When Microsoft paid $240M for a 1.6% slice of Facebook, a lot of people were surprised that Google did not outbid Microsoft as it had done when it acquired Doubleclick for $3.1B.
In fact, conspiracy theorists argued that Google only showed an interest to ensure that the final price would not only reach investor Peter Thiel’s $10B sought price but surpass it as well.
Technically, the fact that MSFT “only” paid $240M (instead of $500-750M) to keep Facebook out of the hands of Google showed Bill Gates shrewdness… but it also suggested that Google had learned from history.
After all, when MySpace-led Fox Interactive Media got a $900M guaranteed deal from Google, I suggested that Google overpaid. That comment had nothing to do with MySpace, but rather because social networking in general was challenging to monetize. Of course, in the same vein, Google paid $900M to keep MySpace’s massive inventory out of the hands of Yahoo! and MSFT and could very well explain why Google’s market share continued to grow at the expense of IAC’s, AOL’s, MSN’s and Yahoo!’s.
But regardless, $900M was a lot of money, at the time it could have probably bought all of Facebook.
Today, a couple of years later, I feel somewhat vindicated by my call. From Google’s analyst, from CNET:
CFO George Reyes said social networking advertising is not monetizing as expected. When questioned further Sergey Brin, president of technology, said: “We don’t talk about individual partners or anything like that.” Brin noted some things were tried that didn’t pan out. While Brin won’t talk about partners it’s fairly obvious that MySpace is an issue. Google is obligated to pay at least $900 million in minimum revenue guarantees to MySpace through 2010. Later, the question was revisited again. He noted that Google also has Orkut and other social networking partners. “We have an incredible amount of this inventory,” said Brin. “I don’t think we have the killer best way to monetize social networks yet. We have had a lot of experiments (and some disappointments).”
Sergey Brin is smarter than I am, granted, he has enough expensive consultants around, but I see the “killer best way to monetize social networks” through content partnerships, which, you guessed it, is something we’ve been doing aggressively by virtue of distributing premium, professional produced video content on such social networking sites.
As I outlined this morning, you can’t get lazy and take shortcuts, media/publishing/advertising has remained fundamentally consistent and similar for over a century. Without good content, you cannot effectively advertise.
Disclaimer: WatchMojo.com is a content provider to both MySpace and Google’s YouTube, companies mentioned in this post.
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