Microsoft's "Investment" in Facebook Was a Down Payment

Yesterday Erick Schonfeld posted that Google should buy Facebook. He admitted that it was something that probably won’t happen but asserted that Facebook and Google should partner together to integrate people search and general web search. Yes, Google has the upper hand when it comes to search but Microsoft is investing heavily in search and I would argue that their “investment” in Facebook at the ridiculous $15 billion valuation, was not an investment but merely a down payment.

Think of Microsoft as Facebook’s rich uncle. Nobody knows exactly what went on in the room when Mark Zuckerberg went to meet with the Microsoft executives (including Steve Ballmer) but one can assume that everybody in the room felt a common bond. Everybody knows that Mark Zuckerberg was inspired by Bill Gates’ personal story and that it was one of the driving forces behind him leaving Harvard.

Some people are suggesting that the company is in need of cash quick. That could be the case but when it comes down to it, they can always go back to Microsoft and ask for more money. We also don’t know what exchange Mark Zuckerberg made with the Microsoft Executives but we do know that Microsoft has gotten access to the highly desired search box on Facebook. While the search performance is currently poor, the company is investing heavily to improve it.

In the meantime, Facebook’s job is to keep acquiring new users who continue to come back to the site on a recurring basis. Take a look at the top global sites according to alexa and you immediately realize how big of an impact Facebook would have in regards to search for anybody that’s searching the web. They say that over one third of searches on the web are related to people. Facebook is quickly becoming the center for those searches, and if not the place where the search was initiated, it’s where the user ends up.

It’s pretty obvious that Facebook will be one of the largest search engines if the majority of people searches are going through their site. Back in September I wrote about the site being one of the fastest growing search engines, and that trend continues. While the web industry has yet to figure out how to monetize people search effectively, it’s only a matter of time.

Facebook is poised to be the largest people search engine in the world. Google and Microsoft both know that and that’s why Microsoft has already placed their down payment. Will Facebook sell the company eventually? Perhaps they’ll hold off and wait for the IPO. My guess is that the two most popular technology companies founded by Havard dropouts will be tightly connected throughout the future.