Why Microsoft Paid Less For Facebook

The reason why Microsoft just paid $240 million than $750 million for Facebook

1. Microsoft Only Needs an Entrenched Position
Ballmer's plan to acquire 100 startups in 5 years is still sketchy, but we got the point -- Microsoft wants momentum. If the company is to go forward as planned then taking a small, strategic piece of Facebook makes sense. Microsoft's financial interests in Facebook's ad platform already exist, so it only makes sense to strengthen that tie as the hype builds. Getting a direct line to Facebook's international audience (which makes up a whopping 60% of its users) isn't too shabby either -- at least for Redmond's ad sales department. A larger commitment (financial or otherwise), could definitely help with Facebook's cash flow, but at this juncture the company really needs support for its ad platform, just as Microsoft needs an entrenched position in the online ad market.

2. Microsoft Wouldn't Drink the $15 Billion Kool-Aid
Let's face it -- a $15 billion valuation for Facebook is just as pretentious as a monocle. With today's alliance, Microsoft most likely chose a figure it was willing to spend ($240 million) and then invested accordingly. Even though Facebook can claim that it's 1.6% of $15 billion, it will always be $240 million to Microsoft. At the end of the day, the social networking site is probably just happy to have a lighter load for generating revenue, and Microsoft is glad it didn't dump $750 million into what could be the next Skype.

3. Microsoft Was the Highest Bidder
$240 million really isn't that much. Especially when $750 million was the going figure for the longest time. In terms of Google's cash flow, a company accountant could trip coming out of the bathroom and drop that much cash. It's safe to say that Microsoft was the highest bidder because it wanted this particular investment more. That's not to say that Google turned its nose up at Facebook entirely. The interest was there -- just not at Facebook's asking price. The cost of hubris? Having to eat crow and take Microsoft's down-to-earth offer.