Hoping to prove that the geek can land the homecoming queen, Microsoft (NASDAQ:MSFT) appears to be ready to pay as much as $500 million for a 5% stake in hip-and-happening Facebook. The Wall Street Journal, citing unnamed sources, is reporting that the world's biggest software company is in talks to own a piece of the popular social-networking site.

This move feels awfully similar to Google's (NASDAQ:GOOG) taking a 5% stake in AOL two years ago, to secure its role as the paid-search provider through America Online's properties. Like Google to AOL, Microsoft is Facebook's ad-serving partner.

If the Microsoft story is true, the deal values Facebook at a lofty $10 billion. That's a far cry from the $1 billion price tag Yahoo! (NASDAQ:YHOO) was supposedly offering to buy all of Facebook last year.

There's no question that Facebook is worth more today than it was a year ago. The company is growing quickly. Opening up its site to third-party developers is sheer, visionary genius. But that doesn't mean Facebook is 10 times the company it used to be.

If anything, Microsoft may very well be scratching Facebook's back, after Facebook opted for the less proven paid-search advertising solution over seasoned pros Yahoo! and Google. After all, Microsoft isn't going to shell out $10 billion for the entirety of a young social network. It's looking to buy just a sliver of Facebook at that valuation.

Doing so will make it that much easier for Facebook to go public at a lofty valuation, since investors might figure that if a stingy Mr. Softy thinks Facebook is worth $10 billion, it just has to be worth at least that much.

The Journal article also says Facebook may be holding out for a valuation closer to $15 billion. Let's hope not. Facebook is bound to sport some impressive, high-margin financials, but at $15 billion, it would command nearly half the market cap of Yahoo! or the equivalent of 13 CNET Networks (NASDAQ:CNET).

Maybe, someday, it will get to that point. The company is doing all the right things lately, after all. Let's just hope that greed doesn't get in the way of its greased-pole slide into what should be one of the hottest IPOs of 2008.

A view to an IPO
Oh, yes, Facebook is going public. It hasn't filed with the SEC yet, but it's just a matter of time. All the signs are there. The company has been hiring seasoned veterans of public companies (or subsidiaries of public companies) including AOL, IGN, and Amazon.com (NASDAQ:AMZN) for key executive positions. A job-listing entry this summer for a stock administration manager certainly hints at such a move -- the position requires knowledge of SEC regulations and insider-trading practices, and even experience with international equity awards.

Facebook is becoming the Internet's most talked-about private company. Not striking while the buzz is hot would put the bubbling hype and anticipation at risk. Why chance it? The company has been around for only three years, but it's a draft-eligible junior that may as well skip its senior season to head to the pros. It's a first-round lock. Who knows what will happen if it waits and social-networking websites fall out of favor? Or worse, what if Facebook falls out of favor within its peer group, the way that News Corp.'s (NYSE:NWS) MySpace -- the current market-share leader -- has struggled to keep growing quickly these days?

Facebook was right not to settle for being Yahoo!'s billion-dollar wingman. If Microsoft is willing to give it a nod as a $10 billion company, let's just hope it's not deluding itself into justifying a $100 billion market cap a year from now.

The Google factor
The intriguing part of the Journal story is that it claims Google has also approached Facebook about taking a minority stake in the company. Google's Orkut social-networking site is a hit in key foreign markets, but Google isn't much of a Web 2.0 force domestically.

However, Google's potential interest clearly validates the monetization of social networking. Google is paying at least $300 million a year to News Corp. to field the search queries on MySpace. Google might believe that buying a ticket in the Facebook lottery is a good business decision, or it might simply be making a tactical play to either block Microsoft or make it overpay. But either way, it equals more respect, fanfare, and mania heading Facebook's way.

So if you're Facebook, now is the time bail on that senior season, and go for the big money that's waiting for you at the pro level. If Microsoft and Google are willing to vouch for your being worth $10 billion, it's an offer that you really can't refuse.

Take the money. Then turn around, go public, and take the money again.

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Amazon.com and Yahoo! are Motley Fool Stock Advisor newsletter selections. Microsoft is an Inside Value stock pick. CNET is a recommendation in Rule Breakers, the Foolish newsletter most likely to side with Facebook after its IPO. Read all of the original recommendation reports -- right now! -- with a free, 30-day trial subscription.

Longtime Fool contributor Rick Munarriz still regrets not buying in on the Google IPO. He does not own shares in any of the companies in this story. He is also a member of the Rule Breakers analytical team, seeking out the next great growth stock early in its defiance. The Fool has a disclosure policy.