Today we're running the second in a continuing series of conversations about the Internet's very own Fight Club, Google vs. Microsoft. Every Friday, I pit my meager wits and florid prose against veteran Microsoft journalist Mary Jo Foley as we discuss competition between the two companies. The friendly fights begin Friday mornings, when one of us posts a note, and then the other responds. We'd love to hear what you think, so please leave your thoughts in the comments.

Today's topic: Is there any upside to Microsoft's ad deal with Facebook, or did it just get totally schooled by Google's MySpace deal? Here's Mary Jo's response.

-----Original Message-----
From: Bryant, Stephen
Sent: Thursday, August 24, 2006 2:32:00 PM
To: Foley, Mary Jo
Subject: Friday Fight: Second Place Is the First Loser

Hey Mary Jo,

So this week Microsoft corralled social networking site Facebook into a three-year banner advertising deal. According to the Times, the deal began in earnest after Google jumped in bed with MySpace.

IMHO, Microsoft got schooled. First, it lost MySpace--which has a Microsoft-based infrastructure--to Google, and then it made a "me too" deal with Facebook. Microsoft didn't even disclose the deal's terms, implying that it doesn't compete financially with Google's MySpace coup.

Of course Microsoft was probably chatting up Facebook before the MySpace deal. I mean, you don't invest millions in new advertising technology without chatting up your biggest potential customers, right? (For what it's worth, in April, it was the first company to be included in Facebook's workplace networks feature.)

But let's be honest: Facebook--which we might as well refer to as the Monty Hall of deal making--is notoriously receptive to odd partnerships. In June, it gave ad group Interpublic a .5 percent stake in the company and rights to data mine the profiles. So maybe MS and Facebook deserve each other. After all, they're both trying to convince the Internet they're relevant.

The only upside I see here for Microsoft is that Facebook may be poised to grow more quickly than MySpace. Facebook only has 9 million users to MySpace's 100 million, but the former has been making some technical strides recently, and its users spend more time on the site than MySpace users spend on MySpace. In the long run, Facebook may have a more sustainable value proposition for users.

But at the end of the day, advertising isn't as powerful online unless it's coupled with search. Google understands that he value of MySpace isn't just ads. A huge portion of the Internet audience is on MySpace every day. And not only will they be using Google search, they'll be clicking on Google AdWords generated by those searches. For a bonus, Google gets better insight into how people use social networks. (That is, beyond crime and kiddie porn.)

Microsoft's AdCenter is unproven. Facebook is a consolation prize. And even if the Facebook deal goes well, Microsoft will only prove it's good enough for second place.

What do you think?
-s.

p.s.: Here's Mary Jo's response.

p.p.s.: To all you info network junkies who may be reading: Isn't it interesting how nobody mentioned the Memex when Google purchased MySpace? When Google bought Pyra Labs in 2003, some of us thought Google was building Vannevar Bush's connectivity machine. So let's raise a glass to ye olde halcyon days, when Google was an unvarnished hero and search results were more than just spam.

p.p.p.s.: I don't think social networks online are fighting a zero-sum game. Facebook and MySpace can continue to grow independently with some overlap between users. Or they can fill separate niches. Or they can both become platforms. They're not mutually exclusive properties. As I've said before, I think MySpace will be successful to the degree it becomes invisible to users. Facebook will be successful to the degree it insinuates itself into existing social and educational institutions.