Best Deal of 2007: Microsoft-Facebook?

Much has been written on the terms of the deal between Microsoft and Facebook. The gist of it is this: Microsoft paid Facebook $240M for 1.6% of the company, and the exclusive rights to sell online advertising for the site.

This being the year-end, all pundit types have got their best and worst lists coming out, and this deal seems omnipresent on worst deals of the year lists.

Its not hard to see why this argument is made: "worst" is really a proxy for "stupidly lopsided value creation", and is Facebook remotely worth that much (remember that MySpace went for $500M and YouTube for $1.6B)? It creates an implied valuation on their user base (figure 50M users or so) of, like, $300 a head... that's some big math... hard to see how Microsoft ever really recoups its investment.

But of course, that's to focus on the value with regard to public markets and value cap - the *wrong* metric here. That implied valuation of $15B, is pretty much (forgive my language) bull$#!t because this deal was, in reality, a barter deal.

Let's look at the deal another way, very simply, in terms of cash:

1) Facebook gets a $240M cash infusion while giving up very little control or equity,
2) Microsoft gets a significant destination outside its network in which to build the value of its recent, very large acquistion of aQuantive (4% of the $6B that's already "sunk"),
3) Microsoft has to generate incremental ARPU of only $5 a user *in total* to break even,
4) Facebook is valued at $15B, which means...
5) Facebook is either (depending on where you think this ends): (a) off the market for some time at that price (so no Google, Yahoo, et al spoilers), or (b) tied to Microsoft and hardening/creating value in their online ad platform

Win, win, win, win, win - at least for Microsoft and Facebook: you know, the parties actually doing the deal?

Isn't that the definition of "best"? Lopsided value creation for *both* sides?

Any "investment" dollar$ back from the deal is pure upside for Microsoft. That means that they, more or less, let Facebook fill in the denominator: $240M of $XX - Microsoft doesn''t/didn't *really* care what that number was...

I don't know about you, but it leaves me with a funny taste in my mouth... is this the "revenue exchange" program of the new bubble - a variation of the old: "I'll buy from you if you buy from me and both our revenues go up, but we're not spending any money trick?"

Dunno - but it also smells suspiciously similar to another "equity for exclusivity" deal...

Android: Sound and Fury signifying... ?

So... I've been looking at Android a little bit (what's actually available thus far is really the SDK, not the platform itself).

A few comments:
- Custome Java(-ish - more on this shortly)VM/bytecode engine
- Integrated Webkit for HTML/JavaScript authoring
- Fast, robust 2d graphics (native and software only) with a custom presentation engine
- OpenGL ES, with possibility of HW acceleration
- Rich storage semantics through SQLite
- Still a little fuzzy on the licensing terms: Google says (emphasis mine)"Over time, more of the code that makes up Android will be released..." - not sure what that means...

The SDK support Java application only at this stage (and the forseeable future?) - though, in theory, platform source code being available under "non-restrictive" terms creates the opportunity for other types of enhancements.

So - still early, but on the good side: LOTS of (welcome/needed) attention to the graphics and presentation layers.

On the bad: fracturing Java (which only recently has started to make progress on getting past the "build once/debug everywhere" problems). If Sun doesn't address this with Google, it'll be hard for them to maintain any credibility or cohesion with the Java Community Process for managing Java's roadmap.

Interestingly this hilights a truism of mine: for software, single implementation trumps single specification - more on this in a future post.

How this will work with open source and Android is unclear, because as Johnathon Schwartz (Sun's CEO) points out: "Companies compete, communities simply fracture".

In particular, it'll be interesting how Google rationalizes their rumoured "non-fragmentation" clause and the idea of "non-restrictive" licensing...

Watch this Space, pt 1 (AKA the Android cometh)

Updated: Up and available around noon EST (someone sent me the link already! :)). Will look at it tonight... amusingly, win and mac tarballs downloading now, but consistently crapping out on linux set...

So, despite all the "news" last week (*cough* tease) - and all the subsequent pontificating - today (in theory) is when the Android SDK - the guts of the long rumoured Google "gPhone" - is actually released, and we get some real meat.

I have to hand it to the Symbian guys, though who take "quote of the week" for John Forsyth's likening of a Linux mobile initiative to the common cold: "It keeps coming round and then we go back to business."

Heh.

So... watch this space (I'll share some thoughts once I get an "open" look...)

Data problems

Not a new observation, or anything, but there's been an explosion in storage capacity, with revolutions of change still coming.... but our ability to organize and manage that data has only incrementally improved over the last two decades. For example, at the high end, although every medium to large business drowns in an excess of data they have trouble managing, core rDB tech has only evolved incrementally, at least commercially - yet remains the tool of choice.

Cutting edge is considered selecting MySQL instead of Oracle - yeah, that's bold :P

Companies like Google, whose mission statement is about data organization, of course, don't just fall back on tried and true patterns - they created tools (genuine internal infrastructure) like BigTable to help address these issues.

In a similiar vein (courtesy of Slashdot), you should check out the Database Column - a "multi-author blog on database technology and innovation" ("Column", get it? :D). Clearly, there's some interesting thinking going in the space that will change how data management happens - column-based dB tech vs. row-based is really only the tip of the iceberg, but provides a nice visual metaphor for how sideways things will get.

Interestingly enough, the "middeware" thing I referred to previously was in this space. If I manage to get out off my keister with that project some weekend, I'll post a sample application... but don't hold your breath :)

Microsoft's good at this...

I'd love to see Microsoft's "best practices" guide on the platform effect - they're good at it (generally). Like the developer entanglement Adobe's attempting with their eco-system, hard to argue that 4 gigs of Silverlight storage and streaming is bad for developers... just check out the community response (from a self proclaimed Adobe "Flex Machine", no less).

Though, these days, this seems more like a Google tactic than a Microsoft one... what does that tell you?