EightBlack.

It was a deal Microsoft virtually had to win. (And I think they got off cheap).

Does it make sense? Not sure yet. Too early to tell. Apparently, negotiations were going on as late as Thursday/Friday last week when both Steve Ballmer and Mark Zuckerberg were in San Francisco attending the Web 2.0 Summit.

There is no doubt Ballmer would have gone “ballistic” if this deal had fallen into Google’s hands. It was probably the reason why he allegedly handled the final negotiations himself. They always had the upper hand in one sense, because of the existing ad relationship that was in place. That was always going to be a hurdle for Google to jump over.

And last week at Web 2.0, Mark Zuckerberg struck me as the sort of young man that wasn’t easily as influenced with the standard job spiel enticement from the Google HR folks (ie “Mark, dude, come to Google, free food, great facilities and technology and you get to work on the coolest shit in the world”). Zuckerberg’s response would most probably have been “but I already am…”

The cash injection of US$240 million for a 1.6% stake values the social networking at US$15 billion.

Apparently, the funds will be used for infrastructure, hire more super geeks, make acquisitions (of more super geeks) and help with international expansion, which is where the growth lies for the barely 3 year old company.

From today’s Facebook-Microsoft conference call with reporters: Microsoft needs the international ad agreement because Facebook says nearly 60 percent of its 50 million active users are based outside of the US. Facebook also claims to be gaining 200,000 new users per day, worldwide.

The deeper issue here is not that Microsoft won and Google didn’t - although its psychologically important. The bigger issue is that Facebook may have cracked the “AdCode” and found a very viable alternative to the absolute market dominance of Adwords and Adsense.

If, as is reported at VentureBeat -

Yesterday, reports also surfaced a new Facebook ad product, apparently trademarked “SocialAds,” will be previewed November 6 to some of Facebook’s closest advertisers. Conde Nast, Nike, Apple, Sony, General Motors, Coke, CBS, Chase and Verizon have paid $300,000 each to be “Landmark Partners,” meaning they are the first advertisers to try SocialAds, according to these reports, none confirmed by Facebook. When asked for comment, a Facebook spokeswoman responded: “Facebook does not comment on speculation or rumor.”

The idea of the deal is to focus on “demand fulfillment” by taking advantage of Facebook users’ high engagement with each other, Facebook VP of product marketing and operations Chamath Palihapitiya was quoted telling FastCompany.

Facebook has a unique set of data about users that may be able to provide more relevant targeting, more often, possibly putting Facebook in competition with Google’s Adwords and AdSense programs.

You can be sure that the “courting” has only just begun. Microsoft’s deal simply gets them a seat at the table. Sort of like a rich uncle coming to dinner.

Google will scramble to push MySpace as quickly as they can now and the sooner MySpace opens up its API so the world’s development community can get to work, the better. Momentum has shifted to Facebook of late, but I for one, wouldn’t write off Murdoch and DeWolfe over at MySpace just yet.

According to this chart (courtesy Commscore and WSJ), MySpace still have more than double the unique visitors, but the percentage change with Facebook’s numbers is what should be worrying Murdoch.

One things for sure, the social networking “fad” as many people were referring to is no longer one of fiction. It’s here to stay.

And Microsoft, to their credit, are now a serious player.

Round One to Microsoft.

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This entry was posted on Thursday, October 25th, 2007 at 7:33 pm and is filed under Facebook, Google, Microsoft, Social Networking, Web 2.0. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.