Last year, it was YouTube, this year it’s FaceBook. You guessed it right – I am talking about the “phenomena” which has set the entire blogosphere on fire, events which suddenly gets everyone’s eyeballs and reinforces our faith on web2.0 (and the associated VC funding and blahs!)
Let’s look at the MS/FB deal from different stakeholder’s perspective:
A few FaceBook stats to stay in perspective:
- FaceBook has close to 30 million unique visitors.
- FB serves 600 million searches per month
- Facebook received 15.7 billion page views in August’07
- Facebook was the ninth most visited website in the U.S.
- 200,000 new users register for Facebook every day.
- Average age of a FaceBooker is 35+
- Steve Ballmer plans to buy 50 companies in the advertising/Web 2.0 space within a year.
And now, the perspective from different players:
Microsoft: never cared about the online world and was a sleeping giant (were they listening to “wake me up before you goo gooo..le!”?). Microsoft doesn’t have any significant search engine market share, has no worthwhile presence in web2.0/online media world and the only way they could get a piece of pie was via inorganic growth. Was $15 billion valuation justified? Maybe yes, maybe no. Depends who you are.
If you are Microsoft, you need to pay the price for being the late entrant and most importantly, “make an indecent proposal that no one can match” – indecent to such an extent that the later investment will be difficult to match (at the same speed, FB’s valuation will go higher for the next round of investment).
Above all, Microsoft will be the exclusive advertising provider (adCenter platform) to FaceBook. Apart from Microsoft’s ad platform, FaceBook will also house Live search and maybe, other MS products. More than all this, this is probably the first deal where Microsoft has beaten Google and has announced it’s web2.0 avatar.
So in short, MS wins by a huge margin – they get the stake as well as access to FB’s ad platform which itself will fetch them more than $240 mn within a short timeframe.
Yahoo! : 360 is dead, mash is still learning to crawl, Yahoo!’s strength lies in communities but surprisingly, Yahoo has no social networking tool to it’s credit. Yahoo tried wooing FB earlier (and was in serious discussion to acquire FB for $1bn!), but of no success.
With FB in MS’s lap, Yahoo! needs to work on it’s social networking strategy and maybe, take audacious and risky bets!
Google: obviously the biggest loser!, Google tried hard to woo FB in order to increase it’s footprint in the social networking space. Most importantly, Google will be worried about losing the search/advertising opportunity @ FB and also on the growing claws of MS.
Interestingly, for privacy reasons Google’s search engine is barred at Facebook’s door like an unwanted encyclopedia salesman (source).
But FB’s threat to Google is more than one dimensional.
Google is losing it’s best talents to FaceBook.
In July, Gideon Yu, finance chief at Google’s YouTube, left for Facebook. Now other Google guys, stuck in the Googleplex and smelling a Facebook IPO that could turn early employees into early retirees, are also jumping ship.
The latest defector: Benjamin Ling, the top engineer at Google Checkout, its online payment service. A Stanford comp-sci Ph.D., Ling will be overseeing Facebook’s entire software platform. Losing finance types is one thing. But smart engineers are the lifeblood of a great tech company, and Ling was worth a pint, insiders say.
Those employees who missed the Google IPO will surely not commit the same mistake twice. Moreover, Google isn’t a cool brand anymore (aren’t they becoming another Microsoft?).
FaceBook: needs cash for expansion and building new services. But more than that, FaceBook needs to explore their monetization model (which gets more challenging because of FB’s significant international audience).
FB can’t charge third-party developers, has no ad platform of it’s own, so the only option left is online advertising.
And why go with Microsoft? Well, Microsoft in recent years has built up a large online advertising sales force and has invested in technologies to broker advertising over the Web (source) and maybe, FB can influence lot of MS’s inventory to it’s own favor.
Only time will tell whether these are signs of Bubble 2.0! Meanwhile, have some beer and join the fun!
There could be many stories cooking, why did MS invest in Facebook, a discarded entity by Yahoo…
>Reasons could be plenty, Facebook planning to raise 750 million dollars to get it moving from the present stage….
>Does it mean Google need to worry abt Facebook, not exactly until and unless facebook reaches the Search domain, but this wont; happen or rather it would tie up with the existing search giants to tackle google in its own space.
>Facebook is planning to raise an IPO, and with MS valuating it at 15 billion, when it hits the NASDAQ scene, it would definitely put more pressure on Google and there might be all good chances of Google stock [currently 600 + /share] might take the beating.
>Well MS can’t beat google in the search, Map, mailing, nor any organic and creative way, so it has found loopholes to bring in the perspective, we all know Google has 160 billion dollars as the market capital, if ballmer states ” to get 50 companies in a year”, in few years down the lane Sergey and Larry can very well bid for MS for few billion dollars [exaggerating though....].
>its all in the mind game, which MS is known fro playing all these years and they would still be taming the other players by there whacky style!
>I agree Facebook is definitely a growing trend and has made lot of noise, and with there channels opening up fr the API fro 3rd party developer sis a huge hit amongst the SN, yet it has long way to go and make itself a name apart from SN culture and to give a reason to put more pressure on to Google
“Google isn’t a cool brand anymore (aren’t they becoming another Microsoft?).”: Its TRUE.
“Only time will tell whether these are signs of Bubble 2.0! Meanwhile, have some beer and join the fun!”
This my friend is the most important line in your entire post
Good article.
It was too much for 1.6% I think.
All sounds like a stunt by MS…. obviously when you keep sleeping while rest of the world is striding ahead you have to pay a heavy price to ensure your place for next round of negotiations.
after-effect :
Startups will add value to MS service in near future – knowingly or unknowingly.
Many services will come up just because MS is also there in the field.
@Kamal – I dont think that MS has paid a huge amount of money for the 1.6% stake. Look at what they have received in return
1. exclusive ad contract till 2011. Given the pace with which FB is growing, MS will earn more than 2-3 BN $ in another 4 years.
2. Foot in the social networking door!
I guess the FB valuation has been blown out of propotion by media and bloggers. Don’t you think so?
Your facts about facebook are slightly outdated – Facebook is the 6th most visited site – after google – in the US – and if you minus youtube from google – then facebook is the 5th most visited site…
@Rahul – well, yes! The stats keep changing with every month.
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