Microsoft's investment of $240 million (€167.65 million) for a 1.6 per cent stake in Facebook values the three-year-old social networking website at $15 billion.
Well-placed sources also suggested yesterday that it had received a further $500 million from two New York hedge funds.
The news vindicates the decision by Facebook founder Mark Zuckerberg (23) to rebuff an offer last year from Yahoo, which sought to acquire the entire company for $1 billion.
Microsoft's move expands the relationship between the two companies, which began last year when it started selling advertising on Facebook in the US. As part of the investment, Microsoft will become Facebook's exclusive third-party advertising provider and will begin to sell advertising for Facebook internationally.
When Facebook was founded at Harvard University in early 2004, it was initially open only to college students and staff of selected large companies. From September 2006, however, anyone with an e-mail address has been able to sign up.
Last month it was the sixth most-visited website in the world, with 73.5 million unique visitors, up 420 per cent from the previous year, according to tracking company ComScore.
This week it was revealed that the website has 131,660 Irish members, up from an estimated 7,000 at the beginning of the year. Despite the massive growth, though, Facebook still lags behind Bebo and MySpace in the Irish market, although its users have an older age profile, which may be more attractive to advertisers.
Microsoft executives will have been keenly focused on beating Google to the punch on this deal.Besides chief executive Steve Ballmer's well-publicised dislike of Google, the internet upstart pipped Microsoft to the post in a number of recent deals, including the purchases of DoubleClick and YouTube, and the acquisition of a stake in AOL.
Microsoft has consistently lagged behind Google in the increasingly lucrative internet advertising market. The world's biggest software maker boosted advertising revenue by 21 per cent to $1.84 billion in its financial year to the end of June, while Google's advertising sales jumped 64 per cent to $13.3 billion.
It hasn't all been plain sailing for Facebook, though. A BBC investigation this week revealed that Facebook users may be putting themselves at risk of identity theft. Consumer advocacy programme Watchdog created a fake profile which appeared to be of a girl in her 20s. She contacted 100 random Facebook users asking them to be her friend and, despite not knowing her, 35 agreed.
This revealed the personal profiles of the users to the BBC team. Using information from the profile of one of these users - Scott Gould (23) - as well as information freely available elsewhere on the web, they successfully opened an online bank account and applied for a credit card in his name.
