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Bhopu / Tags /
Microsoft News
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Posted On
Nov 02, 2007
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 I may be the only one or maybe one of you caught wind of this last few weeks or have thought it reasonable given the Facebook and Microsoft developments of late. Well Google, out-bidded by Microsoft, is out to seek a share of the social networking profit.
But wait?
I thought Google already had its own social networking site Orkut, is it? Though the Times is reporting that all of these smaller social networks are trying to take down Facebook (or at least cut away at its fast growth rate), it seems that what has been created is just a market of social networks. The ones that are more user-friendly, visually-enticing or gathered a large audience during start up and early promotional phases are the ones that will dominate the market. The other, small networks are available but seem to fill the void of niche markets. Unless you belong to a certain subset or want to identify yourself in a way that Facebook or MySpace don't allow (or both of these lose their coolness factor), then why have 2, 3, or more social networking memberships?
So what is the entire buzz about?
Microsoft enters the splash by acquiring stake in Facebook?
Microsoft paid US $240 million for a 1.6% stake in Facebook that values the hugely popular social networking site at $15 billion. Facebook allows users to set up personal web pages and communicate with each other, turned down an offer from Microsoft's rival Google, which was also keen to invest the site.
Microsoft will also sell Internet ads for Facebook outside the United States as part of the deal. Microsoft already provides banner advertising and links on the US site.
Facebook soon hopes to become an advertising magnet by substantially increasing its current audience of nearly 50 million active users. Facebook. The company expects to make a profit of $30 million this year, so on conventional valuations a $15 billion price tag looks expensive.
Why Microsoft Needed Facebook & Google Didn’t
After weeks of speculation , finally Microsoft won the battle over Facebook, with Google second, and Yahoo nowhere to be seen. While it may seem that Google’s lost momentum–by not partnering with Facebook, I see it more as a sign that Microsoft knew Facebook was its only hope.
Let me explain that to you in detail.
Social networks are hot, right now. It doesn’t really matter which one you prefer–MySpace, Bebo, Facebook, or Dogster–social networks are the next evolutionary step in the growth of the internet. Now that we’ve all learned to check our email, order online, research restaurants, and read news, we’re starting to use the web to connect with each other. We’ve realized that we enjoy making connections, sharing our random thoughts with our mates. Social networking is the second generation Internet.
Unfortunately for Microsoft, social networks have to be perceived as cool, exciting, trendy places to hang out at. But, just like the rich kid in school, Microsoft has enough money to buy itself some friends–or in this case, a network of friends. For Microsoft, the only choice was to buy a piece of a popular social network.
Then there’s Google. Along with Apple, Google has one of the best brands in the world. A brand that can make us all dribble and pander after their every announcement.
If Google really wants to build a popular social network, it can. A social network that already has all of the pieces in place: email, instant messaging, blogs, image and video sharing. If Google really wanted to own a social network, it could take the $240M it just saved and put that towards building a most excellent one. A few rumors, closed beta invites, and denials of competing with MySpace later, and the whole world’s going crazy over Google Connect.
So I think, Microsoft had no hope other than to buy into an existing social network that was popular enough that even the “Windows Live” couldn’t slow it down. Google, on the other hand, knew it didn’t have to partner with Facebook at any cost, they could bide their time and decide whether they want to build their own social network.
How will Microsoft make use of Facebook network?
Microsoft is building and acquiring technologies and expertise to challenge Google for a pot of online advertising revenue that Johnson pegged at $40 billion and growing. Earlier this year, it paid $6 billion for Seattle digital-advertising shop aQuantive, which came with technology to better serve and track online advertisements.
More than just an expanding stream of online-advertising revenue, the Facebook deal represents a chance for Microsoft to tightly bind itself and its technology to the en vogue world of social networking.
Social networks, including Facebook, MySpace, Bebo, Google’s Orkut and many more, have skyrocketed in popularity. People spend hours building and updating personal Web pages with photos, videos, links. They stay in touch with friends, classmates and co-workers by visiting pages, which include all manner of add-on Web applications for sharing musical tastes, sending instant messages and virtually anything else.
A new Microsoft tool for making hybrid Web applications will allow programs to be published directly to Facebook pages. Facebook supports Microsoft’s new Web video platform, Silverlight, which competes with Adobe Flash. And Microsoft and Facebook have worked on other tools for software developers. Microsoft is building its own technologies, such as mapping and advertising systems, and letting third-parties use them. Facebook, on the other hand, invites developers to build applications and provides a venue for distribution to its users.
The future looks bright for Microsoft as we all know that Facebook is one of the most premium properties online today from a social-networking standpoint. This deal represents a major advertising syndication win for Microsoft.
Some Related Articles:
Microsoft acquires equit stake in Facebook
Facebook sells $250m stake to Microsoft
Microsoft acquires minority stake in Facebook
Microsoft expands advertising partnership
Microsoft contracts an agreement with Facebook
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