Report: Microsoft Feels Out Facebook Deal
SAN FRANCISCO -- Did Microsoft (MSFT) - Get Report 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
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) - Get Report
.
(GOOG) - Get Report
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.
Another rationale for acquiring Facebook would be to make it interoperable with Windows Outlook.
As Microsoft seeks to grow its online presence, one possible target occasionally mentioned as an alternative to Yahoo! is AOL, a division of
Time-Warner
(TWX)
. But AOL has significant drawbacks for Microsoft. Although it has a big presence in some foreign markets, such as Russia, the portal lacks an advertising platform, already outsources ads through Google, and is not gaining market share, Hall said.