We can still remember the howls:
Back in 2007, Microsoft was SO STUPID and SO DESPERATE that it paid a LUDICROUS $15 billion valuation to invest $250 million in Facebook!
What a bunch of dolts!
Yes, back then, when a 23 year-old entrepreneur named Mark Zuckerberg brilliantly played his hand and walked the valuation of Facebook’s financing round up from mid-single-digit billions to the aforementioned $15 billion, Microsoft was resoundingly pilloried for revealing itself to be the world’s greatest fool.
No way was Facebook worth $15 billion, everyone agreed. NO WAY. And Microsoft had obviously just burned $250 million.
Well, who’s laughing now?
Even back in 2007, of course, most people missed the fact that Microsoft bought preferred stock in Facebook, not common stock, so the valuation of the deal was pretty much irrelevant. The preferred stock meant that Microsoft would get its money back even if Facebook’s value fell by ~98%.
And what Microsoft was buying, of course, was a lot more than Facebook stock. It was buying an extension of its ad sales deal with Facebook, which was worth a lot to Microsoft back then. It was buying information and expertise that it utterly lacked. And, perhaps most importantly, it was buying an ally against a competitor that had the potential to destroy Microsoft: Google.
Well, it’s clear now that all of the things Microsoft bought with that Facebook investment back in 2007 have paid off.
Microsoft’s preferred stock, for example, is worth more than twice what Microsoft paid for it–and has the potential to be worth a whole lot more. Microsoft made some money off the ad deal, and it’s certainly smarter about Facebook and the social business than it might otherwise be. And, again most importantly, it still has an ally against Google. And that ally is getting ever more powerful.
A month or so ago, Microsoft’s Bing became the first major search engine to integrate Facebook data. On Monday, when Facebook announced its email platform? (Sorry, “Messages”), Microsoft announced that day that the Facebook version of Office–Facebook Docs–will be fully integrated into the Facebook messaging program.
Microsoft and Facebook, in other words, are working ever more closely together. Google and Facebook, meanwhile, are now having a pissing match over Facebook’s refusal to allow users to export their information. And as Facebook becomes even more central to people’s lives, they’re likely to clash more and more.
See Also: 15 Amazing Facts About Apple
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