Posted October 25, 2007 10:23 am by with 19 comments

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image So, after weeks of speculation, Microsoft won the battle over Facebook, with Google second, and Yahoo embarrassingly nowhere to be seen. While it may seem that Google’s lost momentum–by not partnering with Facebook–I see it more as a sign that Microsoft knew Facebook was its only hope.

Let me explain.

Social networks are hot, hot, hot, right now. It doesn’t really matter which one you prefer–MySpace, Bebo, Facebook, or Dogster–social networks are the next evolutionary step in the growth of the internet. Now that we’ve all learned to check our email, order online, research restaurants, and read news, we’re starting to use the web to connect with each other. We’ve realized that we enjoy making connections, sharing our random thoughts, and turning our friends into virtual zombies. Social networking is the second generation internet.

Unfortunately for Microsoft, social networks have to be perceived as cool, exciting, trendy places to hang out at. None of those words apply to Microsoft–sorry guys. But, just like the rich kid in school, Microsoft has enough money to buy itself some friends–or in this case, a network of friends. For Microsoft, the only choice was to buy a piece of a popular social network. No one would ever feel excited about joining a network called “Windows Live MyBeboBook.”

Then there’s Google. How cool is Google’s brand? Uber-cool. When Google launches a new product–heck if Google hints at a new product–the whole world goes nuts. Along with Apple, Google has one of the best brands in the world. A brand that can make us all drool and pander after their every announcement. When Google farts, we want to have our nose close by–that’s how much Google is loved.

If Google really wants to build a popular social network, it can. I’m not talking about the crappy science experiment they call Orkut–you don’t expect a social network to become popular when it sounds like a pest control company–but a real “Google” social network. A social network that already has all of the pieces in place: email, instant messaging, blogs, image and video sharing. If Google really wanted to own a social network, it could take the $240M it just saved and put that towards building a kick-ass one. A few rumors, closed beta invites, and denials of competing with MySpace later, and the whole world’s going crazy over Google Connect (or whatever they want to call it).

So you see, Microsoft had no hope other than to buy into an existing social network that was popular enough that even the “Windows Live blah blah blah” couldn’t slow it down. Google, on the other hand, knew it didn’t have to partner with Facebook at any cost, they could bide their time and decide whether they want to build their own social network.

Besides, give it a few more years and we’ll all have Google implants anyway–that’s when Google will tell us which social network we should join. 😉

Sure, MSFT has Windows Live Spaces, but with a 0.15% share (even Orkut is higher) and a focus on blog content, it’s hardly something the company can rely on.

  • Excuse me, but if Windows Live Spaces isn’t a social networking site (albeit a piss-poorly named one) with tens of millions of users, then what is?

    I’ll tell you what it isn’t – it isn’t a niche social hub for people whose native tongue is Portuguese.

  • But I want my Google implant TODAY!

    Good post Andy, nice to see an analysis of the situation.

  • @Jeff – kind of proves my point. Doesn’t exactly capture mind share as a social network. It’s more of a connection of blogs, than a true social network.

  • Windows Live Spaces is still a social network, much like Yahoo! 360. They just took a different approach, tying blogs, groups, networking, instant messaging and the like into one personal “hub”. It’s still larger than some of the ones you mentioned, Dogster and Bebo.

    I recently deleted my own MySpace account because the interface is terrible and the back-end infrastructure (what large website uses Microsoft IIS as a web server, complete with *.cfm file extensions!?) is even worse coupled with a lack of friends and poor Canadian user adoption. Now, I only have Facebook and LinkedIn accounts and plan to keep it that way.

    As far as Bebo goes though, what a terrible company. They’re barely in the top 10 for most popular social networking websites yet their founder (who many describe as an obsessive, money-hungry publicity whore) tries to demand a billion dollars for his website. Until they lower their valuation to something reasonable, they won’t get bought out and will go the way of Friendster (if they’re lucky) or ZeroDegrees (if they aren’t; that is, shut down with no advance warning). I’m putting a very generous valuation of $125 million on Bebo and not a dollar more.


  • @Doug – MSFT might not life the comparison with Yahoo 360 😉

  • Interesting take on the sale. I’m actually surprised Google hasn’t already launched a social network. And I agree Okrut doesn’t count.

  • wow good way at looking at it – yea google needs to let the baby orkut grow into something more seroious because social networking is hot hot hot

  • Google could really come up with a brilliant social network with all its services integrated, Gmail, Gtalk, Blogger, Piaca and many other useful services it has as standalone products.

  • For all we know Google already has a top-secret SN in double-secret private beta now. If they don’t, what the heck are they waiting for?

    btw, if they release one, i would vote to name it Peeple

  • Excellent article ! I think as Google keeps pumping Gmail with Apps everyone can use ! Gmail
    may be in a great position as the vehicle that feeds the social networks their content ! No one as large as Google needs a Social Network their Brand Identity is established

  • Agreed that social networking sites are the thing right now and no one can afford to miss that boat.

    But dont denigrate Orkut, I am a bit of a fan myself. Just so happens that my friends and shool mates seem to have all congregated there.

  • Orkut is the next big thing in social network in USA. It’s really popular in Brazil, and Google is ready for some big impact on Nov 5 2007.

    It seems like a majority of the readers keep on underestimate orkut, they think it’s a small player… from from I read on, their platform will integrate everything: gmail, gtalk, documents, and whatever other service google.

    So let’s see… Google may hurt FaceBook since it’s game time.

    MadMax 3000

  • It’s funny but, when mentioning $240M and Google in the same sentence, it would be the same as saying I have $2.40 in my pocket. It resonates to me so perfectly as to how utterly desensitized I am to Google and Money.

  • I believe that the future of all of this, as it continues, will be highly specialized sites. History is a great teacher of this and look at television as an example. First started out with 3-5 choices (the big 3 networks), then a few UHF stations and ultimately hundreds of specialized channels (and not just sports but micro channels like Golf, Tennis, NFL, etc). Its all about meeting people where they have the strongest interest. MySpace, Facebook and others will survive because they have tonage but smaller players will have a role.

  • TanNg

    I believe that Google need FaceBook, otherwise they didn’t participate on the bid. They lose, that is the fact, undeniable.

  • Fact Check-I am not sure the buy in on Facebook was a bid ! What facts do any of us have that Google Loses ! Google is a well branded educationally oriented firm ! Gmail has developed some excellent work a day world applications! Microsoft in this case was forced by competition to spend $200 Million Plus dollars to create a larger market through Facebook Subscribers! Google did not spend $200million dollars to create a Market for Gmail !
    Microsoft took a gamble on buying a Branded Mailing list trust me it is a straight business transaction buying Market Share ! The subscribers on Facebook have value their apps are at a very low level of Abstraction! Semantically Yours!

  • I think it should be safe to assume Google is not willing to acquire every bright internet company : )

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  • Perhaps Google realizes that social networks are highly trend effected and their life cycle is very short and sharp at the growth stage. Google has so many applications that they could integrate into one killer social network that could do some massive damage to the others.