Yahoo Reportedly Tries To Woo Facebook Social Networking Website

Facebook in May was the third largest social network on the Web, with No. 1 MySpace and No. 2 Classmates.com, according to ComScore Networks. Such sites have become advertising magnets because of their coveted audience of teenagers and young adults.

Last month, Facebook signed a deal giving Microsoft exclusive rights to sell and display banner ads and sponsored links on the site. Although financial details were not disclosed, the Journal quoted sources saying Microsoft promised to deliver $200 million worth of ads over three years.

The Facebook-Microsoft deal followed by two weeks Google's agreement to pay News Corp. $900 million over three years to provide search and distribute advertising on MySpace.

David Card, analyst for JupiterResearch, said Yahoo would be a good home for Facebook, because of the entertainment portal's solid infrastructure for delivering targeted advertising to groups of consumers. In addition, Yahoo would offer entertainment advertising and promotions, and the ability to integrate its instant messaging and email services, which are some of the world's largest networks.

"Yahoo 360 doesn't seem to be going anywhere for older teens and young adults," Card said in his blog.

According to ComScore Networks, 34 percent of Facebook's 14.8 million unique visitors in August were 18 to 24 year olds. That compared with 11.4 percent for Yahoo, which had 131.3 million visitors that month.

For Yahoo, Facebook, which has more than 9 million unique visitors, would bring a ready-built social network that the portal hasn't had much success in building on its own.

Microsoft's talks with Facebook broke down, because the site had wanted $2 billion, according to the Journal. Nevertheless, Microsoft would benefit from such an acquisition in ways similar to Yahoo, Card said. "One could say all the same things about Microsoft."

The phenomenal growth of startup social networks has been a key attraction to investors and the largest Internet and entertainment companies. In April, the top 10 social-networking sites attracted 45 percent of all Web users, Nielsen/NetRatings said.

Nevertheless, long-term growth, and a return on investment, is not guaranteed, given the fickleness and passion of the audience. Facebook, for example, sparked a rebellion among hundreds of millions of registered users after it instituted new features that they considered an invasion of privacy. To quell the uprising, Facebook founder Mark Zuckerberg apologized, and the site gave users the ability to opt out of having their activities automatically broadcast to other members.

Social networks that rise quickly, can also fall just as fast. Friendster, an early leader in the market, is one that fell from grace almost overnight to competitors, such as MySpace, the largest social network on the Web with more than 66 million unique visitors, according to ComScore Networks.