Microsoft Invests More Than $200 Million In Facebook And Obtains Exclusive Advertising Rights

Microsoft dealt a major blow to its chief competitor Google by acquiring a 5% stake in social networking powerhouse Facebook and reportedly spent more than $200 million to obtain a 5% share in Facebook. This move is part of a recent acquisition spree by Microsoft to aggressively compete with Google on Google's own turf: online advertising. Microsoft is banking on an exclusive advertising deal with Facebook one of the leading social networking sites that began at Harvard as student networking site that has emerged as a college and professional networking sites that allows individuals to share content such as video, audio, music and pictures within their networks and their friends. This deal also was the second setback for Google which also lost the exclusive advertising rights to Digg one of the most successful news and content sharing sites. This may be the reason that Google will soon be embedding advertisements in its free You Tube videos. Microsoft sees this as a viable market to make inroads of Google's considerable lead as the online advertising leader. Google had recently outbid Microsoft for the acquisition of the second largest online advertiser, but that purchase is facing a tough battle with the Justice Department's anti-trust division and criticism on Capitol Hill. These recent deals by Microsoft may truly even the field some since the advertising rights to Facebook and Digg are two of the most coveted on the web. It will be interesting now to see if Time Warner keeps its AOL division which many investors and tech observers believe is an under-performer. If AOL were to be sold look for Google and Microsoft to have another major tug of war. In fact, Google could make a preemptive strike for AOL if Time Warner is willing, and a partnership with Google for Time Warner on advertising could also sweeten this pot. The AOL name still has some cache and now that it has gone to the free route, a Google partnership would be just what Google needs to develop its own social networking force to take on Facebook, Moreover, Google may also be able to forge a partnership with Apple and AOL in this deal since Google has three executives on Apple's board and Steve Jobs is the largest Disney shareholder. TimeWarner and Disney may partner now that NBC Universal and Fox are teaming up online with the new Hulu online video site.
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