Tech Town, NC

Adam Ostrow gives credit where credit is due by lauding a couple big steals in the world of web 2.0 acquisitions: MySpace and Flickr. When Mr. Murdoch bought MySpace for $580 million in 2005 many thought he had lost his mind. In retrospect, that was chump change.

Microsoft has ponied up about half of that amount ($240 million) for a mere 2% stake in facebook. Now, that could mean that Microsoft is just very, very serious about winning the web 2.0 war (I’m sure they are) but it also highlights the fact that they’re very late to the game. If they had Rupert Murdoch on their M&A team, we might now be talking about how Google was the one who needed to play catch up.

Flickr is a more quiet success story since it was initially purchased for just $35 million, but it’s grown steadily into an anchor of the web. It’s 40 million or so users have built a lively community and some of them are even paying customers. All that pegs Flickr’s value somewhere north of $1 billion, possibly up to $4 billion.

These acquisitions have 3 important things in common:
1) The acquiree was supported by an enthusiastic community
2) The acquirer stayed mostly hands-off and let the property continue to grow
3) The acquirer got in ahead of the curve

Who fits that mold? A few companies come to mind – LinkedIn, Yelp, Twitter, and Digg most prominently. So what should Microsoft do? Keep their eyes out for a bargain, and let their new pet grow.