Comments on article found at:  http://online.wsj.com/article/SB10001424052748703673604575550342284601912.html?mod=WSJ_Tech_LEFTTopNews

Comments on article found at: http://online.wsj.com/article/SB10001424052702304772804575558484075236968.html

The Microsoft-Yahoo deal never made any sense to me unless Microsoft got yahoo cheap. However, this deal with Facebook makes sense.

Since 2007 (thereabouts) Microsoft and Facebook have been trying to develop something together that would benefit both companies. Now Microsoft and Facebook have created a deal that I believe may actually work. However, the big concern to consider is “privacy’. My suggestion to investors is: Do not let the analysts with skin in the game con you into believing “the privacy issue” is not an issue because it is a big issue.

I am hoping Microsoft and Facebook have carefully thought through the “privacy issues”. Based on the information the companies have provided it seems the two giants had been thinking through privacy.   At least Microsft had been thinking through the privacy issues.

I believe that the deal will enable Microsoft to differentiate Bing from Google’s search engine. Product differentiation and information will be the big differentiators between these parties.  Even with the recent setback, I believe the deal is still good.  However, whether or not the deal actually closes is another matter.

Assuming the two companies can deal with the bad news, a question I have for Microsoft and Facebook is: “Now that you appear to have a way to help one another how do you plan on generating revenue?”

The end result has to be about generating revenue. Companies like YouTube, Facebook, and MySpace have all proven people love their “15 minutes in the spotlight”. However, none have ever been able to monetize the social web. Forget about the numbers of eyeballs on your webpage as a way of establishing value. Let me say what I used to tell clients 12 years ago during the days of the Telecom/Internet boom – “At the end of the day you need to make money. Everyone loves you use cool stuff when it is free. However, someone has to pay the salaries and the bills that make all this cool stuff available.”

When I first began writing this posting the news about Facebook’s privacy issues had not come to light. Thanks to the Wall Street Journal the “truth” about privacy and Facebook the deal is likely in jeopardy. I gather the Wall Street Journal will be releasing more information in the days ahead. One thing is clear to me, this news will impact the Microsoft-Facebook deal. At a minimum the mainstream media will be flooding the news feeds with this story.

According to the Journal, the defenders of online tracking say that the kind of surveillance Facebook’s App partners perform is benign. However, one of the data gathering firms that 10 of the most popular apps on Facebook have been transmitting users’ IDs to outside companies. According to the WSJ, one of those companies, RapLeaf transmitted the IDs to a dozen other firms.

In a word; “setback”.

In a word; “disaster”.

Microsoft and Facebook will need to perform some major spinning of this news.