The Wall Street Journal says Microsoft is looking to acquire a stake in famed Web 2.0 social networking operation Facebook. Referencing unnamed sources "familiar with the matter", the finance writers suggested Redmond might take five per cent of Facebook for "roughly $300m to $500m".

The actual market value of Facebook has been a hard thing for tech industry analysts to pin down. The company's software isn't anything particularly exceptional, and its idea has been replicated by many competitors.

Facebook's value lies mainly in its user base - or "goodwill" as old-fashioned biz folk used to say. Founder Mark Zuckerberg has suggested in the past that he personally believes the operation to be worth in excess of $10bn.

That seems a bit on the high side. The WSJ says Facebook is used by 40 million people. If Facebook is worth $10bn then each user is worth $250. By comparison, Friends Reunited users - some of them actual paying customers - were worth about $16 a head (http://www.theregister.co.uk/2005/12/06/itv_friends/) two years ago.

Perhaps Facebook users are more commercially valuable because they multiply faster, or gain weight quicker - the way Bernard Matthews' turkeys make more money for him than the same number of organic gobblers. Or something.

In the end, a thing's worth what people will pay. If the WSJ's sources are right, Microsoft believes Facebook is worth anywhere from $6bn to a Zuckerberg-style $10bn overall, and it isn't doing more than dipping its toe at the moment. Entry into some household-name network business - as opposed to desktop software licencing from the days when computers mainly communicated by floppy disk - could be worth half a billion to Redmond.

And hey, ad revenue is well known to be a perfectly sound basis for running a company (cough). That said, one might ask if there's enough ad revenue in the world to keep Microsoft afloat as well as Google and the other established players. Ballmer & Co can dip a toe in this pool without causing any problems, but if the big daddy of the tech industry jumps right in, all the water might pour out over the sides and everyone could hit the bottom with a nasty thump (don't try these metaphors at home, kids).

No official comment was offered by Facebook or Microsoft last night.®

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