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Microsoft finally took the plunge into Facebook, acquiring 1.6% of the fast growing social network for $240m. That values Facebook at $15bn, or around $300 per registered user.

By comparison
- When Google bought YouTube they paid the equivalent of $21 per registered user.
- News Corp bought MySpace at the equivalent of $6.37 per user.
- Bebo has repeatedly refused offers, the highest of which would have represented $25 per user.
- Skype (slightly different) went at $30 per users.
- Friends Reunited, went years ago at $20 per user.

This sort of valuation represents the changing perception of what communities of users like Facebook are worth, when News Corp bought MySpace everyone thought they paid too much, and now this. The big difference of course between MySpace and Facebook is the extent to which users are engaged deeply and daily with the latter. There is no doubt that Facebook users are way more engaged with the site than the MySpace crowd. Facebook presents a big opportunity for online advertising, in part because it collects detailed information about its users — such as their hobbies, favorite music, location, age, and gender — that can be used to place highly targeted ads.

Here are some useful stats:
* More than 49 million active users
* An average of 200,000 new registrations per day since Jan. 2007
* An average of 3% weekly growth since Jan. 2007
* Active users have doubled since Facebook expanded registration in Sept. 2006
Source: http://www.facebook.com/press/info.php?statistics

Here is the Wall Street Journal article that reported the news: here

Another point to consider is that with revenues of £150m (according to those familiar with the company) and 50m users, that means Facebook is earning around $3 per user. Prior to this metric, previous stats that I had gathered in relation to a number of social networks put the average per user revenue at around $1.26.

Google’s apps are smartphone ready, it’s partnering with cellular carriers, and the company may bid on wireless spectrum. Connect the dots.

Google looks set to be developing its own smartphone, it has been involved in auctions for the next band of cellphone networks, and it has already developed a dozen smartphone applications, including mobile versions of its search, maps, Gmail, calendar, and RSS reader tools.

The company is searching for an executive to head its mobile business development in North America. The candidate, according to the job description, should have “a thorough understanding of the mobile vertical, both from a carrier and a handset OEM perspective.”

Handset OEM perspective? That could be a reference to the rumored Google phone, reportedly to be designed in collaboration with Taiwanese handset maker HTC. Speculation has it that the phone would carry the Google brand and come with Google services and applications, perhaps running on a Google-developed mobile operating system.

Google has been expanding its mobile software portfolio since 2005, when it acquired Android, a developer of mobile phone operating systems. Google’s evasive about its plans for that technology, but the acquisition fueled predictions that Google will develop its own mobile OS, either for a Google phone or to run on handsets from other vendors. Any Google OS would be tightly integrated with the company’s search, maps, Gmail, voice over IP, and other apps.

Google mobile ads–text-based, targeted ads that appear with search results on cell phones–debuted last year in Japan and quickly spread worldwide. In general, users have been receptive to display ads on mobile screens, defying analysts’ predictions to the contrary. In September, Google extended its advertising platform to various forms of mobile content with AdSense for Mobile, software that aims ads at users based on the mobile content they’re downloading.

Google this year waded into the FCC’s planned auction of the last prime frequencies for advanced wireless services. CEO Eric Schmidt pledged $4.6 billion in bids.

Google-To-Go???
- SEARCH Google search for the small screen
- MAPS Gets mobile workers from point A to point B
- DOCS & SPREADSHEETS Downsized documents
- GMAIL A second in-box for businesspeople
- CALENDAR Track appointments by cell phone
- READER News in the palm of your hand
- SIMS Includes set-and-save location feature
- BLOGGER Post from the road

Overseas carriers such as Vodafone in Europe, KDDI in Japan, and China Mobile have agreed to display Google applications and services on their handsets, while in the United States, Sprint Nextel and T-Mobile are listed as Google partners, though few details have been forthcoming.

Who stands to lose if Google succeeds? Microsoft, for one. Microsoft’s Windows Mobile 6 operating system is expected to ship on 20 million devices this year. The last thing Microsoft wants to see is an exploding population of smartphone users abandon Office, which also runs on smartphones, for Google’s free, untethered applications.

