Facebook, which was set up just three years ago by Harvard graduate Mark Zuckerberg, could now become the centre of a global bidding war between Microsoft and Google, which has also been linked with acquiring a stake in the social networking website.
According to reports in The Wall Street Journal, Microsoft approached Facebook's owners in the last two weeks about acquiring a 5% stake in the site, which would equate to around a $300m-$500m investment.
However, it is believed that Zuckerberg could hold out for higher bids, which could push the overall market value of Facebook as high as $15bn. Rival MySpace was snapped up by Rupert Murdoch's News Corporation for just $580m in July 2005, making that appear a very smart investment.
Last year, Facebook was in talks with Yahoo! about a deal that would have resulted in it being bought for under $1bn.
If Microsoft were to formally make a bid for a stake in Facebook, it could reignite long-term interest from Google, which has previously been linked with acquiring part of the business.
However, Microsoft and Google are not the only players interested in taking a stake. It is understood that Facebook has also approached financial institutions including venture capitalists, hedge funds and private equity firms.
The estimated $10bn valuation of Facebook underlines the meteoric rise of the website since it was opened up to non-university graduates in September 2006. The site now has around 42m members worldwide, of whom 5m are based in the UK, and attracts around 200,000 new members each day.
According to Neilsen//NetRatings, Facebook has now edged ahead of second-placed MySpace and third-placed Bebo as the UK's most popular social networking website, with 6.5m unique visitors for the month of August. MySpace came second in the poll with 6.4m unique visitors, with Bebo trailing in third on 4.4m.
Microsoft's reported interest in Facebook confirms the technology giant's aim to build up its digital portfolio, an area that has traditionally been viewed as weak for the business. The company currently has a display ad contract with Facebook, but buying a stake in the website would significantly strengthen its presence in digital media.
Meanwhile, it has been revealed that Facebook has been issued with a subpoena by Andrew Cuomo, New York Attorney General, over allegations that the site is misleading users that it is safe from being misused by sex offenders.
According to reports in The New York Times, Facebook is being investigated by the attorney general's office about whether its advertising statement to users is "materially misleading" under state law that the website is a safe place for children from adult sexual predators.
Microsoft and Facebook have so far declined to comment on Microsoft's reported interest in the company.