Facebook Ready to Be Acquired?

The only question really is how much will it take? I’ve always believed that Facebook would ultimately be acquired and that Microsoft would be the likely buyer. Here’s what I wrote in May when Facebook launched its vaunted platform:

Facebook reportedly turned down nearly a $1 billion offer from Yahoo!. Facebook says it wants to remain independent and many people believe it’s angling for an IPO. I don’t believe that the company will generate sufficient revenues in the near term to make it an attractive public offering. But I could be very wrong about that.

More likely in my mind is a bidding war in which Facebook is acquired by Google or Microsoft or potentially TimeWarner, though that’s much less likely. (IAC is also a potential bidder.) Presumably Yahoo! has bid as much as it’s going to bid for the site I imagine. However, among the big three search engines Yahoo! is probably the best fit.

Neither Google nor Microsoft really have social networks, despite claims to the contrary. Google was somewhat blindsided by the rise of MySpace, Orkut doesn’t count (unless something changes) and Microsoft’s Spaces isn’t convincing to me.

Microsoft’s VP for emerging business got on stage yesterday during the partner portion of the program. The minute that happened, I thought: “Here’s Microsoft’s next big acquisition.” I could be wrong of course but that was what came immediately into my brain.

Now the New York Post reports that there’s a bidding war going on between Google and Microsoft for an investment in Facebook (perhaps it will turn into an outright acquisition), with Microsoft CEO Steve Ballmer apparently willing get somewhat irrational to block Google:

This time around, however, Microsoft is hanging tough, despite recent comments by CEO Steve Ballmer that social-networking sites were “a bit faddish.” One source said the Redmond, Wash.-based company is “willing to give any valuation possible” to keep Facebook away from Google.

Facebook’s investors, which include Accel Partners and Greylock Partners, are looking for a pre-money valuation of $10 billion-$15 billion in any deal. On the high side, that means Microsoft or Google would have to come up with $1.5 billion for a 10 percent stake or $750 million for a 5 percent piece

The article speculates that it’s unlikely that either party will put up all that money itself.

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Related: More from the WSJ.

UPDATE: Facebook and Microsoft Corp. today announced that Microsoft will take a $240 million equity stake in Facebook’s next round of financing at a $15 billion valuation, and the companies will expand their existing advertising partnership. Under the expanded strategic alliance, Microsoft will be the exclusive third-party advertising platform partner for Facebook, and will begin to sell advertising for Facebook internationally in addition to the United States.