The Wall Street Journal reported today on a story that Microsoft could buy into FaceBook at a $10bn valuation.

When I wrote about my justification on why Facebook was worth $10bn a month ago, I had a lot of skeptics who thought that I was smoking some really good stuff. In fact, I saw quite a few visitors on my blog from Redmond – heck, maybe I even helped the deal go through

At the end of the day, valuations are really about willing buyer, willing seller, and perceived value to the buyer (based on the value that they can extract from the deal). I’ve always said that Microsoft is the most likely buyer here, and I don’t think that Google will get this deal in the bag – in fact, it looks as if Google is going to use Orkut to compete globally.

Facebook holds the biggest opportunity to provide demographic targeted data to advertisers, and the valuation sounds about right, based on that rationale, and all the other metrics combined. Google is not going to take this standing down – watch out for an Orkut retaliation.