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Microsoft wins Facebook

In a great win for Microsoft the software giant announced Wednesday that is investing $240 million for a 1.6% stake in Facebook.com — The deal concludes that the social network is valued at a huge $15 billion. Beating out Google, Microsoft also won exclusive global rights to sell third-party banner ads on Facebook.

To put this in perspective for everyone, you know I have to toss in the reality, the Microsoft wins Facebook deal is reportedly expecting a profit of $30 million on revenue of $150 million. So the $15 billion valuation is based on earnings of just 10% of that amount.

A lot of people were thinking Google would win this one but Microsoft has an agreement to sell ads on Facebook in the U.S. since August of last year so it seemed they were in the pocket already. Another smart move by microsoft was to expand the agreement internationally because 60% of Facebook’s nearly 50 million registered users live outside the USA.

Microsoft believes that user base is on track to exceed 200 million and eventually 300 million members, said Kevin Johnson, president of Microsoft’s platforms and services division, during a conference call Wednesday.

On the call, Johnson downplayed what one analyst called the “faddishness” of Facebook. “Figured with [Facebook’s] monetization opportunities,” said Johnson, “you could very quickly get to the valuation” of $15 billion.

Analysts agreed that whatever Facebook’s prospects, social networking can no longer be considered a fad. “These are seasoned companies making well-thought-out investments,” said Gartner analyst Andrew Frank of the deal.

As you may know Microsoft owns a branded social networking offering, “Windows Live Spaces,” which has attracted an audience of 9.8 million, according to comScore.

Johnson said he was pleased with Microsoft’s ability to monetize Facebook’s network thus far, but that there are “many initiatives underway to drive that higher.”

Owen Van Natta, Facebook’s vice president of operations and chief revenue officer, did allude to Microsoft’s recent acquisition of aQuantive, saying the deal was “a deep strategic move for them.”

With this latest victory, Microsoft still faces an uphill battle against Google in the war for online ad dollars. In its fiscal year ending in June, Microsoft’s online ad revenue rose 21% to $1.84 billion. During the same period, Google’s ad revenue totaled $13.3 billion.

It seems this is also another shot at Myspace which was once the dominant social network but it seems first to market in the social networking space may not have been the best idea given the amount of negative press they were under initially.