Why Microsoft Needs Facebook

I’ve been thinking more and more about it. Microsoft is in dire need of Facebook to have any chance of succeeding in the online advertising game. Within a year, Facebook is going to become an advertising behemoth. Given that their network enables targeted advertising based on more focused demographics than even Google can offer currently (unless they decide to leverage Orkut which currently doesn’t have the same U.S. market penetration), Facebook will provide an edge for any company that decides to partner or acquire them. At the current time, Google has a grip on the online advertising industry and will continue to for the foreseeable future. Here are a few of the main reasons that Microsoft needs Facebook:

  1. Targeted Demographics – The bottom line is, if you are a marketer that wants to target a specific niche (e.g. teenage guys that listen to hip hop), Google Adwords just won’t cut it. You need a more focused advertising platform, and Facebook will be able to offer this. From this perspective I do have to wonder why MySpace never offered a similar service. Theoretically they could still compete in this area.
  2. Social graph – While the social graph is a term that has yet to be permanently defined, everyone seems to think that every internet giant needs one now. I hate to be one that follows the crowd, but I’ll go with the crowd on this one. Ultimately, to leverage the power of the open-source community, web companies will need to embrace the concept of a social graph.
  3. Potential to gain in search – Given that Facebook is going to eventually become a leader in people search (they are definitely a people-ready company), and Microsoft is currently way behind in the search market, this is a huge opportunity for them to gain ground against Google. Given that over 30% of searches are people related, this is a serious proposition for Microsoft.

The bottom line is that Microsoft needs to take some drastic action if they want to get a piece of both the internet advertising and search industries. The best method for them to do this is through acquiring Facebook. In addition to having the potential for gaining ground in internet search and advertising, there is also the prospect of rapid growth of Facebook itself. Microsoft has the cash to make something happen. If they are going to act, they need to act soon.