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Microsoft + Facebook – The Next Microsoft Acquisition ?
Wall Street journalist Kara Swisher lays claims to breaking this story. Didn’t Bill Gates say first maybe another acquisition attempt by Microsoft, while traveling in Korea and then - NO way, while Gates was in Japan?
According to sources close to the company - Microsoft’s bankers have been putting out subtle signals to Facebook to see if it would be open to a full buyout of Facebook.
Microsoft already invested $240 million, back in October 07′ in Facebook, the social-networking site… hence the wacky current $15 billion valuation.
No word on what Facebook’s reply was, although Harvard University dropout, 23 year old Facebook CEO and Founder, Mark Zuckerberg has long said he’s not interested in selling the company.
Zuckerberg owns a 20 percent share of Facebook, which is now valued at $3 billion. Accel Partners, the venture capital firm that invested $12.7 million in May 2005 and owns 11 percent of Facebook, now holds stock worth $1.65 billion.
Facebook spokeswoman Brandee Barker declined to comment on the report.
For Microsoft, the deal underscores the rising importance of online advertising. The current arrangement with Facebook gives Microsoft control over the placement of banner ads on Facebook outside the U.S., where about 60% of Facebook’s 49 million active users reside. Microsoft has already reached agreements with Facebook to sell U.S. banner ads through 2011. Facebook Vice-President Owen Van Natta declined to discuss why Facebook chose Microsoft over Google back in 2007, when they also bid to be an Facebook investment partner. Microsoft is desperate to differentiate itself from Google (GOOG) and get into the No. 2 spot now held by Yahoo.
First - while in Korea Tuesday, Microsoft Chairman Bill Gates backed Microsoft CEO Steve Ballmer’s do-it-yourself path and his move to walk away from Yahoo… Gates also added what amounts to the second option for Microsoft. “I wouldn’t rule out some partnerships, but we don’t have anything imminent there,” he said.
… then while touring Japan later in the week, Microsoft Chairman Bill Gates held a news conference inwhich he stated that Microsoft isn’t likely to pursue other deals following its withdrawal of its ill-starred takeover bid for Yahoo. Gates, went on to say “Now at this point Microsoft is focused on its independent strategy.”
Gates then said in Tokyo that Microsoft put “a lot of effort” in the talks with Yahoo and has decided the two should pursue “independent paths.” But Gates also said that Microsoft was determined to make “advances” in its own search offering and meetings were in the works in Seattle, Washington, to hammer out more specific plans. “We will make the advances that give people a great choice there,” he said.
The Redmond, WA software giant Microsoft (NSDQ: MSFT), over the weekend (May 3rd 08′), walked away from its unsolicited offer to buy Sunnyvale, CA-based web portal Yahoo(NASDAQ:YHOO) for $47.5 billion. The goal of Microsoft’s unfriendly take-over of Yahoo, was to build an online advertising powerhouse to rival Google Inc. The unsolicited bid was widely seen as Microsoft’s CEO, Steve Ballmer’s admission that Microsoft needed Yahoo’s help to upgrade its unprofitable Internet division.
Responding to Microsoft’s withdrawal of their unsolicited offer, Jerry Yang, Yahoo! CEO and co-founder, said that “with the distraction of Microsoft’s unsolicited proposal now behind us, we will be able to focus all of our energies on executing the most important transition in our history so that we can maximize our potential to the benefit of our shareholders, employees, partners and users.”
“This squarely puts the pressure on Jerry Yang to deliver results and shareholder value,”Standard & Poor’s equity analyst Scott Kessler said. “You are going to see a lot of shareholders just throwing in the towel because they are going to realize it’s going to take awhile for the stock to get back to where it was Friday.” “Clearly there’s frustration,” said Darren Chervitz, co-manager of the Jacob Internet Fund, which owns Yahoo stock. “I am not even sure if Yahoo cares about its shareholders because they didn’t show much regard for shareholders’ best interests in this process.”
Jerry Yang accompanied by Yahoo co-founder David Filo, flew to Seattle on Saturday (May 3rd 08′), to inform Ballmer that Yahoo wouldn’t sell for less than $37 per share — a price that Yahoo’s stock hasn’t reached since January 2006.
Yahoo also might attempt to placate shareholders by buying back stock.
Microsoft CEO, Steve Ballmer also will be under the gun to prove he can come up with another way to challenge Google’s dominance of the Internet’s lucrative search and advertising markets.
Microsoft CEO Steve Ballmer expressed disappointment in Yahoo!’s refusal to entertain a new, enhanced offer of $33 per share. Noting Yahoo!’s hold out for another $5bn, Ballmer said: “We believe the economics demanded by Yahoo! do not make sense for us, and it is in the best interests of Microsoft stockholders, employees and other stakeholders to withdraw our proposal.”
