Maybe it’s desperation on the part of Microsoft. Yesterday, the company which seems to be under threat from all quarters: from the EU commission, from Google, from Linux, from Sony and Nintendo and from Apple, has just attempted to buy itself a big chunk of the face of the Internet’s future. At least it’s the face of the â€˜Net’s immediate future.’ Who knows what will be next?
To say social networking sites are all the rage is an understatement. First there was MySpace, then there was YouTube, perhaps not social networking as such, but it’s the same ball park, same kind of audience and the same mystifying business model. Now there’s Facebook.
The inflation in the price of social networking companies goes like this. Thirty months or so ago, MySpace was offered to Google for around $290 million. The company’s two bosses Brin and Page have foresight aplenty. Since their own particular company is the very model of stratospheric dotcom growth, the two men were no doubt used to seeing business plans with lots of noughts in the projections. Even so, they reasoned, it was an absurd price. You would have been hard pressed to disagree with them. Yet, a few months later, Rupert Murdoch came busting onto the scene, said, “G’day” to YouTube’s founders, and offered $580 million. Had the Australian maestro finally lost the plot? Had his brains gone walkabout? Well, in no time, it seemed he was proven right. For while the ink on his $580 million cheque had barely dried, Google was signing a $900 million advertising deal with MySpace, and no doubt cursing along the way. It’s a fast growing business indeed when not even Brin and Page can keep up.
But Google was not to be disappointed a second time. As that famous dotcom analyst Oscar Wilde once said, to “lose one dotcom purchase is unfortunate, to lose two seems like carelessness,” and before you could say, “Let’s put our family video on the Internet” Google was forking out $1.65 billion for YouTube, a company which at the time could only point to modest revenues. The YouTube purchase was agreed in October last year and so now all eyes move to Facebook.
At least, eyes at the Wall Street Journal turned to Facebook and earlier this week reported that Microsoft is considering offering $300 to $500 million for a five per cent stake. But Google is not sitting back. It too wants some of the action and may even bid for the same shares.
So, if Facebook is worth $10bn, and MySpace has even more visitors, you would think Mr Murdoch would be pleased as punch right now. Well, actually, the NewsCorp shares price fell when the Facebook rumours started.
You see, in this rapidly changing world of social networking, it’s growth that matters. Right now, Facebook is growing faster. In the UK it is now more popular than MySpace, and the traffic on the site has swelled 541 per cent this year. But, on a global basis it’s still around half the size of MySpace, which had 68 million visits last month.
Mark Zuckerberg, the 23 year old sandal-wearing founder of Facebook, a business he founded in an attempt to make enough money to take his buddies on a holiday, can perhaps now contemplate asking the travel agent to book a month on Mars for his friends’ jolly.
But, is this inflation in dotcom valuation rational? Or will it all go belly up? It’s important you realise that this time it’s not investors adopting a herd instinct, rushing headlong to the edge of a cliff and jumping with joy over the edge, oblivious to their error. This time, it’s big business. Shrewd, albeit in the case of Brin and Page as yet inexperienced, businessmen, pragmatic, savvy and probably just as bemused as the rest of us. Moore’s Law might talk about processors doubling in speed every 18 months, but that’s nothing compared to the pace at which the Internet is changing culture. In nature, evolution is a slow process, but in humanity has given way to cultural evolution where things start to accelerate. And when we developed agricultural techniques, things went up another gear. The Industrial Revolution brought with it a new level of evolutionary change, but it appears we have now moved to a new phase, one in which change itself seems to occurring at an accelerating rate. The new Moore’s Law should not refer to capacity doubling every 18 months. Rather, it should state that the speed at which things double, doubles every few months.If you like this article, why not register for our daily newsletter? Or if you already receive the newsletter, then start spreading the news and tell your friends and colleagues. To register visit this link
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