Right off the bat I need to admit that I’m in no position to second guess Steve Ballmer, CEO of Microsoft. But reports in the last couple of days point to discussions between Facebook and Microsoft about an acquisition of the social networking giant by the beast of Redmond.
Lets look at why Microsoft needs to do something;
Clearly MS’s web strategy hasn’t been overly successful – they’re a company that has made all it’s money by creating software that gets installed on corporate and home machines. Changing its business model to one that derives revenue from web advertising, a la Google, is a real challenge. As most commentators agree, it’s very hard for a business to give up a great (but shaky) income stream to move to a new way of doing business that risks all that. (Especially a business that has Wall St to answer t)
While one would think that with the resource base that MS has they could create a scaled and profitable internet business on their own but history tells us it’s just not in their corporate DNA.
Hence the acquisition trail – and the last few months talks with Yahoo which some would say have now broken down completely.
Which gets us back to Facebook. I just don’t get it – sure Facebook has squillions of eyeballs, but most realistic commentators agree that it is at the plateau of its growth phase – user activity (and remember that it’s user activity that MS wants, not new subscribers – after all it is continuing eyeballs that create value for advertisers) has fallen and FB seems to be wandering aimlessly trying to find ways to keep existing users engaged – chat being the latest (and, it has to be said, pooly executed) development.
So my advice to Steve – don’t do it, Facebook is just the latest in the fad fueled Web 2.0 startups, much better to work a new monetization channel beyond advertising – rather than trying to catch Gogle at their own game, create a game with entirely new rules.