UPDATE 5-Microsoft beats Google to Facebook stake

(Updates share price)

By Daisuke Wakabayashi

SEATTLE, Oct 24 (Reuters) - Microsoft Corp (MSFT.O: Quote, Profile, Research, Stock Buzz) beat out Google Inc (GOOG.O: Quote, Profile, Research, Stock Buzz) on Wednesday in a battle to invest in socializing Web site Facebook, agreeing to pay $240 million for a 1.6 percent stake in the Web phenomenon.

Microsoft also clinched exclusive rights to sell ads on Facebook outside of the United States as part of the investment that valued Facebook at $15 billion -- on par with the market capitalizations of retailer Gap Inc (GPS.N: Quote, Profile, Research, Stock Buzz) and hotel chain Marriott International Inc. (MAR.N: Quote, Profile, Research, Stock Buzz)

Analysts said Microsoft paid a steep price on a bet that the three-year-old company would be able to transform itself into a hub for all sorts of Web activity.

"The only way this works is if Facebook becomes sort of the users' operating system on the Internet -- everyone logs into Facebook every day to get in contact with their friends and use a multitude of future applications that will be developed for it," said Morningstar analyst Toan Tran.

Facebook, a social network that lets friends share information, allows outside developers to create games and other applications for its site.

The popularity and depth of knowledge Facebook has about its users makes it valuable to companies like Microsoft and Google which want to sell advertising targeted to individual preferences.

Founded in 2004 by Harvard student Mark Zuckerberg, Facebook said it registers 250,000 new users a day, 60 percent of whom come from outside the United States.