Microsoft looks at Facebook after losing Yahoo!

08 May 2008

Microsoft may seem to have lost out on Yahoo!, but it is still intent on increasing its presence in the online space. Latest reports indicate that it has sounded out social networking site Facebook for a possible acquisition, a deal, which would cost Microsoft much less than the $47.5 billion it was willing to pay for Yahoo. Also, with Facebook, Microsoft may have a more popular alternative to Google's Orkut.

And while in India Orkut may be the most popular social networking site, on the global internet arena, it is Myspace that rules, with Facebook coming a close second. Media magnate Rupert Murdoch had recognised the potential of social networking much before its recent explosive popularity and had acquired Myspace for $580 million in July 2005, a price that had seemed exorbitant then but not so today considering Facebook's current $15 billion valuation, since its launch on 4 February 2004.

Today, it is the most popular social networking site in the world with an estimated 110 million registered users. Around 230,000 new users sign up every day on average. However, Facebook, founded by former Harvard student Mark Zuckerberg in his dormitory in 2004, is a serious claimant to the top spot, having already crossed 100 million users.

Teenagers and young adults flocked to Facebook after the site expanded beyond university students in 2006, attracting advertisers that want to target users of a particular age or gender. It is poised to continue growing at an explosive rate to surpass Myspace and eventually have a user base of around 300 million.

It is this amazing popularity of Facebook, which has enhanced the social networking experience with several innovative features that has garnered the interest of corporations far and wide. However, founder Mark Zuckerberg has been quite adamant about not selling out but has resorted to minor stake sales to raise funds. Murdoch, the chairman and chief executive of News Corporation, parent company of The Times and owner of MySpace, has, in the past, ruled out buying Facebook, saying that it was overvalued.

Facebook had received its first investment of $500,000 in June 2004 from PayPal co-founder Peter Thiel, followed a year later by $12.8 million in venture capital from Accel Partners, and then $25 million more from Greylock Partners and Meritech Capital Partners.