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How Microsoft and Facebook Are Spending $1 Billion Each

"A billion here, a billion there, and pretty soon you're talking real money."
-- Something Sen. Everett Dirksen probably never actually said, but still a good quote.

Microsoft and AOL this week cut a deal that makes both parties look like titans of the lost 1990s compared to Facebook, which just keeps charging ahead into the 21st century.

The software giant bought a billion dollars worth of patents (more than 800 of them) from the provider of Internet service to senior citizens, giving AOL a much-needed (but one-time) financial shot in the arm and providing Microsoft's lawyers with fresh new ammunition for the company's patent-lawsuit weapons. The deal seems like a win-win, to use horrible jargon, but it's about as exciting as a "never-ending talk show" (which, terrifyingly, could actually emerge from the deal).

Meanwhile, Facebook, all youth and vigor, is buying something called Instagram for about $1 billion. Instagram must be new and hip because your editor has barely heard of it and has certainly never used it. That's a good sign that it's excellent acquisition fodder for Facebook. If your editor is actually using an application or Web site on a semi-regular basis, it's pretty certain that app is embarrassingly passé and is about to fade into oblivion (after all, we at RCPU actually own an HP Touchpad). Instagram passes the RCPU "what?" test and therefore should be a wise spend for the Facebook folks.

Although they're not related, these deals do reflect where Microsoft and Facebook are as companies. Microsoft's billion is basically going to lawyers, who will likely be able to make the company a ton of money by crushing competitors large and small in East Texas courtrooms (where patent lawsuits always seem to happen). It's also a defensive buy, covering Microsoft's considerable backside in case of legal attack from some patent troll. That's great, but it's not exactly something that's going to spur innovation or give partners a talking point for prospective clients.

Facebook, meanwhile, is off buying something it can weave into its services -- probably in some way that will end up enraging users about a lack of privacy, but still. The new paradigm for everything, social media, is swallowing up new categories of users and expanding its profile while Microsoft, a traditional software company, is digging in for legal battles and bailing out struggling, has-been tech titans. This is dining at the Ritz and embarking on a night of clubbing compared to scarfing down the 4:30 p.m. "dinner" special at the Golden Corral (we just kind of figure there is one) and going home to watch something on TV with "CSI" in the title. But, hey, that's the way it goes getting older ... right?

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Posted by Lee Pender on April 09, 2012