Sorry, Microsoft, Google Has Already Won Facebook War

The Post suggests that our prediction of a month ago is coming true: Either Google will run off with Facebook, leaving a jilted Microsoft (MSFT) fuming at the altar, or Microsoft will have to pay a king’s ransom to win the bidding war–just as it did with aQuantive:

Microsoft and Google are each vying to take a stake of between 5 per cent and 10 per cent in Mark Zuckerberg’s social-networking site, with a deal expected to be announced in the next 24 to 48 hours, according to three sources familiar with the situation.

Google, in keeping with its past modus operandi, has been trying to drive the price up to a point that would scare away Microsoft. Running point for the Internet giant in its talks with Facebook is Tim Armstrong, the same executive who helped Google elbow Microsoft out of a deal with AOL similar to the one being talked about with Facebook.

This time around, however, Microsoft is hanging tough, despite recent comments by CEO Steve Ballmer that social-networking sites were “a bit faddish.” One source said the Redmond, Wash.-based company is “willing to give any valuation possible” to keep Facebook away from Google.

Microsoft is indeed in a pickle here.  A close relationship with Facebook is worth far more to it than to Google–and it’s also worth a lot to Microsoft not to have Facebook end up with Google.  On the other hand, Google’s currency is far more valuable.

Predicted victor?  Google. Unless Tim Armstrong makes the same mistake Google did with Skype, which was to barge in and arrogantly announce that its bid was “10% higher than the next highest bid” (a stance that understandably so offended the Skype founders that they chose an otherwise nonsensical partner, eBay), Google will make a better Facebook partner.  Zuckerberg also already seems to have some agita about Microsoft, and partnering with Google will likely reduce the chance that Google will eventually become a Facebook competitor.  So the price will likely go up, up, up until Steve Ballmer sensibly throws in the towel and storms off.  At which point Google will overpay, but whatever.

Even if Microsoft does outbid Google in a testosterone-driven rage, moreover, Google will still win.  Why?  Because Microsoft will overpay, too–wildly–and won’t get much for its money.  Facebook will no doubt extract other concessions (great pricing on ad sales, full control, etc.), and then will probably take Microsoft’s money and turn its back.  So Microsoft will lose that way, too.  And Google will do just fine without Facebook.

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