$10 billion Facebook valuation? Desperation breeds Microsoft's insanity

Microsoft is wasting its money on Facebook, instead of investing R&D dollars into extending existing products.

It is fairly typical for also-rans to overpay for relevance. In other words, the runner-up in a competition is often willing to pay a hefty premium for something that it thinks will make it relevant again.

This phenomenon is on display today with the Wall Street Journal reporting that Microsoft is pushing for a $300 million - $500 million investment in Facebook (or 5%), valuing the social networking site at $10 billion. This is a clear indication that Microsoft believes that it needs Hail Mary efforts to become relevant online, and that a site that allows users to "chomp" and "poke" each other will somehow translate into insane amounts of revenue.

Good luck on both counts, Microsoft.

If Microsoft were serious about social networking, it would augment Exchange/Outlook to put social networking where it belongs: the address book. Microsoft could build the ultimate online trust engine with the address books it already controls.

In other words, Microsoft doesn't need to pay $500 million for Facebook, which may go out of style tomorrow (as social networking sites are wont to do). It needs to do what it does best: use existing centers of power to expand into adjacent markets. (Yes, there are antitrust issues embroiled in so doing, but this hasn't stopped Microsoft before.)

Give us something that is actually useful, Microsoft. Not a website that we visit to network, but an extension of the ultimate networking platform: our address books.

Tech Culture
About the author

    Matt Asay is chief operating officer at Canonical, the company behind the Ubuntu Linux operating system. Prior to Canonical, Matt was general manager of the Americas division and vice president of business development at Alfresco, an open-source applications company. Matt brings a decade of in-the-trenches open-source business and legal experience to The Open Road, with an emphasis on emerging open-source business strategies and opportunities. He is a member of the CNET Blog Network and is not an employee of CNET. You can follow Matt on Twitter @mjasay.


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