Microsoft and Facebook: What could have been (but will not be)

Microsoft and Facebook: What could have been (but will not be)

Summary: Do you think it's worth it for Steve Ballmer & Co. to try to go back to the negotiation table with Facebook's Mark Zuckerberg in the new year? Are there any other tech acquisitions you think Microsoft should be considering actively?

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A Microsoft exec confirmed this week what was already reported (by author David Kirkpatrick earlier this year) -- namely, that CEO Steve Ballmer made a serious offer to buy Facebook, but was rebuffed by Facebook CEO Mark Zuckerberg.

I've heard Ballmer say at least once or twice during various stump speeches that "Facebook wanted to remain an independent company," leading me to believe Microsoft had broached the topic of acquisition on at least one occasion. So this week's revelation didn't blow me out of the water.

But thinking back to 2007, things looked a lot different, in terms of Microsoft's investment strategy. It was a free-wheeling time. That same year, Microsoft almost bought Yahoo. (Luckily, Microsoft M&A guy Charles Songhurst talked Ballmer off the ledge and saved Microsoft $48 billion, as his bio proudly notes.) Microsoft also didn't end up spending the $15 billion (Facebook's valuation at the time) on Facebook. Instead,  Microsoft took a 1.6 percent stake in Facebook for $240 million, "spurning a competing offer from online search leader Google Inc." The Facebook investment --  a move that was ridiculed at the time, as being too pricey -- has been celebrated more recently as being not just wise, but downright brilliant.

Jump to 2010. Might Microsoft have made a new overture to acquire Facebook? Based on the company' very conservative current acquisition strategy, I would say no. As a December 10 Wall Street Journal article acknowledged, corporate America is stockpiling cash due to fears about the economic recovery or lack thereof. "Among the top holders are Microsoft Corp., with $43.25 billion in cash and short-term investments; Cisco Systems Inc. with $38.9 billion; and Google Inc. with $33.4 billion," according to the Journal.

Plus, what would Microsoft do with Facebook?

A couple of years ago, many pundits were advising Microsoft to buy Facebook, primarily to keep it out of Google's clutches. Microsoft also might have benefited from a Facebook acquisition, in terms of improving its search share and/or Facebook advertising play, some company watchers said. But back then, the Softies (and most other tech vendors) had barely scratched the surface of what social networking was.

Yes, Facebook was (and still is) interested in becoming a "platform vendor" -- a status Microsoft already had carved out for itself. So maybe there'd be some synergies there. And yes, Microsoft is interested in making Windows Live more "social." (Though its strategy of surfacing "activity streams" in Hotmail, Windows Live Messenger and a variety of other places has made me and a number of other users rather unhappy campers. Microsoft has been experimenting with using Facebook as a delivery vehicle for its Microsoft Docs and Office Web Apps offerings, and has created tighter integrations between Windows Phone 7 and Facebook.

But take over Facebook? Turn it into a Microsoft subsidiary? Make it the keystone of Windows Live? Big acquisitions are hard and Microsoft has experienced first-hand the challenges of trying to swallow companies like Great Plains, aQuantive and Danger. I just don't see a Facebook acquisition benefiting  Microsoft or its users much. Instead, I can see a lot of backfire potential. If users think the Hotmail brand is tainted, what would they think of Microsoft Facebook?

In the end, I think talk about Microsoft acquiring Facebook is moot. Microsoft isn't buying anything of substanial size or worth these days. And Facebook execs claim they aren't selling.

Do you think it's worth it for Ballmer & Co. to try to go back to the negotiation table with Zuckerberg in the new year? Are there any other tech acquisitions you think Microsoft should be considering actively?

Topics: Enterprise Software, Banking, Microsoft, Operating Systems, Software, Windows, Social Enterprise

About

Mary Jo has covered the tech industry for 30 years for a variety of publications and Web sites, and is a frequent guest on radio, TV and podcasts, speaking about all things Microsoft-related. She is the author of Microsoft 2.0: How Microsoft plans to stay relevant in the post-Gates era (John Wiley & Sons, 2008).

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29 comments
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  • I wish I understood

    What Microsoft sees in Facebook, but the good news is, if Microsoft can't have it, neither can Google.
    The one and only, Cylon Centurion
    • RE: Microsoft and Facebook: What could have been (but will not be)

      A better question would be why Facebook Stock was 76$ a share on October 1, 2010.

      How do they make money?
      Michael Alan Goff
      • RE: Microsoft and Facebook: What could have been (but will not be)

        he'll explain his comment in a non-biased fashion, though, with little to no random<a href="http://www.6999999.com/"><font color="light&amp;height"> automotive</font></a> of industry that <a href="http://www.belex-homes.com/"><font color="light&amp;height">home</font></a> from any the <a href="http://www.fwtrack.com/"><font color="light&amp;height">track</font></a> from people of <a href="http://www.wa2dci.com/"><font color="light&amp;height">best</font></a> any other food <a href="http://www.hemofilia-malaga.org/"><font color="light&amp;height">blood</font></a> to the money insults
        gogon gondrong
  • Proof that Facebook is a LOOSER investment

    So far, everything Balmer has touched has become a total failure. This just proves that Facebook is an investment for idiots.

