As Facebook prepares to surpass Yahoo in terms of global reach (they already surpass Yahoo! in terms of time spent on the site), Yahoo! has redesigned their site to incorporate Facebook into the homepage. The company is also letting developers create other applications that can be integrated into their homepage. Sound familiar? It’s similar to Facebook’s strategy and it’s an ongoing strategy that started months ago when the company launched the Yahoo! Social Platform.
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Microsoft CEO Steve Ballmer paid “lip service” to a Yahoo! deal and cleverly set the stage for acquiring Facebook, during his keynote at the Digital Hollywood Media Summit.

Yahoo!’s stock price shot up on the news of his comments, but I think the press and the markets are missing the big picture: Microsoft’s is using the “potential Yahoo! deal” as a red herring with investors. Ballmer is using Yahoo! to convince the market that Microsoft needs to buy Facebook to compete with Google, and to set a price floor of 50 billion for the acquisition.   Microsoft may be facing a situation where Facebook usage grows so fast that its costs skyrocket, creating a cash crunch, and in this difficult fundraising environment it’s best bet is just to buy Facebook.
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Last year when Microsoft invested in Facebook at a $15 billion valuation I doubt they expected Yahoo! would soon fall below that level. As of yesterday’s closing price, the company now has a market capitalization of $12.67 billion, over $2 billion less than Microsoft valued Facebook at. Facebook is now valued at around $4 billion according to leaked reports about internal stock sales.
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