Novice Investing - Facebook Faces Microsoft

Date: Friday 29th 2008f August 2008 09:12:41 PM

Facebook Faces Microsoft - 08/23/2006

By: Hari Wibowo

Here we go again. The loser always went away with another loser. While both Facebook and Microsoft Corp. (MSFT) aren't your conventional type of losers, they are the loser of the Google-MySpace deal announced last week. Today, both Facebook and Microsoft announced partnership in a web deal to provide advertising. Hey, it is better to find a lousy partner than not.

I personally feel that Facebook is a lousy partner to have, not Microsoft. This is the company that rejected a $ 750 Million offer and instead asked for $ 2 Billion. Later on, it got only a $ 25 Million of private funding. As was calculated, assuming a 5 % stake in the deal, Facebook was worth 'only' $ 500 Million and not the $ 2 Billion it was asking for. Perhaps, many have noticed. But, social networking business is a fickle industry to be in. You can be on top one day and then forgotten on the next. Just look at the pioneer Friendster versus the now megastar MySpace. People get 'bored' easily. You can also see that with Facebook Alexa trend for the past six months. Its user base seems to taper off a bit.

Now, I don't mean it in a bad way. But, facebook is lucky to strike on the advertising deal with Microsoft. At least, they can monetize some of their content before their glory days are over. Now, I don't think Facebook will face the music anytime soon. They have still a good niche in the industry. However, this is not the website that folks want to acquire for $ 2 Billion. With the advertising deal that is announced today, do you think Facebook has the card to get what it wants? Probably not. If you read the news release, the term of the deal is not even disclosed. This is unlike the $ 900 Million deal between Google and MySpace. Microsoft is not dumb. They probably strike a $ 100 Million deal with Facebook at most. Not an inspiring amount for Facebook. While Facebook has an amazing concept, it has to face the music sooner or later. It is not as wanted as it thought.

Facebook has more than 9 million registered users and is the 7th most trafficked sites in the United States. That ain't too shabby. However, it is competing with a bigger giant in MySpace. Microsoft gets a good deal but it also saves Facebook from becoming obsolete. With the deal, at least Facebook has additional gasoline on its fuel tank.

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Disclaimer: The sole purpose of this article is educational. This article is merely the opinion of the writer and is not in any way a buy/sell recommendation regarding Microsoft Corp. (MSFT) or any other securities.

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