Microsoft Corp., after failing to crack Google Inc.’s dominance of the Internet search market, may try to block its expansion into social-networking sites by tightening ties with Facebook Inc.

Microsoft is in talks to buy a stake in Facebook of as much as 5 per cent, for $300 million to $500 million, the Wall Street Journal reported on Monday, citing unidentified people familiar with the matter. That would value Palo Alto, California-based Facebook at about $10 billion. Teenagers and young adults have flocked to Facebook since the site expanded beyond university students a year ago, attracting advertisers that want to target users of a particular age or gender.

Existing pact
A stake may give Microsoft, world’s largest software maker, deeper relationship with Silicon Valley startup and more opportunities to expand its own ad sales. Microsoft, which already has an ad agreement with Facebook in the US, may want to keep the company away from Google, the most-used search engine. Talks between Microsoft and Facebook are still preliminary and Google has also expressed interest, Wall Street Journal said.
Microsoft, Google and Yahoo! Inc are rushing to make sure they aren’t left out of the market. In August last year, Google struck a deal to provide search and advertising features to MySpace. Yahoo, owner of most-visited US internet site, forged an agreement this month to sell video and banner ads for Bebo Inc., owner of the most-popular social Web site in the UK.  Facebook was founded in 2004 by Harvard University dropout Mark Zuckerberg as a way for friends to maintain online profiles and exchange messages. In May, Facebook began letting independent developers and companies offer their own programmes on the site. Facebook now has more than 8,000 registered developers.

Facebook’s investors include Peter Thiel’s Founders Fund and venture-capital firms Accel Partners, Greylock Partners and Meritech Capital Partners. In December, Thiel said Facebook may be worth $8 billion or more.