The Microsoft versus Google case!

In October 24th, 2007 Microsoft payed $240 million for 1,6% of Facebook (that amount values the 3 years old firm at $15 billion). Microsoft did so because they realized their future is online advertising (a market led by Google) and not software license fees, which was their path for generating revenues during the past - present.

The Microsoft - Google battle has as follows:

1. Microsoft: Built its own online-advertisement network, ad-Center, and searched for alliances - acquisitions to boost its ad inventory.
2. Google: Was spoiling those deals...
1. Got stake in AOL, the Internet arm of Time Warner.
2. Won a deal to supply advertisements on MySpace.
3. Bought YouTube.
4. Acquired DoubleClick, and online advertisement firm.
3. Microsoft then...:
1. Bought aQuantive, an online advertisement agency, for $6 billion, making it its largest acquisition ever!!
2. Tried to get Facebook (Google has its own social network, Orkut, which does well in emerging markets and is about to get a revamp).

The Benefits:

By acquiring the 1,6% of Facebook, Microsoft:

1. Keeps it away from Google.
2. Deepens the advertising alliance between itself and Facebook (in 2006 Microsoft became Facebook's exclusive broker of American banner advertisements, and after the 1,6% deal becomes Facebook's sole broker for international advertisements).

Source: economist.com