Much has been written about the purported potential investment of Microsoft in Facebook mostly focused on whether a $10 billion valuation is justified or not. That’s not the focus for this post. My point is to focus in on why Microsoft so desparately needs Facebook and it’s not about having a social network with all it’s users and advertisers. Microsoft doesn’t need a portal ala Yahoo! or a big page view generator like MySpace – no what Microsoft needs is a next generation development platform. And what’s the hottest development platform these days? Facebook.
Living in Seattle, the heart of Microsoft country, I am fortunate to have lots of friends who work for the company. What I hear from those friends is that Microsoft is worried to death that Microsoft’s bread and butter – owning the most valuable development channel – might be going the way of the DoDo.
Now we already can see that the desktop OS is losing importance as traditional client apps are all moving online into the browser. As was often predicted – the Network has become the Computer. But Microsoft isn’t worried about the shift from the desktop to the web per se – they’re worried that their development platform for the web – ASP.NET – is about as cool to the next generation of developers as their Dad’s or Mom’s Oldsmobile. Microsoft has been a ginourmous success largely because they have historically not only owned the platform but more importantly owned the developer community. If there’s a company that understands ISV relations, it’s Microsoft (as discussed previously here).
The number of next generation developers (18-25 year olds) learning .NET is fading fast compared to PHP or Ruby. And since Microsoft’s bread and butter is owning the developer channel. And throw FBML and FQL into the mix and you’ve got Microsoft wondering about why it’s no longer the cool kid in school. When was the last time you saw an article about a really cool .NET app versus articles about really cool FB apps? Exactly. LAMP stack or bust is the usual moto at web companies these days.Since FB is the cool new development platform then Microsoft gets a whole lot of cool with Facebook. Another generation of developers and the economics that come with that. And if FB does become the social graph/network OS – that’s likely a very valuable platform to own. So you can begin to see why Microsoft hearts Facebook.
Quickly – on the topic of valuations – two posts worth passing along are from mr. facebook dave mcclure (organizer of the upcoming don’t miss it FB conference – Graphing Social and Silicon Alley Insider (henry blodgett’s new very good news commentary site). Both essentially argue that it’s not an insane number. And assuming FB is on a MySpace like growth curve then I tend to agree (MySpace is on pace to hit $70 million a month in revenue in ’08).