Different sources (for example here, here, here) reported that Microsoft might be putting a large financial injection into Facebook. According to the Wall Street Journal, Microsoft might invest $300 to $500Mln to obtain a stake of 5% in Facebook. Thus valuing Facebook at approximately $10 billion! In the lengthy article the Wall Street Journal provides a good analysis of the strategy behind such a deal. Microsoft wants to get big in on-line advertisement, and Facebook might be a platform that will give them a lot of leverage against Google.
I personally think it is a very risky strategy. Not only do I find the 10Bln value over the top, there is a more subtle issue here. Google turned over almost 4Bln $ in on-line advertisement in the second quarter this year. But they are not concentrating all that ad revenue in one place. Instead they are capable of spreading their ad revenues over numerous platforms and places on the Internet. And people that are already searching, will not object to a few ads, especially if they match the search.
But if Microsoft is going to monetize their Facebook investment, I think that will be a very risky strategy. Now you are entering the profiles of people, their personal space, their on-line identity. They will not like it very much if there is too much advertisement there. When on-line at Facebook, you’re most likely looking at other people, you’re probably not searching for something. So advertisement there might be much more offending to the users. There is a risk involved here for both Facebook and Microsoft. It’s not a good idea to start annoying Facebook users with too much advertisement. I don’t think I would value that opportunity at $10 billion.