That’s a real risk. Sea Change Management, a small financial services company, switched last year from Microsoft Office to Google Apps (though it still uses Excel where necessary). The company accesses Docs & Spreadsheets from PCs and smartphones “anywhere in the world,” says managing principal Jason Winship. Employees collaborate using Gmail chat and shared documents.

summarised from Richard Martin’s excellent article in Information Week, here

A great article here from Charlene Li at Forrester… I have reproduced it in its entirety…via her blog on Forrester

News from WSJ is that Microsoft is looking to take a 5% stake in Facebook for an investment rumored to be between $300-500 million. That would place Facebook’s between $6-10 billion.

It’s that last number that has people swooning — how could a business that didn’t exist just a few years ago be worth THAT much?!?!! Especially when a year ago, Yahoo! was rumored to be willing to pay $1 billion for Facebook.

Let’s break it down. First, Facebook has significantly changed its business from a year ago. It now is open to anyone, not just college students. Moreover, the advent of its open platform means that it any developer worth his or her salt is writing a Facebook app.

This is a crucial point — I wrote a year ago that “as Facebook opens up and grows beyond its core membership of college students, it will have to replace the context of the college campus with content and experiences that people share”. Today, I can find out where my friends have traveled, challenge them to a game of chess, or support them in their favorite causes. Facebook has created a platform and ecosystem that sustains and can grow the community that’s there.

And grown it has. This past August, Facebook had 19 million monthly visitors in the US according to Nielsen Netratings, compared to 9 million a year ago. Facebook says that it has 42 million active users worldwide. At a valuation of $6 billion, those 30 million visitors are worth $142 a piece, and at a $10 billion valuation they are worth $238 a piece. That’s lifetime value — over the course of that person’s relationship with Facebook, it’s the belief that a member will generate that much in advertising and commercial value for Facebook.

Ad spending is roughly $2500 per adult in the US (about $250 billion in US ad spending divided by 100 million US adults). $200-$333 represents between 6-10% of ad spend. If people spend as much time as they potentially could within Facebook, those numbers are feasible.

Why an investment at this time? Facebook’s ultimate goal appears to be an IPO, likely in 2009, because they want to solidify their business and advertising base. That means they’ll need to buy time and a large amount of cash from a strategic partner — or a large institutional round — will give them the leverage to also make strategic acquisitions ahead of an IPO.

Two thoughts about why Facebook would want an investment with Microsoft. First, they already are working together. Microsoft sells the display ads that are targeted against profile information, and will make up about half of the $150 million in revenues Facebook will generate this year. This is part of a multi-year agreement that will extend until 2011. And Facebook’s unique marketing value is that not only can the display ads be highly targeted at actual profile elements, but marketers can also develop a deeper relationship with Facebook members — marketer relationships that Microsoft has in spades.

Second, Facebook needs to scale up a business that’s both consumer-oriented and also developer friendly. Microsoft has excellent developer relationships and also knows a thing or two about how to build successful consumer (and business — watch this space carefully) applications.

Microsoft’s interest is obvious — it wants a stake in one of the hottest companies out there. If they couldn’t outright buy Facebook (they tried last year) they’ll settle for a piece and make sure that no one else — like Google or Yahoo! — can be a part of the party.

via Charlene Li’s blog on Forrester

SEATTLE (AP) — Microsoft Corp. is testing a way to present video advertising that’s less annoying to Web surfers.

Instead of forcing MSN Video visitors to watch an ad before every clip, Microsoft now shows one ad before their first video selection. The next ad appears after at least three minutes of viewing — and it won’t interrupt a video midstream.

The change is part of an MSN Video site redesign that went live in the U.S. Wednesday. In a statement, Microsoft said the new tactic lets people channel surf without being interrupted by a commercial every time.

Web media companies and advertising agencies are still looking for effective but unintrusive ways to present advertising with video. In August, Google Inc.’s popular video-sharing site, YouTube, added semitransparent “overlay” ads at the bottom of some video clips.

The Associated Press uses Microsoft’s MSN video player to distribute video to its newspaper and broadcast members’ Web sites, but MSN’s change does not affect the service.

Microsoft’s new Windows Live software suite includes an updated electronic mail program, a photo-sharing application, online file storage, and a writing tool designed for people who keep Web logs.

Although they will not be included in the initial test release, the company’s recently announced SkyDrive online data storage service and its FolderShare service are being folded into Windows Live. SkyDrive currently gives test users 500 megabytes of free Internet storage, while FolderShare makes it possible to synchronize between multiple computers — including Apple’s Macintosh computers.

