So it has happened (WSJ paid). What to make of it?
I was in a meeting in the Valley when this went down, so I’m late to the analysis party. I have no idea if anyone has said this yet, I am sure someone has. But – if there is not insight/boxing out/exclusivity into the new Facebook Social Ads platform as part of this deal, I don’t get it.
If there is, it’s a slam dunk. Or maybe for Microsoft, it’s worth the valuation just to keep Google from having the remnant ad deal in Europe. But I doubt it.
I want to know what the terms are, and by that, I don’t mean the financial terms. I mean the stuff that is not being announced – the agreements to work together on the upcoming Facebook platform, the ability for Microsoft to sell into the Facebook domain proper, etc. At the very least, some guarantee that Google can’t work with Facebook on any future ad platforms that might be developed. And of course, search distribution, which was not confirmed in the conference call, from coverage I could find.
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.
The long and short of it for me is, the more insight into Facebook’s core business this buys Microsoft, the better it is for Microsoft. How much did they buy with this? No idea. But to think that Microsoft isn’t prototyping exactly what Facebook is already building (social advertising) is to not be thinking – it’d be criminal to not be in this game if you are Microsoft, or Yahoo, or Google. You have to be. So how do those two things square – an investment in Facebook, and a commitment to develop an advertising platform that competes with Facebook?
The Journal’s point of view on this is …. instructive. I think no one in the mainstream press has truly grokked what Facebook has a shot at doing – Adsense driven not by search queries, but by personal profile. It could be a major, major new platform, if we, as a culture, take to it. It’s not a given, but it’s a very compelling vision.
The high valuation for Facebook is the latest sign of a renewed exuberance in Silicon Valley over Internet companies with lots of users — even if those users haven’t yet translated into a lot of revenue — and is reminiscent of the Internet bubble that ended in 2000. Microsoft and Facebook say the valuation is justified and that Facebook is starting to find ways to monetize its rapidly growing user base.
Well, sure they are. The big question is this: will Microsoft get to see what they are doing, and work with them, or are they going to be relegated to selling secondary banner inventory? I have no idea. Do you?