Brian Hall, Windows Live General Manager, stated in front of Merrill Lynch analysts Monday (May 5th 08′), as reported by CNET’s Ina Fried, saying: “We’ve withdrawn the offer and moved on, and now are focused on how we grow as fast as possible organically.” “Yahoo would have been an accelerator, but we’ve moved on and now we’re focused on how fast we can grow organically,” Hall went on to say - he had several goals for Microsoft’s online business, including creating a killer application for Windows through Windows Live, using contextual information from Hotmail and other Microsoft Web applications as a way to drive display advertising across Microsoft’s sites and third-party Web sites, pushing into contextual search that takes place outside the usual search engine home page and growing Microsoft’s online partner base.
Hall also said that Microsoft already had achieved a strong position on the Web, with 448 million active visitors logging into Microsoft’s online services last month, and Microsoft’s sites accounting for 11% of the total amount of time spent on the Web worldwide.
For example, Hall added, Microsoft has quadrupled the size of its search index in the last year, completed the aQuantive acquisition to give it a strong position in the growing display advertising market, begun pulling Windows Live into a cohesive suite of applications, and kept Live Messenger growing.
Microsoft will soon begin combining elements of its MSN Web portal and Windows Live by adding things like an e-mail notifier and presence indicator as well as other social networking features into MSN, according to Hall. A test of that integration in the United Kingdom drove higher user engagements and more site visits.
So far, Microsoft has had limited success with social networking, but Hall hopes the company can turn that around by turning social networking more into a feature than only a destination, as it largely is today with sites like Facebook and MySpace. “From a total number of users, we have done well, but engagement is very low,” he said. “Rather than taking a verticalized approach where everything is about the application, where we see this going is more of a horizontal approach, where I have a set of contacts and they have context, but it’s available in all the applications that I use. The fact that I get an instant message from someone doesn’t mean it can’t show up in my e-mail in-box, the same with social networking.”
Could it be that there is reluctance for social net-workers to use Microsoft portals because Microsoft is perceived as “BIG BROTHER” or that most of their other products are NOT secure or require 5-10 update patches per month - that it is not perceived as worth the effort?
Hall said that despite Microsoft’s position far behind Google in Web search, there’s still an opportunity to contend. “We definitely can gain share in search,” he said. He pointed to opportunities in search outside of the search homepage where users can do Web searches from within other sites and Web applications, and said the large number of still unanswerable queries present an opportunity to make search algorithms better.
In an e-mail to employees as well as a statement on Saturday, Microsoft CEO Steve Ballmer hinted that future acquisitions and partnerships would be part of Microsoft’s strategy in making up for opportunities lost in the failed Yahoo acquisition.
One of the possibilities being floated by financial analysts and others is that Microsoft buy or partner with AOL, partially in order to bolster its ability to push display ads.
Asked about AOL, Brian Hall, Windows Live General Manager wouldn’t comment on how the company would be interesting to Microsoft. He did note that AOL was in a strong position in the instant messaging market, but that it had outsourced its search assets to Google and hasn’t been gaining share in any of its markets. full story –>Information Week Magazine
Back in Sept 2007, as part of the deal, Microsoft would sell the banner ads appearing on Facebook outside of the United States, splitting the revenue with it. Later last year, Microsoft struck a deal with Facebook to run banner ads on the site in the United States through 2011.
Representatives of Facebook say the investment will allow it to add employees, expand overseas and aggressively develop its own advertising system that will tailor ads to the personal preferences users make public on their Facebook pages. Facebook is expected to introduce such an ad network at an event in New York next month.
Google’s Orkut dominates Brazil, Friendster dominates the Philippines and Facebook is becoming the dominant forum in the United States, Canada and Western Europe.
Facebook’s larger rival, which has more than 110 million active users and is owned by the News Corporation. “MySpace is not based on authentic identities. Facebook is based on who you really are and who your friends really are. That is who marketers really want to reach…
full story –> New York Times
Should Microsoft’s blog division ‘Live Spaces’ become the blogging component of Facebook, the features of Facebook would become full-fledged services with those of Live Spaces, like the photo sharing. Microsoft’s Soapbox would be integrated with Facebook for video sharing, Live Messenger has a ton of integration opportunities for messaging, pokes, notifications. Facebook applications could be ported as Live.com Gadgets and Sidebar Gadgets. A Windows Live Search box could top every Facebook page.
Microsoft still needs to find available solution to improve its search and advertising tactics, especially if it wants to compete with the web advertising giants Google and Yahoo.
Facebook now has more than 70 million active users. In the past, Zuckerberg has resisted selling the entire company, opting to work toward an initial public offering.
Hotmail helped significantly add credibility to Microsoft’s MSN. Then the acquisition combination of Overture and Inktomi created a unique search unit for Yahoo where there was a void. But, Hotmail wasn’t able to allow Microsoft to trump Yahoo in Web portals end game. Many very good smaller independent Internet companies have already been snatched up by Yahoo, Microsoft or AOL.
For now, most advertisers & publishers handle display & search ads as completely separate categories. Google’s incursions into display ads have not knocked AOL’s Advertising.com from its competitive leadership position.