The new service is an indication that Microsoft plans to compete head-on against archrival Google and others, and not only in the search-engine business where it is at a significant disadvantage. Instead, Microsoft will try to outmaneuver its challengers by becoming the dominant digital curator of all a user’s information, whether it is stored on a PC, a mobile device or on the Internet, industry executives and analysts said.

The Wired magazine blog talks about Microsoft patenting a technique for preventing and reversing music piracy at the hardware level.

“Microsoft and Apple are thinking along the same lines when it comes to enabling users to copy music between their wireless devices.

Certain cellphones already allow you to do this via Bluetooth file transfer, but Microsoft’s patented idea would take the concept further, by allowing users to trade MP3s that may have come from file sharing networks to one another, expiring the song on the recipient’s device after three plays, unless the user pays Microsoft a fee in order to continue to listen to the track, with a percentage going to the person who provided the song. As the abstract puts it, “even [the] resale of pirated media content [can] benefit… the copyright holder.”"

Here’s an excerpt from the patent application:

“Systems and methods are described for an off-line economy for digital media. In one implementation, exemplary media devices of buyer and seller participate in the off-line economy by performing secure off-line transfers of digital media content between themselves. The media devices store proof of the off-line sales transactions, so that a percentage of the sale price can be applied to a copyright owner and a percentage of the sale price can be applied to the seller as an incentive. Even resale of pirated media content benefits the copyright holder. The off-line economy opens an effective and inexpensive distribution channel for copyright holders and allows buyers to obtain media content anywhere, at any time, from any participant in the off-line economy without connecting to the Internet. The off-line economy allows copyright holders and media sellers to optimize pricing by market probing.”

Words are on Techcrunch here

After spending billions of dollars on trying to become THE internet company, Microsoft is said (again) to be in talks with Yahoo. The now-its-on, now-its-off talks have begun again, though analysts say its unlikely that MS will buy Yahoo outright. Even a merger of some sort is likely to cause major cultural and managerial problems for the pair, and its not clear if the resulting company would be fast or agile enough to overthrow the dominance of the big G.

Microsoft already provides the software for many telco’s IPTV offerings. Already, AT&T, British Telecom and Deutsche Telecom are using Microsoft’s underlying IPTV software, and Microsoft says 11 other companies are either evaluating the software or running trials.

They also hope to get telcos offering Xbox 360 consoles to consumers as an alternative IPTV receiver and recorder. I can think of a few consumers who would see that as a great attraction!

Bill Gates, Microsoft’s chairman, said this week at CES, “We started over 10 years ago (on IPTV), so we were completely over-optimistic.”

At CES, Microsoft is demonstrating the features of its IPTV system, including high-definition display, fast channel changing and the ability to preview channels at the bottom of the screen before switching to them.

Business week has a long article about Yahoo’s Panama project and why it may not have the positive financial impact the company is hoping for. Yahoo’s goal for Panama is to make their pay-per-click advertising program more efficient at extracting dollars from advertisers. The details aren’t important, but the basic idea is that the highest bid on a keyword doesn’t guarantee it takes the top ad spot. A combination of highest bid and highest click through rate determines where ads are placed. That change should bump up the average cost-per-click, and have a positive effect on Yahoo’s revenue.

The article doesn’t mention Microsoft’s Adcenter product, which is a full generation beyond both Panama and Google’s existing product because it factors in demographic information about the person viewing the advertisement. While Microsoft hasn’t ramped up on advertisers yet, it’s clear that this is a three way race. An example of how much Microsoft means business is the fact that they probably bought their way into handling ads for Facebook. Without a revenue guarantee, Facebook would have gone with Google or Yahoo.

Frankly I don’t know who’s going to win the contextual advertising war over the long run. The important thing is that Yahoo has finally weaponed up, and the war is starting in earnest. Google has long hidden its revenue share details with partners, although the rumors suggest that they keep 50%ish of the gross revenue. This is way too much, and in a properly competitive market that percentage will tend towards zero as Google, Yahoo and Microsoft all compete for the same page views. Profit will need to be generated based on new product features and efficiency gains, which is the way it should be. Of course, they’ll always own their own internal page views as well, and it will be an important factor. To get the participation of the big advertisers there needs to be enough inventory to make it worth their attention. And without a robust network of advertisers the auction prices won’t go high enough. Still, all three of these companies have massive internal page views to lure these big advertisers.

So while I don’t know how much of a difference Panama will make to Yahoo’s bottom line next year, I know that the fact that they are catching up to Google is good for all of us.

OA on is on Techcrunch here