Words can't express how insane I think this is but I'm sure every blogger in the world will have some kind of take on Microsoft's investing $240 million in Facebook at a $15 billion valuation. At first today actually made me feel very small. The cool applications, some of which are great RIAs that make Facebook what it is were less than an afterthought in the deal. At the core this is about eyeballs and advertising. At first glance no one seems to give a crap about RIAs and this is about getting more inventory for banner ads and milking that cash cow as far as it will go. Facebook's potential as a targeted ad platform makes it an even better target.
Michael Arrington has the quote from the conference call that get to the guts of the investment:
Q: How do you support valuation?
Vivech: Online advertising is $40b/year, will grow to $80b per year. Equity stake in facebook is a strong statement of confidence in MS’ ad platform and in facebook. If you look at FB growth and think that they will get to 200 million users in future, combine that with monetization opportunity along with modest rev/user/year, the valuation is supported.
There's more here however if you know where to look. This is about the changing face of advertising as much as the present value of a site like Facebook. If you look at what makes aQuantive such a great acquisition it came down to talent. Talent creating engaging ads. The team at Avenue A | Razorfish have some excellent Flash talent and have been building some great RIAs in the consumer space. Is it worth $6 billion by itself (what MSFT paid for aQuantive)? No way, but it is a very integral part of what aQuantive does. Then look at Facebook. It was Facebook's platform that turned the tide and helps keep people coming back. There are some very engaging RIAs built on top of that platform that help make Facebook what it is.
I'm not dumb enough to think that RIAs had any major impact in the acquisition of either aQuantive or the investment in Facebook. But advertising and rich Internet applications are subtly intertwined and as advertising becomes more complex and more important, RIAs stand to benefit. The focus on advertising infrastructure should be welcome for any company/developer/designer building rich Internet applications because you have a chance to stand out. Both in figuring out ways to monetize the next generation of software and to make your advertising/rich media experiences stand out from the crowd on sites like Facebook.
Update: Saw I had messed up a link.