Microsoft Beats Google For A Stake In Facebook

Microsoft was dueling with Google for a stake in Facebook and the right to run its advertising infrastructure, a move it hopes will strengthen its expanding advertising-platform business and shore up its "Web 2.0" cred in the rapidly growing social-networking sphere.

At last week's Web 2.0 Summit, Microsoft CEO Steve Ballmer and Facebook CEO Mark Zuckerberg were cagey about their plans but hinted that their companies had struck an accord.

Facebook, which launched in 2004 and shot to broader prominence this year when it opened its platform to outside application developers, is wrapping up a financing round that the company said will value it at $15 billion. It has not disclosed what backers, other than Microsoft, have invested. Facebook's last major financing round, in April 2006, netted it $25 million from venture capitalists including Greylock Partners, Meritech Capital and Accel Partners.

In addition to an equity stake, Microsoft landed an extension of its existing advertising alliance with Facebook. Already contracted to serve ads for Facebook in the U.S. until 2011, Microsoft will now handle Facebook advertising internationally as well.

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Facebook's rapid rise and skyrocketing price tag recall the late '90s tech boom, when companies with no earnings -- and, in some cases, no revenue -- commanded lofty valuations and hefty investments from venture capitalists and Wall Street.

But 23-year-old Facebook CEO Zuckerberg learned a few things from the dot-com mania he was too young to experience firsthand.

"We don't want to be a company that's burning through a lot of money as we grow," he said at the Web 2.0 Summit conference. "When the site cost $85 month, we put ads up on the site to make sure we made $85 a month."

He also deflected calls for Facebook to file for an IPO, saying that if the company ever does go public, it won't happen until it's much larger and more mature.

"I'm not saying it's never going to happen, but it's years out," he said.