Microsoft purchased only a small stake in Facebook (1.6%) – so, what’s the big deal?

This is potentially a very big deal as the focal point of this investment is the online marketing/advertising potential of Facebook.

The Wall Street Journal reported that:

The software giant is gambling that the online advertising boom will continue and the popular social networking site will be among the biggest beneficiaries.

[In addition] Microsoft and Facebook say that the valuation is justified and that Facebook is starting to find ways to monetize its rapidly growing user base.

Facebook presents a big opportunity for online advertising, in part because it collects detailed information about its users — such as their hobbies, favorite music, location, age, and gender — that can be used to place highly targeted ads.

The cash injection from Microsoft will give Facebook funds to invest in new services, buy equipment, make acquisitions and hire engineers.

Facebook in coming weeks plans to unveil a new advertising system that will let advertisers visit an automated Web site to place targeted ads on Facebook and elsewhere on the Web, say people familiar with the matter.

Read WSJ full article.

Could this venture be the demise of Facebook? The never-ending plethora of ads on MySpace has resulted in the migration of individuals to Facebook. Could Facebook be subject to the same fate as MySpace? And if so, then what’s next for MySpace, Facebook and social networking?