Facebook is winning, why try to fix something that isn't broken. What's left to be seen is actual ROI on the advertising on Facebook. The word on the street is that people click less on ads when they are on social networks because the content within the network is so much more attractive.

I wonder whether Facebook decided to go with Microsoft because they did not want anything to do with Google's own social networking plans. Those call for a more open ecosystem of social networks driven by OpenID and other similar technologies.