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28 May, 2009 08:28

Russian company makes friends with Facebook for $200 million

A Russian Internet investment company has invested $200 million into the US social networking giant Facebook. It’s also hoped Russian experts will help to turn traffic into cash and make the website profitable.

Facebook is one of the most popular social networking websites in the world and Russian investment company Digital Sky Technologies (DST) now wants a slice of the action.

DST has already invested more than $1 billion in web companies across Russia and Eastern Europe, including social networking site Odnoklassniki (literally “Classmates” in Russian) popular in Russia and former soviet states. Now, all DST’s internet projects are making vast profits.

“This investment will pay off in the future. It is not cheap to create this kind of a social network. You need to invest in technology and development within a business structure. DST has experience in this and will make sure Facebook makes a profit,” says Albert Popkov from social network Odnoklassniki.

This is Facebook's first big investment injection since 2007 when Microsoft paid $240 million for a stake, but the website is still not making money. So, DST will use its expertise to find out how to make money through advertising or e-commerce.

Facebook bosses say DST stood out because of its impressive history of financial growth for the internet companies it has invested in previously. Every website it has backed has made a profit.

The Russian investors will have a 2% share, but the deal doesn't allow them a seat on the board.

Naikolay Mitushin, Investment Director at ABRT Venture Fund says:

“If DST considers Facebook a strategic investment without requiring control or operational changes in the company, that would probably work well.”

Facebook has grown at a rapid rate, with its 200-millionth member recently signing up, but, unlike other internet giants, Facebook is not yet turning traffic into cash. It hopes Russia's experts will show them how.