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Some interesting rumors have surfaced this week regarding the Microsoft, Google and Facebook juggernauts.
First, Michael Arrington from TechCrunch set the blogosphere afire Friday when he reported that a group of “industry luminaries” attended a cloak-and-dagger meeting at Google’s headquarters to discuss how to deal with Facebook, whose 40-million-plus users aren’t the issue so much as its open development platform. Arrington said not one but THREE sources fed him the info (can you say “leak”?).
Then the Wall Street Journal sparked the market Monday by reporting that Microsoft is in talks to buy a minority stake in Facebook, for whom it is an advertising provider, for $300 million to $500 million. Of course, Google has also expressed interest in taking a piece of Facebook. Let’s examine both reports.
As for the Google-Facebook meeting, Arrington reported that Google’s goal is to fight Facebook by being even more open than the Facebook platform. To do this, he wrote, Google will announce a new set of APIs on Nov. 5 that will let developers tap into Google’s social graph data.
Supposedly, Google will start with Orkut and its iGoogle personalized home page, and extend it to Gmail, then Google Talk in the future. But apparently, Google also is planning to give developers in its network the ability to pull Orkut data outside of Google and into third-party applications via the APIs.
Furthermore, Google also is considering allowing third-party social networks to give access to their user data to developers through those same APIs.
So while Facebook allows developers to build application off its platform, Google will allow programmers to write applications off Google and, presumably, other third-party platforms connected to this network. This is where the notion of Google trying to “out open” Facebook comes in.
If there is a shred of proof to this leak, I can’t help but believe Google has abandoned its attempt to grab a stake in Facebook and that this move is a declaration of all-out war against a company it perceives as a threat to its online advertising business.
Facebook has made no secret of the fact that it wants to go public and will likely allow its search box to return keyword-driven results to generate greater online advertising dollars, which would pose a serious threat to Google.
This also makes the appearance of a story about Microsoft eyeing a stake in Facebook a few days later conspicuous. Joe Wilcox of Microsoft Watch pegged this news bit to the Journal as a leak and I couldn’t agree more. I’m sure it’s a rebuttal to the Google “social graph” leak.
Microsoft is way, way behind in the online advertising battle, while some believe Facebook represents the future in this market. By aligning itself with the future, Microsoft is trying to put the fear of FUD in Google.
Think about it: Microsoft’s financial backing with Facebook’s brand and potential represent a frightening combo for even a company with more than 50 percent of the search market.
With the leaked reports of Google’s social graph and Microsoft’s stake in Facebook, the companies’ cards are a gambler’s arm length from the big table. But assuming these companies show their cards the way folks are reporting, the pressure is on Microsoft and/or Facebook if they are entering this battle for Google’s advertising business together, to execute with speed and precision.
Google isn’t going anywhere, and pumping out a social graph offering, while we have no idea what effect, if any, it will have on the market, comes in heady anticipation of Facebook’s growth arc. Or is it already too late?
If you believe Lee Lorenzen in this excellent analysis of the situation on TechCrunch, Google by design has no leg to stand on in the so-called social operating system war and will have a tough time fighting Microsoft and Facebook.
But if you believe the Journal’s assessment that Facebook is looking to compete with Google and Microsoft on the online advertising front, perhaps no alliances or investments are sacred.
If I’m Microsoft and I get a toehold in Facebook, I’m buying the whole thing to take out two competitors (one formidable now, one getting there). I don’t care what the cost at this point.
Then I’d let Facebook do its thing, take over the advertising market from Google and turn to other battle fronts, such as Google and Salesforce.com in SAAS and VMware in virtualization, to name a few.