Microsoft puts money down on Web 2.0 trend

Analysts claim the deal between Microsoft and Facebook is motivated by more than the online advertising market.

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Microsoft's agreement to purchase one percent of Facebook for $240m (£116m) might go way beyond the immediate need to compete more heavily with Google in the online advertising space.

Analysts say the deal, coupled with two quieter announcements that Microsoft plans to help two online application vendors integrate their wares into Microsoft's Sharepoint platform for online collaboration, shows the technology giant believes Web 2.0-inspired technologies are here to stay.

On the surface, the deal fills Microsoft's need to land a small fraction of Facebook so it can increase its share of advertising on the rapidly growing Facebook platform, which has about 30 million members.

Back in August, Facebook and Microsoft announced a partnership by which Microsoft would help bring relevant advertising to Facebook users. In this context, Microsoft's latest investment in Facebook solidifies a relationship between the two companies while also grabbing online advertising real estate that its rival Google would like to get.

Analysts point out that the deal could be the start of something even bigger. They say if Microsoft and Facebook can collaborate on advertising, there's no reason to believe they couldn't incorporate a Facebook-like application into SharePoint, Microsoft's portal-based server that allows companies to manage shared documents and run collaborative technologies such as a blog or a wiki. The future result could be more robust Web 2.0 offerings that corporate IT departments offer under the comfort and familiarity of a Microsoft environment.

"Right now, the Facebook deal is really motivated by the consumer and marketing side of things, and to really get [Microsoft's] ad platform up and running" in the social network space, says Oliver Young, an analyst at Forrester who researches Web 2.0 technologies in the enterprise. "But if that relationship goes well and continues to deepen, I think we could see some cross-pollination between Facebook and SharePoint."

Young's assessment can be backed up by two recent announcements that flew under the radar because of the Facebook announcement. At the Web 2.0 Summit, in San Francisco in 17 to 19 October, Microsoft announced that it would help Atlassian, a provider of enterprise-grade wikis, and NewsGator, a popular RSS tool, integrate their applications with SharePoint. For Microsoft, the announcements show they're willing to incorporate best-of-breed Web 2.0 technologies rather than only provide their own applications atop the SharePoint server, which Young says have been adequate but not exceptional.

So far, applications to help bloggers or wiki contributors built up on SharePoint have been "really clunky," he says. "They'll get the job done, but not in particularly elegant way."

Pure play Web 2.0 vendors, meanwhile, spend all their time trying to perfect these technologies in the workplace. Jeffrey Walker, CEO of the $25m (£12m) Atlassian, says that although his product (an enterprise wiki) is run on Java, Microsoft has shown a willingness to help bridge the application to SharePoint because its wiki offerings lack the robust functionality of Atlassian. "It's fair to say Microsoft's wiki is a bit rudimentary," he says. "Microsoft came to us and we're actually very like-minded."

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