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Yesterday Microsoft held their annual Financial Analyst Meeting for 2008 and while you can view the full video and (nearly unreadable) transcripts of the presentations, it was mostly predictable fare. However, there were a few newsworthy nuggets::
Steve Ballmer (Chief Executive Officer)
"One last thing I wanted to also talk about is an extension of our Facebook relationship where we are extending it to Search and Page Search. We will be providing an API to Facebook where they will create a rich search experience, including a Web search for the Facebook users. And that’s something that they will launch in the fall, working with us, and it’ll carry both our Web results as well as our Page Search advertising."
Bill Veghte (SVP, Online Services)
We still have the possibility of doing a search transaction, which we think makes some economic sense. If I had a worry it’s the parallel paths continue, and about the time Yahoo decides that search deal makes sense for them is probably about the time that we have committed to our own plan so much that it may no longer make sense for us."
Yesterday was Facebook’s big debut party for their new platform designed to milk some cash from their faithful members via “social” advertising. Any sarcasm on my part would be superfluous after Nicholas Carr’s application of a flamethrower, but one interesting aspect was that Microsoft, who a year ago was working with Facebook “on future technology and advertising initiatives” and recently bought a slice of the company, was relegated to the position of being merely one of 60 initial advertisers on the new platform.
So where does Microsoft fit into Facebook’s overall advertising plans? Facebook CEO Mark Zuckerberg explains:
Among the unanswered questions surrounding yesterday’s Microsoft-Facebook deal was whether there were any other investors besides Microsoft in this round of financing. Now rumors are circulating that two hedge funds also chipped in for an additional $500 million.
The early (and possibly incorrect) presumption is that the hedge funds are each getting an equity share equivalent to Microsoft’s %1.6, but of course they aren’t getting any of the ad business. That in turn raises another unanswered question: what kind of advertising revenue share did Microsoft give Facebook? Both parties are taking pains to maintain the fiction of two separate Microsoft-Facebook deals in order to preserve the pristine nature of the $15 billion valuation, but one can’t help but wonder how much Microsoft really paid in total to play with Facebook.
Update 11/1: Facebook board member and investor Jim Breyer says this rumor is incorrect.
The long series of rumors finally came true today as Microsoft won the bidding to acquire a small equity interest in the Facebook social networking site and got the rights to foreign ad sales:
