Microsoft is weighing up taking a stake in Facebook in a move that could value the social networking site at more than $10 billion (£4.97 billion) and trigger a bidding war, according to reports.

The world’s largest software developer is considering paying between $300 million and $500 million for a 5 per cent stake in Facebook, according to The Wall Street Journal. Any move by Microsoft on one of the web’s hottest properties could spark a counter bid from Google, the leader in search advertising, analysts suggested.

The privately-owned Facebook has raised about $40 million in venture capital in the three and a half years since it was founded and is expanding fast. Staff levels have risen threefold since last year to more than 300 and further expansion could call for more investment.

The site currently has about 40 million active users and is targeting 60 million by the end of the year. It has assembled an advertising business, which in the United States uses Microsoft as a partner, and has evolved into a distribution platform for third-party software applications, which can be used to market products and services.

The group is expected to achieve revenues of more than $100 million this year – a figure likely to be regarded as disappointing given the huge levels of traffic it attracts. Facebook now claims around 60 billion page views per month.

Mark Zuckerberg, Facebook's 23-year-old co-founder and chief executive, has already rebuffed takeover approaches from groups including Yahoo, which is thought to have offered about $1 billion a year ago. Mr Zuckerberg has repeatedly said he intends to keep the group independent.

Facebook was not immediately available to comment. Microsoft said it would not comment on "rumour and speculation".

Commentators said that a deal would give Microsoft, keen to reassert itself as a growth stock, more exposure to web 2.0-type assets, which focus on user collaboration and communication. It could also stymie the ambitions of rivals including Google, Viacom and Yahoo!, who are also thought to be keen to forge closer ties with Facebook and could emerge as counter-bidders.

Analysts suggested that jockeying for position among that set of technology and media giants meant that traditional valuations of Facebook’s business had been brushed aside. Om Malik, the well-read technology blogger, said: “Rational thinking long ago flew out the window when it comes to anything Facebook.”

Microsoft is already delivering online ads to Facebook in the United States as part of an agreement that expires in 2011. The Wall Street Journal also reported that Microsoft and Facebook are considering extending the current contract and expanding the advertising to other parts of the world.

According to Nielsen//NetRatings, the internet research group, last month Facebook had more British visitors (6.5 million) than MySpace (6.4 million), the global market leader, for the first time. However, in a development that beckons towards the fickleness of social network users, Facebook is no longer the fastest growing social network in the UK, an achievement now ascribed to Perfspot.com.

Almost half of Britons with online access, some 15.3 million people, visited at least one of the ten most popular social networks in August 2007, NetRatings said.

Alex Burmaster, of NetRatings said: “The suspicion that the next big thing in social networking could always be just round the corner is illustrated by PerfSpot.

“It wasn’t even on the social network radar until April of this year but in the last four months its visitor numbers have grown at a greater rate than Facebook has across the last eight months.”

Facebook has also drawn scrutiny in other quarters, including a 50-state investigation into the company by attorneys general in the United States concerned over online sexual predators using the site.

New York Attorney General Andrew Cuomo said on Monday his office had subpoenaed Facebook and accused it of not keeping young users safe. Facebook said it was preparing a statement about the issue.

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