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That Cash Sure Is Burning a Hole in Ballmer's Pocket

Posted by: Rob Hof on May 07

After deciding not to spend $22 billion or so of its cash to buy Yahoo, now there’s word in Kara Swisher’s Boomtown blog that Microsoft is interested in buying the rest of Facebook. It bought a 1.6% stake last year for $240 million, which gave the social network that crazy $15 billion valuation.

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A lot of people are posing this wisp of a hint of an acquisition as an alternative to the failed Yahoo bid. Count me doubtful. Facebook has a great service, but it’s still unclear what kind of advertising is going to work well on it. And assuming Facebook comes up with something brilliant, it’s still going take awhile to build momentum. Nothing Facebook has will come close anytime soon to the scale of audience that Yahoo has. And if Ballmer didn’t want to pay up a little more for Yahoo, which at least has a proven if not fast-growing advertising business, why would he pay up even more, relatively, for Facebook? Mary Jo Foley at ZDNet’s All About Microsoft blog can’t figure it out either.

I’m also a little skeptical that Microsoft can get similar benefits by using a few of those spare billions in cash to buy up a bunch of Web 2.0 companies. Oh, I think it may well do some of that, but even for a voracious giant like Microsoft, integrating a half-dozen or a dozen Web companies in quick succession is a huge undertaking. And there’s no guarantee fickle users will stick around if and when they’re rebranded Digg Live or Meebo Messenger or something.

Despite all the talk about how Microsoft really is going it alone, it still seems like CEO Steve Ballmer can’t have really said goodbye to Yahoo forever. But if he goes through with either of these schemes, we’ll pretty much know he meant no.

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Reader Comments

JudgeHolden

May 9, 2008 08:49 AM

I don't understand it, either.

These social networking sites come as quickly as they go. Is facebook here to stay? Who knows. Friendster came and made the first big splash. Then Myspace came and, with the ability to customize pages, became the cool place to show up. Then it reached critical mass and became passe to the hipsters. That, along with the stream of updates letting you know what people are up to, drove people to Facebook.

Then Facebook started spamming that update list. Then it added applications, most of which are assinine and essentially worms that keep spreading their way across by mandatorily inviting your entire friends list to join.

Facebook, due to constant missteps, is vulnerable. Something new will likely pop up, leaving Facebook where Friendster is, leaving Mark Zuckerberg to appear in VW commercials, and destroying investors.

I can't imagine that Microsoft is this dumb.

Lastly, Microsoft should look at what association with Rupert Murdoch did to Myspace, helping push people to Facebook for what is undeniably irrational reasons. Microsoft doesn't have a much better name than anything Rupert is involved with. If Microsoft bought Facebook you'd see the "hipper" North Americans clammoring for the Google service, or for Apple to start one, rationally-based reasoning or not.

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BusinessWeek writers Peter Burrows, Cliff Edwards, Steve Hamm, Rob Hof, Olga Kharif, Steve Wildstrom, Aaron Ricadela, Douglas MacMillan, and Spencer Ante dig behind the headlines to analyze what’s really happening throughout the world of technology. One of the first mainstream media tech blogs, Tech Beat covers everything from tech bellwethers like Apple, Google, and Intel and emerging new leaders such as Facebook to new technologies, trends, and controversies.

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