Microsoft and Facebook have expanded their exclusive partnership to grow more online advertising revenue globally and counter the Google-MySpace threat. It’s a good move for both companies.
On Wednesday, the Redmond, Wash. software giant announced a $240 million investment in the social networking site as well as an expansion of the companies’ exclusive online advertising partnership globally, mimicing the same deal signed between the two companies in the US market 14 months ago.
Microsoft’s investment in Facebook’s latest round of funding was more modest than what pundits predicted, and represents only a small fraction of the $15 billion valuation of the social networking site.
Still, it gives Microsoft’s slow growing AdCenter a larger, and necessary, footprint into an online advertising market dominated by Google -- without breaking the bank.
If social networking ends up in the technological heap, Microsoft will have risked little to get a hand in the game. Had the company been more aggressive earlier in the online search front, it would not be so far behind Google today.
And though Microsoft CEO Steve Ballmer is said to be disappointed with its Facebook pact in the U.S. to date, it is imperative that the company expand its stake in a hot Web 2.0 property that is gaining 200,000 eyeballs per day and that now employs more than 700 people in Palo Alto, Calif.
Executives from Microsoft and Facebook declined to discuss specifics of the partnership, such as the level of technical collaboration that will occur between the two companies and the extent to which Microsoft will exercise control over what Facebook users see and consume.
No doubt, Microsoft will have access to Facebook’s profile data in order to provide “highly relevant” and context-driven user ads. Why else would Microsoft write a $240 million check? Nothing wrong with that.
This investment, signaling Microsoft's more serious Web 2.0 efforts, helped Facebook make the decision to align globally.
“AdCenter is a big platform with massive scale and they do targeting on many sites across the web and leveraging that scale is core to our strategy," the Facebook exec said during a conference call on the investment on Wednesday.
Microsoft may fall behind on the technology front but don't count the company out when it comes to marketing and advertising, dollars and cents.
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Owen Van Natta, vice president of operations and chief revenue officer at Facebook, said this gives Microsoft‘s exclusive rights to sell ads for the web property but insisted that existing third-party advertisers will be grandfathered into the deal.
Aside from the capital injection, Facebook is getting Microsoft’s large online presence and increasingly sophisticated online advertising platform. In August, for example, the software giant completed its acquisition of aQuantive Inc and its high end advertising platform across devices and media.