Facebook and the Microsoft Curse

So, Microsoft has bid over Google for Facebook shares. I should be pleased, right? After all, I’ve ragged on Microsoft repeatedly for letting Google outbid it in the past, and here, finally, Microsoft went deep and won the deal.

If that’s such good news, why do I feel so uneasy? Some might say that it’s because I’m biased against Microsoft, that whatever Google does is good, and whatever Microsoft does is bad.

Hardly. I’ve beaten up on both companies many times in the past, albeit for different reasons. Google is far from infallible, as I’ve written here before. It makes poor acquisitions too.

But I’ll be more specific. Google’s engine empirically does a better job of monetizing content than does Microsoft’s, which is well established. Assuming so, one would expect Google to be able to bid more, economically, for a pure content site (as opposed to an ad network like Doubleclick) than would Microsoft.

But it didn’t. Why not? Obviously because it didn’t see the same strategic value that Microsoft did on top of the economic value of additional ad-ready content at Facebook.

So, it really comes down to this: Do you believe that Microsoft knows its own strategic interests, and that it can act rationally and appropriately in their defense? Ten years ago I might have said yes, but today I have a much harder time. So when it comes to defending a large strategic premium over a credible competitor with a better basis for economic valuation, I have a hard time.


  1. Considering the rumour that Facebook intends to move towards a web-based OS (something that is arguably inevitable) and Microsoft and OS are virtually synonymous, doesn’t it make sense to pay a premium for the partnership and make it easier to see the strategic value for Microsoft?

  2. This is a bet for or against the future relevance of facebook, platform or otherwise. I don’t see it, and though pure growth suggests that my position is indefensible, I’m sticking by it.
    It is far more likely that facebook will be irrelevant two years from today than not. I think Google can see this. Microsoft is looking in the rear-view mirror and attempting to reclaim their long-gone (or at least seriously fading) relevance.
    I applaud Zuckerberg & team for pulling this off, though. I mean – holy shit! Congrats. But you’re not Bono.

  3. Paul check the earnings. Microsoft isn’t DEAD.

  4. I wonder how the Microsoft is “dead” blogger bunch is going to Spin this earnings report. It actually looks like the corpse is still breathing.

  5. … meaning whatever Google does is good. While I agree that Google is far ahead in terms of monetization and probably understands facebook’s potential much better than MS, those are just two factors in many that probably went into this deal. The ultimate deciding factors may have been any out of a hundred possibilities, such as MS would give them better access to the desktop or just that Ballmer is a better salesman. If you really believe Google is able to make such calculated moves based on monetization, what about the youtube deal, where they rushed in even when everyone knew putting up ads next to the rampant copyright violation there would always be problematic at best? People are still waiting on Google to figure that one out.

  6. Also, there wouldn’t be much debate that MSFT is lagging GOOG in terms of momentum.
    Given that (if nothing else) Facebook has tons of momentum…then MAYBE the reason MSFT was willing to pay more was that they NEEDED it more?
    Google doesn’t need Facebook as much as Microsoft does. Nothing to do with ability to assign a value…

  7. If anything is true of the majority age demographic of facebook (late teens to late 20’s), its that we are fickle. We don’t really do the “brand loyalty” thing. We want what works best. We want what’s new now, then we get tired of new things quickly. Facebook slowly fade into irrelevancy when then next retooled social platform comes along. Most people I know are already done with Facebook, including myself. We’re over it :)

  8. jt: what is post-Facebook?
    Where does the Facebook generation go now if they want:
    * to keep up with the happenings in their friend’s lives
    * to play silly games (Vampires, Scrabble, …) with their friends
    * to send messages through a spam-free channel
    * connect with old friends and friends-of-friends
    If there is something other than Facebook that youth are starting to use for all of that stuff I want to find a way to invest in it!

  9. Seems pretty obvious to me why MS paid more than GOOG was willing to. Microsoft’s core (really only) competency is leveraging sticky platforms which lock people in; Facebook is the pre-eminent example of such a platform on the web. Google doesn’t see the need for that kind of leverage; they’re profitable on pretty much anything they can stick an ad on. So Microsoft had to have facebook, and they have to integrate it into Vista+1/Outlook+1. Google will happily motor along selling the rest of the web.

  10. pp: I imagine based on your comment you’re in your early 20s (if not younger). Briefly:

    Where does the Facebook generation go now if they want:
    * to keep up with the happenings in their friend’s lives

    I agree that fb is useful for this, although less so than you might think. I have several hundred “friends” on fb, but only really care about keeping up with perhaps twenty of them.

    * to play silly games (Vampires, Scrabble, …) with their friends

    Post-college, this will become less of a priority for you, I suspect :)

    * to send messages through a spam-free channel

    This is what email is for. I get zero spam through my corporate email and am connected all day and night wherever I go via blackberry (unfortunately… :) Gmail is a wonderful solution too and just as usable on blackberry as it is online.

    * connect with old friends and friends-of-friends

    Again, I agree that fb is somewhat useful for this, although I wonder to what degree. When I want to re-connect with an “old friend” (someone I’ve known at least 5 years is an “old friend” in my verbiage, but I’m young), I pick up the phone and dial, or bang out an email.
    When I was in high school and college (fb came just as I was leaving college), I would have told you how indispensable AIM was to me – it was my social network. I used it to “connect with old friends”, “send messages through a spam-free channel”, “keep up with happenings” (IM status!), and even “to play silly games” (ok, not on IM – we’d coordinate a game of Literati on yahoo – but its essentially the same thing). Now? I haven’t turned on AIM in four years.
    I’m certainly not old by any stretch, but to me the breathy exclamations of facebook’s greatness seem more than a tad naive. If older people aren’t using fb, it’s possible that the reason why isn’t because they “don’t get it,” but instead they just don’t find utility in it.
    Of course, as my old politics prof Larry Sabato loves to say, “He who lives by the crystal ball ends up eating ground glass.” So far be it for me to predict fb’s future. It could take over the world or be the next geocities; neither would surprise me at this point.