Just what would be the hoped-for upshot of Microsoft taking a stake in Facebook?

Microsoft is keen to reassert itself as a growth stock – but is languishing at about half its 1999 peak.

Buying into Facebook, just about the sexiest site on the web right now, might just give it some web 2.0 glamour and pander to Wall Street, analysts have already suggested.

Such a move would also fit in with a wider drive by Microsoft to tap into web-based services – the antithesis of its current “thick client” model, where software tools are by-and-large hosted on users’ computers. A major part of Facebook's attraction is its evolution into a distributive platform for third-party software applications – widgets that can be used to market goods and services.

Microsoft, which is battling to transform itself into an advertising company, would also strengthen its existing relationship with a huge magnet for web traffic.

Facebook originally aimed to achieve 40 million active users by the end of this year. Having already hit that target, it is now gunning for 60 million. Microsoft has already secured the contract to serve Facebook’s American users with ads and is looking to extend that tie-up globally.

As a stake holder, the world’s largest software developer would also be in a position of greater strength to ward off interest in Facebook from Google and Yahoo!.

Google, in particular, has beaten Microsoft to several major deals in recent months. Google bought DoubleClick, the largest broker of online banner ads, beating Microsoft in an auction earlier this year. Google also snapped up YouTube last year, and won the contract to supply advertising to MySpace (which is owned by New Corporation, parent company of The Times). It was also successful in taking a 5 per cent stake in AOL, Time Warner’s web business.

If Microsoft were to buy 5 per cent of Facebook for, say, $500 million, the mooted price, it would be looking at a useful capital gain if the site were eventually to achieve the value suggested by Mark Zuckerberg, its founder and chief executive. Zuckerberg thinks his creation could be worth $15 billion. Microsoft would be buying in at levels a third below that.

For Facebook, the deal would deliver cash to expand. It has ramped up its staffing levels threefold in a year, to more than 300 and is looking at how to milk money out of the vast store of information it holds on its users’ habits, tastes in music, social connections, religious beliefs… you name it.

Yes, there would be massive issues over the compatibility of Facebook's small coterie of staff and the Microsofties that toil in the behemoth's giant Redmond campus. But a deal would also draw a useful line in the sand for Facebook in terms of valuation.

Facebook is being spoken of as a $10 billion company, but is on track to post estimated revenues of about $100 million this year. That is quite some multiple. Having a done deal to back it up could come in handy.

And if even just a portion of Facebook is up for grabs (talks with Microsoft are reported to “preliminary” at best, and neither side has put anything on the record) several other bidders are likely to emerge: think Google, Microsoft and Viacom, for starters.

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