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Oh god, please don’t let us screw it up

Posted by Kathleen Maher on October 26th 2007 | Discuss
Categories: The Market,
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That's the prayer of the Internet dependent as we all enjoy another growth period. And then comes the news that Microsoft has outbid all comers for the "privilege" of investing $240 million bucks in Facebook, the latest thing in social networking ... probably. Microsoft's investment legitimizes a valuation of $15 billion for Facebook. I know I'm not the first to make this observation but that's more than the valuation of many companies that actually design and build products, popular products! There are news stories all over the place about this -- the AP story gets right to the heart of it. Much is being made of Rupert Murdoch's "brilliance" in paying a measley $580 million for MySpace for News Corp. but in the long run, Microsoft could well have the better deal. MySpace, dominated by teen screamers, pre-teens, and stalkers is slowing down and losing relevance for adult users. Facebook has a more grownup appeal and is growing faster than it's more adolescent rival. In addition Facebook has added attractive development tools for advertisers and partners. But the most important advantage Microsoft may have is that they didn't actually buy Facebook (and founder Mark Zuckerberg isn't selling for the moment either). Microsoft has made a deal to sell advertising for the site and share the proceeds and no doubt the new partners have plenty of plans for new revenue sharing opportunities but an outright buy might never be in the cards. (Here we are firmly in what-do-I-know territory.) Shawnee sniffed that all this smelled like irrational exhuberance to her and she's right, if a tad glib. The key to social networking is very likely to turn out to be not about individual sites like MySpace, Facebook, Friendster (remember them?), LinkedIn, or any other of growing list of affinity sites. Rather, it's the enhanced ability of people to communicate and network online. After all, how is a site like Facebook all that different from a site like ExtremeTech, or Hot Topic? Sites come and go, becoming popular and then fading as users wander off to play with a new toy. When a site is hot, then by all means buy in, get leverage, buy advertising, make strategic deals but when it fades do you want to be the guy holding the bag with a $580 million or $15 billion price tag? I think not.

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