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, it's this Microsoft Watcher pitting her wits against Google Watcher Steve Bryant 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, too, so please comment early and often (but not TOO often).

-----Original Message-----

From: Foley, Mary Jo

Sent: Thu 8/24//2006 5:22 PM

To: Bryant, Stephen

Cc:

Subject: RE: Friday Fight: Second Place is the First Loser

Hey Steve:

You ask a good question: Is there any upside to Microsoft's ad deal with Facebook, or did the Redmondians just get totally schooled by Google with its newly-minted MySpace deal?

There's no doubt in my mind that Microsoft wanted an ad deal with MySpace, but Google was the no-brainer choice (to the tune of $900 million). Facebook was definitely a consolation prize.

Even though Microsoft's adCenter platform is untried and unproven, Microsoft probably still believed it had at least some kind of shot at winning MySpace's ad business -- given that it already had cemented deals to be one of MySpace's main infrastructure providers.

However, I'm less intrigued by the Facebook vs. MySpace face-off than I am with the Windows Live Spaces vs. MySpace battle that is likely to heat up in the coming months.

Microsoft execs have said repeatedly that Live Spaces is not designed to go head-to-head with MySpace. But if you look at how most users are using Live Spaces, however, that argument seems specious.

Live Spaces is both a blogging platform and social-networking service. Microsoft usually plays up the blogging side of the product more than the MySpace-like capabilities. Except when the Softies are talking numbers, that is….

Microsoft currently claims there are 72 million Windows Live Spaces users on the Web. (Comparatively, there were an estimated 100 million MySpace users and nine million Facebook users.)

By the way, that 72 million figure set off a debate of epic proportions earlier this week, with former Softie Robert Scoble questioning Microsoft's oft-repeated boast that it is the largest blogging platform on the Web.

But back to Spaces vs. MySpace. I think what's going to be interesting to watch is the performance of the MSN adCenter platform vs. the Google AdSense platforms, as these social-networking sites grow more complex and more widespread.

Microsoft's adCenter is brand new. That could be a plus for customers who can gett Microsoft to jump through hoops for them, in order to prove just how customer-focused (and business-hungry) they are. But, as anyone running any kind of Microsoft 1.0 release knows all too well, it also can be a big minus. The first few months/years with adCenter are likely to be fairly rocky ones.

But, hey, the first few weeks with the new Windows Live Spaces platform were none too smooth, either. When Microsoft rolled out earlier this month the first release of Spaces that was no longer under the "MSN" brand, but now a "Windows Live" property, chaos ensued. Performance was abysmal. Users couldn't access their traffic stats. How did this happen to a product that went through months of beta testing? The Live Spaces 1.0 rollout doesn't bode well for other Windows Live services rollouts, I'd say.

So, while it's all well and good to talk about first place and second place, when it comes to ad deals, the more interesting area for us Microsoft and Google Watchers to keep tabs on will be the performance of the base ad platforms and social-networking services themselves.

What do you think on this one, readers? Can and will Windows Live Spaces match up against MySpace? Will Microsoft adCenter ever be able to one-up Google AdSense? Talk back below or write me at mswatch@ziffdavis.com and
let me know what you think.