Microsoft has paid US$240 million for a 1.6% stake in social networking site, Facebook, making the company instantly worth US$15 billion.

Does this statement ring true? My view on this is that it’s a ridiculous theory.

Sure, if you do the maths considering current equity positions, it might come to $15 billion, but is that really what Microsoft is buying into? The most important part of the press release tells us that Microsoft is now the exclusive advertising partner for Facebook until the year 2011. The 1.6% equity stake is just extra gravy.

Similarly, Google paid US$900 million for exclusive advertising rights for MySpace a few years ago. If they had received a 1.6% share, does that make MySpace worth some multiplicative factor of $900 million?

If the press release had simply said, Microsoft pays $250 million for exclusive advertising rights, no one would have batted an eye. Microsoft has not paid US$15 billion for Facebook, but rather has purchased advertising rights. But I think it’s brilliant on Microsoft’s part taking 1.6% equity; the equity has little monetary value - it’s unlikely that Facebook will ever be worth $15 billion - but look, aren’t we all talking about it?

This is a win for Microsoft. And naturally, a win for Facebook.