Yesterday I, among many others, commented on the Microsoft-Facebook deal — though in my case, I’m more interested in the potential impact on real estate than I am in the specifics of the deal itself.  While yesterday’s post thought through the implications for real estate consumers in the mid-Peninsula, today I have some thoughts on the implications for real estate professionals, and in particular the ongoing legal brouhaha between Move.com and Active Rain.

A quick recap:  Move.com, the 800-lb gorilla of the online real estate world, was apparently in negotiations to buy ActiveRain, the 50,000-member strong real estate blogging site.  The price tag was rumored to be around $30M.  ActiveRain is now suing Move.com for allegedly reneging on the deal.

The $30M price tag certainly raised eye brows.  The BawldGuy himself wondered aloud in a comment on my first article on the issue whether ActiveRain was even worth $1M.  My back of the envelope calculation — based on the fact that Facebook was roughly valued at $250/user – suggested an argument for a $12.5M valuation for ActiveRain.  Yesterday’s news upped the ante for Facebook to around $300/user, implying ActiveRain may have a value of $15M.

Back to Microsoft-Facebook for a minute.  What does Microsoft see in Facebook?  Simple — it has the potential to become a finely honed online advertising machine, in which Microsoft can target users’ interest with pinpoint precision — not (as is currently the case with search engines) simply by what the user is searching for, but rather by what the users’ interests, group memberships, and friends’ list implies about his or her interests.  You’re a member of the groups “San Francisco” and “Wine afficionados?”  Perfect — we’ll serve you up with an ad for a weekend getaway in Napa.

What does (or did) Move.com see in ActiveRain?  Perhaps one of (at least) two things:

1) Yet another venue to rape pillage plunder charge agents for the Web 2.0 equivalent of “Enhanced Listings.”  Want to have a blog?  That’s free.  Oh, you want to actually be able to write something in your blog and have pictures, links, and comments?  That’ll be $4.95/month.  Want to get rid of competing agents’ ads next to your blog articles?  Another $4.95/month, please.  Want to “enhance” your blog so it shows up higher in a search on Active Rain?  $9.95.

2) A finely honed online advertising machine, a la Facebook, but specifically within the real estate industry.  Again, ads could be tailored according to the users’ group memberships and friend lists.  You’re a Coldwell Banker agent, and a member of the “Boise interest group”?  We’ll serve you up an ad from a competing Prudential franchise in Boise that’s looking to expand.  You’re reading an article comparing some of the different MLS search providers?  Bingo!  We’ll show you an ad advertising such wares, along with a one month free coupon.

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The blogosphere has been buzzing since yesterday with news of the Microsoft-Facebook deal in which Microsoft invested $240M in Facebook in exchange for a 1.6% stake.  To spare you reaching for your calculators, that gives Facebook a whopping valuation of 15 billion (with a b) dollars — not bad for a company with a 24-year old college-dropout CEO.  (Perhaps part of the attraction of Facebook for Microsoft was a sort of nostalgic deja-vu on the part of Bill Gates, who is also a Harvard dropout, and was also running an exciting and very successful company by the age of 24.)

I’ll leave the analysis of the deal itself to pundits far more knowledgeable on the subject.  What interests me as a real estate professional is the impact this deal may have on real estate in the area.

The connection, in my mind, is quite simply:  One of the reasons why the real estate market here in Silicon Valley continues to chug along is that the tech industry is doing very well.  VC’s are flush with cash, busy investing in the next big thing.  Many of the local tech giants are having good years.  The current bellweather of the local tech economy is Mountain View-based Google, and with its shares well north of $600 each, and its ongoing voracious appetite for skilled engineers, the Valley is feeling pretty brash and confident these days.  That confidence, and the cash that comes from stock options, translates into buoyed demand for housing in this area.

So what happens if Google, which currently can do no wrong, stumbles a bit?  What if it fails to hit analysts’ quarterly earnings target?  What if it even fails to beat expectations by as much as analysts thought it would?  What if its stock drops to, say, $300, over a one year period?

Without a doubt, that would have a negative impact on our local real estate economy, both directly — Googlers not buying as much housing — and indirectly — the overall attitude of the local tech economy getting soured.

Here’s where Facebook, currently housed in downtown Palo Alto, comes in.  The company reminds many of us of the pre-IPO Google of, say, 5 years ago:  great product, smart people, excellent management, modest cash flow, and HUGE ambitious and expectations.  If Facebook continues along the same trajectory, it may well be that in, say, three years, it becomes our local bellweather.  It may well have several thousand stock-option-engorged employees right at the cusp of their homebuying life stage.  They may well do for our local housing economy what the Googlers are currently doing.

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Here’s another really slick piece of Web 2.0 software that may soon be a part of every tech-minded listing agent’s arsenal:  Microsoft’s Photosynth product, still very much in Beta.

What is it?  It’s sort of a souped up virtual tour, on steroids.  It stitches together hundreds of photos of a certain setting into a very believable 3-dimensional world in which you can zoom in and out, walk around, pan around…in short, get as close to being there without actually…being there.

I’d love to test it out personally, but currently there are two obstacles for me:
1) It’s not yet open for the public to play with; for right now the site only has canned demos.

2) It requires IE7 to operate, and I make it a policy to not be an early adopter of Microsoft browser products…plus QuickBooks 2005 doesn’t like it.

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