Scott Edwards Blog

The Wall Street Journal comes out and says what everyone knows or should be saying: that “Microsoft is partying like its 1999.” Let’s think about the numbers here for a moment. Microsoft just invested $240 million in Facebook, netting it a stake of only 1.6%. This means that, according to Microsoft, Facebook has a valuation of $15 billion. This is absolutely insane. As the WSJ points out:

To put a valuation like that into perspective, if you slapped it on General Electric, the industrial conglomerate would have a market cap of $11 trillion, just $1 trillion short of the total U.S. GDP.

In my opinion, the biggest reason MSFT made this deal is not because it makes business sense, but because they could in fact not afford to lose Facebook. Had Google, what most people consider the other competitor in the deal, won out, their control over the ad market would have been almost absolute. Such a blow to Microsoft’s struggling Digital Advertising business at such an early stage would have been crippling.

Now that Microsoft has this deal, they have at least one flagship property their sales team can point to as a reason to use Microsoft advertising services. This smacks of typical Microsoft style, if you can’t compete on your product’s merits, buy something and then force people to use your product because they have no other choice.