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Facebook's social star rises

A possible deal with Microsoft could value the social-networking site at $10-billion.

SAN FRANCISCO - Setting the stage for a possible bidding battle, Microsoft Corp. is mulling an investment in Facebook Inc. that would value the rapidly growing online hangout at $10-billion or more, according to a report published Monday.

Citing unnamed people familiar with the matter, the Wall Street Journal said Microsoft is holding preliminary discussions that could culminate in a $300-million to $500-million investment in Facebook, a Palo Alto, Calif., social-networking site founded 3 1/2 years ago.

In exchange for the money, Microsoft of Redmond, Wash., would receive up to a 5 percent stake in privately held Facebook, which has previously raised nearly $41-million from venture capitalists and other individual investors.

Facebook declined to comment on the reported discussions, as did Microsoft, which branded the report as "rumor and speculation."

An outright sale of Facebook is considered unlikely. Mark Zuckerberg, Facebook's 23-year-old co-founder and chief executive, has repeatedly expressed his desire to remain independent. He rejected a $1-billion acquisition offer from Yahoo Inc. last year.

Facebook also has been exploring whether to raise more money from venture capitalists to help expand its current payroll of roughly 300 employees and finance other parts of its ambitious expansion plans.

With more than $100-million in annual revenue, Facebook is believed to be a prime candidate for an initial public offering of stock next year or in 2009.

If Facebook's talks with Microsoft heat up, it could draw online search leader Google Inc. to the negotiating table, too.

Two years ago, Microsoft and Google vied against each other to buy a 5 percent stake in Time Warner Inc.'s AOL, with Google ultimately prevailing by agreeing to pour $1-billion into the company as part of a wide-ranging advertising partnership.

Already a popular online hangout among teens and adults, Facebook has broadened during the past year by allowing people of all ages to set up personal profiles on the site and making it easier for other Internet companies to run their applications on its users' pages.

With more than 30-million users, Facebook now ranks as the Web's second-most-trafficked social network behind News Corp.'s MySpace.com.

It appears some of the biggest names on the Internet are vying for a piece of the action.

Having been rebuffed by Facebook, Yahoo is testing a social service called Mash and recently struck a deal to deliver ads in England and Ireland to the social network Bebo. Meanwhile, the blogosphere is speculating that Google plans to introduce new social networking products later this year.

"We're always looking for new ways to help our users connect with each other, share information, and express themselves, but we don't have any new details to share at this time," Google said in a statement Monday.

FAST FACTS

Facebook vs. MySpace

- In August, 33.7-million visited Facebook. Founded in 2004, the site opened registration to noncollege students in 2006. The company is privately held.

- MySpace drew 68.4-million in August. News Corp. acquired the site, launched in 2004, when it bought Intermix for $580-million in 2005.

Bloomberg News, Times files

[Last modified September 25, 2007, 00:10:41]