John Battelle writes on the recent investment into Facebook from Redmond giant Microsoft. Microsoft invested $240 million and got a measly 1.6% stake (and likely the guarantee they’re going to be the advertising supplier for the Facebook platform). The real upshot of this is that Microsoft just verified the wild claims that Facebook was worth $15 billion dollars.
Maybe it comes down to this: Microsoft won, Google lost. If that’s the case, OK, but…the real winner here is Facebook. At least, until it has to earn into a $15 billion valution. Good luck with that if social ads doesn’t pan out. On the other hand, well, congratulations for getting money so cheap.
All of the recent activity indicates to me that the market has certainly gotten over the dot-com bubble bursting at the start of this decade and they’re ready to invest in internet firms. It used to be enough to use the word internet in your business plan to have investors falling over themselves to throw money at you. Now, the buzzwords are “social networking”.
Were our lives better when we could buy pet food over the internet the first time round? Are they better now that we have Facebook and Friendster and Myspace and Bebo? We’re not seeing much enrichment of people’s lives from these companies and I think that’s why we’re headed for another bust.
It’s also a big red flag to me that Microsoft desperately needs to compete with Google and they’re willing to spend a lot of money for a tiny stake in order to beat them, even at this one, potentially ephemeral, game. I mean, you’re not going to drop that amount of money for that amount of equity just so you can scrape pennies from online advertising? Are you? Ah. It seems you are.
Microsoft has too many enemies at the moment and I feel a little sorry for them. They’re having their ass handed to them in Operating Systems and Music/Media players. They’ve had their first good month for the XBOX 360 and to get that they had to develop Halo 3 and say goodbye to Bungie (there’s a tradeoff – can you see that Bungie was bored of Halo and used the development of Halo 3 to buy their independence? Oh yeah.). They’re trying and failing to get Silverlight positioned as a Flash replacement (I mean, who cares?). They’ve previously failed to displace PDF. They’re not doing too hot with the Open Document format wars. They’ve a litany of failures (Tablets haven’t taken off. Mira? Zune? and I’ll let you in on a secret regarding their competitor to iPhone and multitouch: Surface, the $10 000 coffee table – it’s going to be shit.)
The theory goes that we’ll see targeted ads because of entries on personal profiles. If Facebook knows you’re into Hello Kitty, Friends and Lost but you dislike 24 and CSI, then they’re going to tell Microsoft and Redmond is going to fire adverts at you containing just the things you like. Advertising based on what you’ve told the system – what you like and what you dislike which, I suppose, has better success criteria than “what I’m searching for now” which is the model espoused by Google. Not sure about that one.
Reading the Segala blog on enabling more trustworthy, relevant and reliable search, I’d think that was a worthy way for Google to combat Facebook. (I’ve never spoken to Paul @ Segala but I’m sure he’d like $240 million!) Remembering that Facebook is very much a walled garden at the moment (you can put your data in but you can’t get it out –not quite true, but still ) and attempts to retrieve data have found some companies getting a kick in the nads and told to eff off. Facebook wants to own the data, thanks, so please stop doing that and use the limited APIs we’ve provided. Or we’ll kill you. (and we have Â£240 million dollars with which to buy hit-men).
At least with such a minority stake we’re not going to see a desperate, drawn-out attempt to make Facebook just like Hotmail, including ripping out any server not running Windows.