Does Microsoft really want to buy Facebook?

Out of one multi-billion dollar attempt to take control of an internet company and straight into another?

So it would seem for Microsoft, which has reportedly lurched from aggressively seeking to take control of Yahoo!, the struggling internet portal, to politely approaching Facebook and asking what it would sell for.

Fresh from being rebuffed by Yahoo! - for which Microsoft had offered $47.5 billion - on the weekend, the company's bankers are said to have approached Mark Zuckerberg, Facebook's 23-year-old chief executive, to inquire what he thinks his company is worth. Or so reported the Wall Street Journal. (Neither company has confirmed the approach.)

Certainly, for Microsoft to express interest in one of the world's most talked about and influential social networking sites is not surprising.

The software giant already owns a 1.6 per cent stake in Facebook - having bought a $240 million chunk in October which valued the young company at $15 billion. And only last week Steve Ballmer, Microsoft's chief executive, cited it as one of only six 'internet properties' that had "any real scale."

As with many of Microsoft's dealings, however - and the company is a veteran corporate operator, not least in the field of takeovers - there may be more here than meets the eye.

One theory is that any approach by Microsoft to Facebook is in fact a negotating tactic in the protracted battle to take control of Yahoo!, which Microsoft has circled publicly for three months now and still wishes fervently to acquire.

Going by official statements, Microsoft's $47.5 billion bid for Yahoo! is off, and even yesterday Bill Gates, Microsoft's chairman, spoke of the two companies being on 'independent paths'.

But the more Microsoft appears to edge away from Yahoo!, the more the latter's share price is likely to fall - it has already dropped 10 per cent this week - and the more its disgruntled investors may put pressure on Yahoo!'s management to come to some agreement with its suitor.

It may also be a prelude to another move which remains open to Microsoft, which is to prepare a proxy slate of directors for election to the Yahoo! board when the company holds its annual general meeting in July. Microsoft has seven days - until May 15 - to prepare its slate, should it wish to.

Either way, Microsoft urgently needs to make some play to improve its game in internet services, which it has placed firmly at the centre of its strategy, but in which it needs the help of a partner to succeed. Google, its arch rival, is the runaway leader in internet advertising - a $40 billion market which is predicted to double by 2010.

Yahoo! is by some distance the most obviously partner. It still has an enormous reach, despite having lost ground to Google in the search market in recent years. Many of the two companies' internet services - including mail and instant messaging - overlap, which could give rise to considerable synergies and cost savings.

Most importantly, Yahoo! has a well established advertising platform, particularly in display - the ads that appear in banners at the tops of web pages - where Google is less strong.

There are other reasons for Microsoft to be hesitant about a potential acquisition of Facebook - notably that the latter has yet to prove that it can generate revenues anywhere near the level of the company to which it is most frequently compared: Google. (In October, Mr Ballmer said Facebook and other social networking sites risked being a 'fad'.)

Facebook has a loyal user base of some 40 million users globally, according to Nielsen Online, many of whom are educated, professional workers and of interest to advertisers. But it has yet to develop a way for advertisers to target Facebook members using what is arguably the site's most innovative feature: the 'feeds' by which users keep up to date with their friends.

Giving advertisers the opportunity to promote their brands sing very personal methods - for instance by tapping into groups of friends on social networking sites - is one of the holy grails of internet-based advertising, but so far Facebook has not managed it.

Microsoft might have another problem courting Facebook - whatever the price - in that it might not wish to be bought. There is a yawning chasm between the companies - both culturally and commercially, and Facebook - still young, agile, and privately held - will likely be wary of being subsumed by one of the giants of the corporate world.

Microsoft would also have to make a strong case that there were a range of benefits for Facebook in being bought that would not available under the existing relationship between the companies, which for instance involves Microsoft serving the display ads on Facebook's site.