Microsoft values Facebook at $15 billion

Call it a Web 2.0 shootout: Microsoft beat out Google and Yahoo for a shot at Facebook’s advertising business, investing $240 million for a 1.6 percent stake in Facebook. The deal values Facebook at $15 billion (on just $150 million annual revenues), instantly making it the fifth largest Web property in terms of market capitalization.

Microsoft was already partnered with Facebook on ad sales; the investment would seem to lock in the alliance. The companies said the deal makes Microsoft the exclusive third-party ad seller on Facebook, with an initial focus on international ad sales.

“We’ve been working with Microsoft for over a year now in the U.S., and it’s been a relationship that has worked really well for both of us,” said Owen Van Natta, chief revenue officer at Facebook, in a conference call announcing the deal.

Facebook executives emphasized that their company would continue to have a direct sales force. The social networking site is expected to announce a new sales approach that involves targeting user profiles and activities at the AdTech conference in early November. Facebook recently filed a trademark for the term “social ads,” clearly signaling the direction its ad efforts will take.

Beating Google at anything at this point is a big win for Microsoft, but in recent weeks, Microsoft CEO Steve Ballmer has made a point of emphasizing Microsoft’s goal to become a major online ad player—with plans to buy up to 20 Web companies per year to fuel its efforts. Ballmer also called Facebook a fad—a concern he apparently overcame.

Read more about the impact of the Facebook phenomena on the telecom industry on the Telephony 2.0 Weblog: Open APIs vs Open User Data, Or What Really Matters at MySpace and Facebook

For now, service providers are sitting on the sidelines watching this dance among Web giants. But search, social networking and advertising have clearly emerged as three key prongs in monetizing online content and user activity.

At the CTIA show this week, Facebook co-founder Dustin Moskovitz petitioned mobile operators directly to open up their platforms—both in terms of access and revenue-sharing—to third-party innovators such as Facebook.

For its part, Google has announced plans to detail its social network strategy—spanning its search, email, RSS reader, maps and social network (Orkut) properties—on November 5.

By coincidence, Google was holding its analyst day on Wednesday as the Microsoft deal was unfolding. Early in the event, Google declined comment on negotiations but by the event’s end, as Microsoft’s victory became clear, Google co-founder Sergey Brin addressed the goings-on. “Some of our competitors might be willing to spend very large amounts of money,” he told reporters. “We’re really interested in doing sustainable economic deals, so we would rather not participate in those sorts of transactions.”