Novice Investing - Googling Your Facebook Investment

Date: Friday 05th 2008f September 2008 05:45:42 PM

Googling Your Facebook Investment - 11/02/2007

By: Hari Wibowo

What a difference a week makes. Last week, Facebook is the game in town as it received $ 240 Million from Microsoft Corp. (MSFT) for a 1.6% stake in the company, essentially valuing Facebook at $ 15 Billion. With such nosebleed valuation, we feel that potential acquirer is better off obtaining other internet assets or start from scratch while creating a dazzling marketing campaign that will attract visitors. We didn't quite understand why Microsoft is keen to invest in the Facebook stake. Doesn't matter anyway since $ 240 Million is a pitiful sum of money for Microsoft.

This week, it is quite a different story with New York Times reporting that Google is allowing a common set of standards to allow developers to write software to various Google's social network. Dubbed Open Social, these networks consists of big heavy names such as LinkedIn, hi5, Friendster, Plaxo, Ning and recently MySpace and Bebo.

With this mind, it is understandable that the perceived value of Facebook has plummeted all of sudden. Facebook has been tearing hot mainly due to its open app system on its site, which is similar to the Google's announcement this week. With its Open Social, Google leapfrogged Facebook in terms of the number of visitors that participate in the new scheme. Also, programmers need to create only one app and it can run on the aforementioned Open Social networks. Contrast this as before where programmers may have to write different apps for different social networking sites. Thus, Open Social is a truly beneficial idea for Google to thwart Facebook's dominance in the open apps area. In recent month, Facebook visitors has ballooned, mainly due to Also, as the creator of Open Social, Google may benefit from additional advertising revenue from these alliance and its additional visitors.

The biggest loser in this deal is Microsoft. We never like the deal from the beginning. Valuing Facebook at $ 15 Billion requires a lot of faith and other things that should go right. I think this Google's announcement reduces Facebook value to $ 5 Billion but Google's Open Social is not without

weaknesses. First, by gathering several social networking site into the alliance, it proves that Facebook business model is viable. Further, Open Social does not have its unique characteristics which is crucial in the social networking field. MySpace and LinkedIn for example, shares very different traits. Regardless, by organizing Open Social, Google had succeeded in letting the world knows that it would thwart Facebook's dominance in the social networking force. Has Google beat Microsoft again? It sure looks like that is the case.

END

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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 Google Inc. (GOOG) or any other securities.

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