ONLINE FACEOFF
M'SOFT AND GOOGLE DUKE IT OUT OVER HOT SITE — Google is threatening to once again beat rival Microsoft to the deal punch, this time in the white-hot Facebook investment sweepstakes. — Microsoft and Google are each vying to take a stake of between 5 percent and 10 percent …
Context & Ripple Effects
This piece landed mid-auction: on the same day, both CNET and CNET's sourcing on the bid battle reported that Microsoft had prevailed, with the $240 million payment buying just 1.6 percent — an implied valuation near $15 billion, far above the 5-to-10-percent-for-the-money framing the Post describes. The Post's account captures the contest at its peak, before the outcome was known to its readers.
The story travelled widely for a stake fight: Britain's PDA asked whether Facebook was about to be bought outright, while Silicon Alley Insider argued Google had already lost — early evidence that the deal was being read less as an investment than as a proxy war between Microsoft and Google over who controls advertising against the social graph. Google was already dominant in internet advertising, which is precisely why a foothold inside Facebook mattered to both bidders.
First-order effects
- Microsoft converts a contested auction into a beachhead: for $240 million it gains a seat inside the fastest-growing social network and, with it, a claim on Facebook's future advertising inventory that Google does not have.
- Google is locked out of the deal entirely — its rumored push for a 5-to-10 percent stake ends with no position in Facebook, leaving its ad dominance unchallenged inside that network for now.
Second-order effects
- Advertisers and agencies gain a second major search-and-display seller in Microsoft-plus-Facebook, giving buyers leverage against Google's pricing in the nascent social-advertising market.
- Facebook's $15 billion implied valuation becomes the reference price for every subsequent social-network financing and acquisition negotiation, raising the cost of entry for any rival bidder or acquirer.
Third-order effects
- Minority strategic stakes emerge as the standard weapon in the Microsoft-Google rivalry — cheaper than acquisition, defensive in purpose, and aimed at denying the other side distribution rather than earning a return.
- If platform stakes keep clearing at these levels, capital concentrates around a handful of consumer platforms whose valuations are set by strategic scarcity rather than revenue, inviting scrutiny of how such auctions price young companies.
The trend: The portal-era giants are fighting the social web through preemptive minority stakes, turning hot startups into battlegrounds where the prize is denied access as much as owned equity.