Microsoft Punches Out Google at the Facebook Altar

Microsoft is the victor in the Facebook struggle in an exclusive deal that seems to leave Google out in the cold.

The software company has agreed to invest $240 million in Facebook’s next financing round, ending weeks of speculation about whether or not Google or Microsoft would win Facebook’s hand in an investment marriage. As Facebook is valued at $15 billion, Microsoft’s stake in the social networking site will be roughly 1.6 percent.

Further cementing the deal, Facebook said in a statement it has extended its August 2006 advertising deal with Microsoft, which will become the exclusive third-party advertising platform partner for Facebook, and will sell advertising for the company internationally as well as in the United States.

This could be lucrative for both vendors: Of Facebook’s 49 million users, roughly 59 percent are outside the United States.

The deal comes a week to the day after Microsoft CEO Steve Ballmer and Facebook CEO Mark Zuckerberg proclaimed their happiness with their existing deal in separate conversations at the Web 2.0 Summit.

Well, not exactly. Ballmer said Microsoft was very happy with the deal, while Zuckerberg, perhaps not wanting to tip his hand, said he was pretty sure Facebook was happy with the arrangement.

There’s no question of the value of this deal to Facebook and Microsoft. Facebook gets a nice chunk of cash with which to hire more developers to bolster its open developer platform, while Microsoft gets a piece of the hottest site on the planet and can use that as leverage against Google.

What does this mean for Google? It won’t help, and may mean Google will have to go it alone in social networking, where its Orkut service is pretty much only popular in Brazil and a few other places outside the United States.

My guess is Google’s goal is to use its strong clout to make Orkut a household name in the United States as well. But is it too late at this point? Have Facebook and MySpace gotten too big for Orkut to compete with?

It will be interesting to see how Google plans to compete here, if at all.