    Sorry, but you have to be a complete moron if you fail to see that:
    #1- Facebook is a temporary fab. By 2012 Facebook will be a thing of the past and a new fab will be crowned ... until is killed by another king.
    #2- Facebook is a legal nightmare. The main source of income is based on stealing personal information (in a semi-legal kind of way that is deap into the gray area). Anybody stupid enough to purchase Facebook is looking a millions if not billions of losses in legal fees and payments.
    wackoae
    • You need a d-i-c-t-i-o-n-a-r-y...

      See http://www.merriam-webster.com/dictionary/looser
      zkiwi
    • Everything?

      I seem to remember hearing about the monumental sales of the Kinect, the great sales of Windows 7, Office 2010, and so forth. I'm sure the Windows Phone 7 sales aren't that bad either, though we can't really be sure about that.
      Michael Alan Goff
  • RE: Microsoft and Facebook: What could have been (but will not be)

    Facebook = Lame
    james347
  • People wouldn't like it

    Personally I like Microsoft, but most people see the name and think bad thinks, except for the Xbox, so "Microsoft Facebook" would, sadly, make everyone leave Facebook. It's sad, but probably a true fact. Maybe one day Microsoft can be a good name to EVERYONE, not just me.
    magicwin31
    • If anything the MS name will IMPROVE the Facebook name

      @magicwin31 Facebook is know for being the identity theft friendly anti-social network.

      Any company, even MS can improve the brand name by actually adding a REAL privacy policy.

      The problem is that buying Facebook is also buying legal problems from past privacy violations. No matter how little they pay ... the price is to high.
      wackoae
      • RE: Microsoft and Facebook: What could have been (but will not be)

        @wackoae Sorry I don't use BING, I don't use IE, and I don't use Hot mail for one simple reason. I don't trust Microsoft or want them anywhere near my personal data, I don't want them managing anything for me as a free service. They just don't know how to do it and I believe they are structured wrong to market it properly. So the day it became Microsoft Facebook would pretty much be the day I would quit the service. I don't want to have to buy an XBOX to use it, have premium content that only works on a Zune, or worry that IE runs in the background...I think a lot of people probably feel that way.
        Socratesfoot
      • RE: Microsoft and Facebook: What could have been (but will not be)

        @Socratesfoot: <b> I don't trust Microsoft or want them anywhere near my personal data</b>

        So who DO you trust? Google? Mozilla (funded largely by Google)? Apple?

        If you answered "yes" to any of the options above, you're just revealed how your irrational hatred of one corporation has led you straight into the arms of a different and equally "evil" corporation. Well done.
        bitcrazed
  • Apple is the only company worthy of Facebook

    M$ is late to the party again
    Ron Bergundy
    • What?

      @cyberspammer2

      What party are they late to now? I fail to see your point.
      The one and only, Cylon Centurion
      • Obviously he is referring to

        Apple's massive social branching similar to facebook. Wait... Apple doesn't have a social network either? Maybe he means Google. No, no, they don't have it either.

        I'm sure he'll explain his comment in a non-biased fashion, though, with little to no random insults about Microsoft.
        Michael Alan Goff
      • RE: Microsoft and Facebook: What could have been (but will not be)

        @Cylon Centurion 0005 He's a moron imitating me. Flag his posts.
        cyberslammer2
      • Oh crap, you're right

        I should have noticed the "cyberspammer" vs "cyberslammer" thing. x_x
        Michael Alan Goff
      • He is correct, they are not the same person

        though by the context of the replies alone, one would be hard pressed to even notice if they do not look at the slight difference in screen names.
        Beyond that they appear to be not so different in tone.
        :|
        Tim Cook
      • RE: Microsoft and Facebook: What could have been (but will not be)

        @Mister Spock I have figured it's probably Trickytom3 or SonofaSailor. It wouldn't be NonZealot because his responses usually take up half a page.
        cyberslammer2
    • RE: Microsoft and Facebook: What could have been (but will not be)

      @cyberspammer2 If you think Apple is any better than Microsoft as Facebook's steward you're naive. They need to stay independent or sell to Google; no other options. Because Facebook can not be tied to some hardware/software companies bottom line and survive.
      Socratesfoot
  • MS Social Strategy- Partenring &amp; Phone Strategy-Acquiring

    MS would gain more by partnering with Facebook than buying it. Buying Facebook would complicate lot of things for Microsoft, they will tend to attempt all the unneccessary integrations and product mergers. Too big of a risk when someone is paying a premuim.<br><br>Incase MS fails with Windows Phone 7, I would blame it on the licencening model and not product itself. MS would better off by investing in some phone hardware company so that they can push their WP7 aggressively. I think MS should wait on the side lines with the cash, while Nokia slowly bleeds to death, they can acquire or attempt a merger. Here they have two advantages over competetiors<br><br>1. Google cannot acquire Nokia, cause Android is deeply penetrated in the market. If by any chance they do all the carries will dump Android and will ready to bed with MS. <br><br>2. If MS Wins Nokia, they have the hottest market in the world, which is developing countries with all the penetrated supply chains Nokia established. <br><br>Nokia apart from Apple is the only company which has profit margins greater than 30%. Either case MS wins.<br>
    rockroars