There’s no question now that the hot thing for any company to do is to make some kind of software that has a social component to it, and why wouldn’t you. If your product is based around friends (and not really friends) interacting with each other then the marketing really does itself, so long as your product is somewhat useful or novel. It’s getting to the point where once a service has been around for a while they will inevitably either integrate with Facebook or build in their own social networking components, usually to keep driving the user numbers upwards. No company seems to be immune to this, even my fledgling little application allows you to login via Facebook, except for one: Microsoft. Despite the social revolution that seems to be rampaging on around them Microsoft has quietly kicked back letting others duke it out for social supremacy. For a company that’s renowned for throwing money around in order to gain market share in pretty much every IT related area their silence on the social scene is quite eerie, verging on the point of them knowing something the rest of us don’t.
For the most part their strategy seems to have been one of going along with the current trend of integrating their products with the current social giants. Their MSN Messenger product was just recently updated with a new beta that had Facebook integration. Already it’s garnered a healthy 4.6 million users or approximately 1% of Facebook’s user base. That might not sound like much but considering that it’s still in beta and the current incarnation of the Live product has well over 330 million users you can expect that a lot of people are going to be getting their Facebook fix from Microsoft. Additionally many Outlook users would be familiar with their new Social Connector which is in essence a social network for businesses and has been getting some traction due to its integration with Sharepoint and the Office suite of products.
Still there’s no Microsoft Social Network (MSN? Ha!) to be found, so what’s the deal?
Part of the answer would seem to lie in the past. Rewind back about 3 years and you’ll come across a flurry of articles speculating on a bidding war between Microsoft and Google for a piece of the next hottest thing: Facebook. Surprisingly enough Microsoft won out in the end managing to secure a small share of the company for a cool $240 million, or 1.6% stake. This was a continuation of the relationship that they had established previously when Microsoft secured an advertising deal with Facebook just one year earlier. Still it was an odd move for Microsoft as the investment was peanuts for them (They had over $23 billion in cash on hand, yes cash) and realistically even if the company went to IPO and they got a 10x exit from it you’re still only looking at $2.4 billion dollars for a company who turns that over in about 2 weeks, so it was more a foot in the door than anything else. Their recent integration activities with Facebook also shows that they’re more keen to work with them rather than try to push them out of the market.
Strangely enough it looks like Microsoft actually did try to compete with Facebook all those years ago. I’ll admit I didn’t know about this when I first starting writing this post, I came across it in my research, but it appears that in response to Facebook going open to all back in 2006 Microsoft retaliated by launching their own site Wallop:
Seattle-based Microsoft Corp.‘s (NASDAQ: MSFT) spin off Wallopsaid Tuesday it was starting service. It’s a site intended to compete head on with MySpace and Facebook. Wallop starts with $13 million in backing from Microsoft, Norwest Venture Partners, Bay Partners and Consor Capital.
Considering that I’ve never heard of this site it’s not surprising that it never managed to get off the ground. Checking out the wiki page on the service it appears that they left their lofty ambitions behind back in 2008 instead focusing on developing applications for social networks rather than trying to compete with them. This it would seem is the reason behind Microsoft’s curious lack of a real social network. They tried, they failed and then realised that there was more to be done with them than against them. This really is contrary to their normal kind of behaviour and I’m sure there’s an ulterior motive to this that I just can’t figure out.
Taking a wild stab in the dark I’d say that they just don’t think they can take the shine off Facebook’s crown. Microsoft really isn’t the kind of company you expect to make products and services like that, they’re more of an underlying services platform that will deliver those products to you. Considering this is where their main revenue line is drawn from it’s not surprising but it’s still one of the first times where it looks like Microsoft has just thrown in the towel and capitulated to the competition. It will be interesting to see how this maneuver pays off as Google starts to ramp up their efforts in the social space with a rumoured Google Me service starting to make waves on the Internet. I still think Microsoft will hang back on that one too, but there’s every chance they’re waiting for the market to segment a bit before attempting to jump back in to the social networking scene.