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!