Microsoft has approached Facebook in recent weeks proposing an investment that would give Microsoft a stake of up to 5% in the popular social-networking company, the Wall Street Journal reported yesterday.
With Microsoft willing to invest between US$300 million (NZ$422 million) and $500 million (NZ$703 million), the deal would value Facebook at US$10 billion or more, the Journal reported, quoting anonymous sources.
Google has also expressed an interest in acquiring a Facebook stake recently, according to the Journal. Thus, Microsoft could find itself competing for Facebook's attention with Google.
However, Facebook's discussions with Google and Microsoft are in the early stages and could end up with no agreement with either suitor, according to the Journal.
The IDG News Service's requests for comment from Facebook, Microsoft and Google weren't immediately answered.
Founded in February 2004, Facebook is one of the world's most popular social-networking sites with about 42 million active users. Facebook has been growing strongly in the past year. In December, it had about 12 million active users.
The site initially only admitted students, but a year ago it lifted that restriction. In May, it opened up to third-party developers to create applications, which has also added to its popularity with users.
Along the way, it has caught the attention of big internet players like Microsoft, Google and Yaho. The latter reportedly tried to buy Facebook last year for US$1 billion.
Facebook's attractiveness is that it builds very strong and deep relationships with its users. Over half of its active members return to the site daily, and Facebook knows a lot about them, thanks to all the personal information people disclose on their site profiles and interactions with other members.
This, in turn, offers a desirable audience to advertisers and to ad sellers and distributors such as Google, Microsoft and Yahoo. A little over a year ago, Facebook chose Microsoft to display banner ads on the site.
Facebook would be interested in using the cash raised from selling a stake for buying other companies, increasing its staff of about 300 and beefing up its technical infrastructure, the Journal reported.
Facebook is also weighing the option of raising funds from financial investors, the Journal said.