Microsoft has invested $240m (£117m) in Facebook, putting a value of $25bn on the social networking site, which has so far failed to make a profit, and agreed a key advertising deal.
Microsoft's investment gives it a 1.6% stake in Facebook, which has attracted interest from a range of internet companies including Yahoo.
The agreement cements Microsoft's exclusive relationship with Facebook to serve ads on its site and keeps out competitors, including Google.
Facebook has been working with Microsoft for a year and has decided to expand its partnership to a global relationship.
The software group already has a deal with Facebook in the US which lasts until 2011 and gives it exclusive rights to provide banner ads. The new deal will make Microsoft the site's exclusive third-party advertising platform partner and it will begin to sell advertising for Facebook internationally, as well as in the US.
It is not clear whether the deal will include search advertising as well as display advertising. If not it leaves the way open for Google and other competitors to seal a separate deal to sell search advertising.
Facebook is growing faster than the top social networking site MySpace and Kevin Johnson, president of Microsoft's platform and services division, said that the growth opportunities justify Microsoft's investment in the site.
Facebook has almost 50m users and its membership grew more than 6% in September, compared with MySpace growth of 1% to 107m users, according to research company ComScore.
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