Microsoft Invests $240 Million in Facebook

But in a conference call yesterday, Microsoft praised the deal's advertising potential, while Facebook touted its status as the new crown jewel of the Internet.

"We had a lot of folks that had been interested in a partnership with Facebook, not just in the advertising space but in other areas as well," said Owen Van Natta, chief revenue officer at Facebook.

It is unclear how much of a victory the deal is for Microsoft, which has trailed far behind Google. Google dominates search-related advertising, and has struck its own pricey advertising deal with MySpace, which claims 200 million members.

Facebook began in 2004. Its use was restricted to college students at first, but increasingly it is used by older people to maintain relationships.

Facebook and sites like it, on which users establish profile pages, have gained importance as people spend more time in front of computers and less time watching television.

To date, Facebook has run relatively few ads. The privately held company's primary focus has been expanding its audience on a shoestring budget, adding features by allowing software programmers to design their own applications for the site, for example. It opened its site to non-students last year.

All those moves have been to build a huge audience that, according to analysts, could be sold to companies looking to use the information people publish about themselves to better tailor their ads.

But trying to reap too much out of sites like these, which can lose popularity as quickly as they gained it, is a challenge, analysts said.

The risk is turning users off with any advertising, Frank said. "There certainly are some pitfalls to be avoided there."

Brendan Barnicle, an analyst for Pacific Crest Securities said international exposure and distribution with Microsoft's backing was a good move for Facebook. But, he added, "it's just critical that they do it in a way that doesn't undermine the integrity for the site, at least as the current users see it."

Despite the similarities in their founders' backgrounds, Facebook and Microsoft started with very different business missions.

Microsoft made its fortune in an era when computing was just getting off the ground. Its primary source of income was from selling software, most notably its Windows system, used on about 95 percent of the world's computers.

Facebook grew from a pet project of putting Harvard classmates' photos and contact information online into a site that some use like a cross between e-mail, bulletin board and online photo album. It quickly gained popularity at Boston area and Ivy League schools.

The firm says an average of 200,000 new users register each day.