Report: Microsoft Feels Out Facebook Deal

SAN FRANCISCO -- Did Microsoft(MSFT) start dating before or after it jilted Yahoo!(YHOO) on Saturday?

The Wall Street Journal reported Wednesday that the Redmond, Wash. software giant has contacted Facebook to gauge the social-networking site's willingness to be acquired.

But discussions are not active, according to the report, begging the question of when the overture was made. Microsoft has already invested $240 million in the site, founded by Mark Zuckerberg, for a 1.6% stake, giving Facebook an estimated $15 billion valuation.

In spite of that tie-up, the Wall Street Journal's digital network reported Tuesday that Zuckerberg is considering appointing Marc Andreessen, the former Netscape founder who has now started social-networking platform provider Ning, to the Facebook board, rather than a Microsoft ally.

In statements since Microsoft CEO Steve Ballmer withdrew an offer of $33 a share for Yahoo!, the company has indicated it will boost its online presence through organic growth or other acquisitions. A Yahoo!-Microsoft deal would have merged the No. 2 and No. 3 companies in search-advertising market share.

A Facebook buy would beef up Microsoft's standing among online social networks. Microsoft's homegrown Windows Live Spaces site has 92 million registered users. In a presentation at Merrill Lynch Tuesday, Brian Hall, general manager of the Windows Live Business Group, said "Spaces doesn't have the level of engagement that the Facebooks and MySpaces of the world have," also referencing the social-networking site owned by News Corp.(NWS). Google(GOOG) has an arrangement with MySpace that places ads throughout the network.

The existing Facebook investment enables Microsoft to place audience-targeted, or contextual, ads on its network, Hall said.