Microsoft and Facebook: Mark Zukerberg gets his way

Microsoft buys stake in facebook It is confirmed, Microsoft is in, Google is out. As we mentioned yesterday, Microsoft has announced that it is investing $240 million in Facebook, at a valuation of $15 billion!

This puts the current Microsoft stake in Facebook at 1.6% which is much less than the 5% stake that Microsoft was initially considering. We had written on September 24th, that Facebook CEO Mark Zuckerberg was “pushing for a whopping 15 billion valuation” for the Facebook site. Looks like this round has gone to Mark!

So Mark Zukerberg got his $15 billion valuation for Facebook, but it is not clear if Microsoft reduced the amount that they had planned to invest in the company or whether the 15% share that they had planned on acquiring was based on a lower valuation of $1.6 B. If that were the case, then indeed, Facebook got a a very good deal.

There has been much said about Mark “Zuke” Zukerberg’s spurning of lucrative offers for Facebook, but certainly a lot of credit has to be given for the fact that he has managed to grow the company into the 5th largest Internet presence, right behind the likes of Google, Ebay, Yahoo and Amazon.

Microsoft will begin serving targeted ads to Facebook’s 20 million active users (their user base has been growing by 3% a month). While Google has been spurned by Facebook, they will probably not be sitting still for long. They already have an advertising network deal signed with MySpaces’ parent company Fox Interactive Media, to serve ads to the 100 million MySpace members. One wonders if there is are any ownership discussions in the offing….

Technorati Tags: Microsoft, Google, Facebook, Myspace, ad network, social network


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Layoffs at AOL - Advertising gold rush continues

Some bad news at AOL - they are laying off 2000 of its 10,000 employees. CEO Randy Falco sent out a letter this morning, explaining the reasons behind the cutback. Kara Swisher at All Things Digital, published the layoff letter.

Dear AOL colleague,

Just over a year ago, AOL embarked on an incredibly complex and significant transformation as we fundamentally shifted our business model from a subscription-based ISP to an advertising-supported Web company.

We aggressively expanded our advertising capabilities, building on the strength of Advertising.com and our premium ad sales force.

Clearly, the big gold rush for the major online companies are the ad dollars, and shoring up the advertising networks has become priority #1. Google has a clear lead in the ad race with 56% of all searches in the US, followed by Yahoo at 23%, and Microsoft with 11%. AOL is bringing up the rear with 5%.

Google, acquired DoubleClick earlier this year, for a resounding $1.3 billion. Google is also making definite forays into the mobile advertising market.

Microsoft bought aQuantive, a digital marketing company for $6 billion, making aQuantive the largest acquisition for Microsoft. AQuantive is the parent of Razorfish, the marketing company that was the darling of the last boom, along with DRIVEpm and Atlas.

On the heels of Google’s acquisition of DoubleClick, Yahoo acquired Right media for $680 million.

AOL acquired a controlling stake in the German ad company, ADTECH AG.

From the AOL layoff letter:

We aggressively expanded our advertising capabilities, building on the strength of Advertising.com and our premium ad sales force. We acquired three leading-edge advertising companies–ADTECH, Third Screen Media and TACODA–and formed Platform-A. AOL now has one of the largest and most sophisticated ad networks in the world, and we’re well positioned to compete where the ad market is heading.

AOL’s current strategy will be geared towards “three core areas–Platform-A, Publishing and Access” according to CEO Randy Falco. Platform-A will enable AOL to serve ads over their own as well as third party sites. Content (publishing) sites provide the basis for the ad network, which the Access platform (AOL’s traditional and highly profitable ISP business) will provide the cash to build the other businesses.

In spite of the impending layoffs, some credit should go to AOL for building, and articulating a clear vision of where it sees itself in the future.


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