The Greed of Facebook

A week after I wrote that the current Internet bubble is different from the late 1990s because it is driven by defensive fear rather than boundless greed, the Facebook deal with Microsoft yesterday shows that there are still some who think they can make untold billions by changing the world.

Not Microsoft. It and Google were bidding defensively.

The key fact here isn’t even the $15 billion dollar valuation that Facebook now commands. That is ultimately a measure of Microsoft’s fear.

What’s significant is how much money Facebook is raising and what it wants to do with it. Facebook took $250 million from Microsoft and hinted that it is looking to raise more. It said it wants to grow from 300 to 700 employees. And it defined its business as “social computing.”

This is a signal that the company wants to take on Google, at least in some realms, by having a battalion of engineers developing original technology. That’s very different from most Web 2.0 companies that pride themselves on using a handful of engineers to do quick, lightweight front ends. And it’s different from MySpace, the other big social network, which is adding media content but can’t seem to improve its central technology.

I remember a long conversation I had with Mark Zuckerberg, Facebook’s founder, about a year ago. He talked about how his role models—like many in his generation– are Steve Jobs of Apple and Google’s founders, Larry Page and Sergey Brin. They weren’t chastened by the excesses of the Internet bubble and have been rewarded for thinking big.

So we’ll see if Facebook makes the same mistakes that killed so many companies 6 years ago. The biggest one is raising a lot of money and then spending all of it too fast. There is nothing that makes a louder boom than a company with high burn rate, little revenue, and investors who are fed up with funding dreams.

This will really start to feel like a bubble if other entrepreneurs start to raise hundreds of millions of dollars on little more than a plan to hire lots of engineers to develop cloud computing applications or some such.

Mr. Zuckerberg, at least, has earned the right to at least consider thinking big. Facebook has risen above hundreds of rivals through a good sense of how to please users and an excellent approach to technology. Anyone who lived through the first crash would have simply cashed in his chips at this point. But Mr. Zuckerberg is doubling down.

His actions, if not his words, evoke the 1999 rallying cry GOBOGH: Go big or go home.