There is a lot of coverage on this in the past two days - the big news that Microsoft snatched the deal with Facebook right under Google’s nose (official press release here and here). The investment itself, even though small ($240 million) compared to its last financial quest with aQuantive which cost them $6 billion, represents a far greater value for Microsoft. With an exclusive deal for ad distribution on Facebook, Microsoft gets a very good opportunity for international market penetration, since about 60% of Facebook users are actually based outside of US. Whether Facebook is actually worth the $15 billion that it’s now valued at (after this deal) is questionable. The site has yet to show a major revenue generating model (that actually works). Facebook Flyers were a good start (similar to PPC ads in many ways), and there are Facebook Polls as well (pay for opportunity to do detailed targeted research using Facebook demographics data and users). The fact that Facebook is now valued at $15 billion is not that important for Microsoft, because they got what they wanted - more exposure and chance for growing revenue on a phenomenon that some compare to Skype.

Naturally, there are reasons to think the $15 billion valuation of Facebook is not realistic, even indications that recent valuations for other Internet companies are leading into another bubble crisis. Facebook is moving forward for now and doesn’t show signs of slowing down. Changes are constantly happening with new possibilities emerging almost weekly. Hype or reality? No one can state with certainty, but the Facebook cake tastes so good, even the most skeptical are feeling the urge to take a bite. There are plenty of pieces of this cake to dish out for now, but at a certain point someone is going to have to pick up the check. Microsoft already paid its piece $240 million and will probably make much more than by the time things go bad (f they go bad).

On the other hand, AdCenter will be one more distribution platform richer, and what a targeted platform that will be! With all the detailed demographic data on Facebook, it should be easier than ever to user PPC ads and get better results. With increasing PPC prices, sometimes reaching ridiculous amounts, this will be a good change. Sure, the prices will probably be just as high, but the targeting will be much better, and thus the results much more precise. Or at least that’s the idea Microsoft/Facebook, right?

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