With the way that Microsoft and Goggle are acting, you would think that Facebook is the most popular girl at school. If the Internet was school, that is.

The fact is that Microsoft and Goggle want Facebook for one thing; your information. Without your information, Facebook wouldn’t look nearly as tempting as it does now. Furthermore, there would be no reason for Microsoft to potentially offer site founder, Mark Zuckerberg up to $500 Million for a mere 5% stake. The offer is out there, however, and Zuckerberg has to decide for himself if how he should respond to Microsoft’s overtures.

For some time now, Facebook has been looking for ways to monetize its social networking operations. With over 20 Million unique visitors a month, Facebook believes it’s best bet will be to create a platform that allows advertisers to target users based on the interests and affiliations they input into their Facebook profiles. Unfortunately, doing this will require a substantial capital infusion brought about by either a) a partnership with an outside entity or b) by finding the world’s most socially-deprived venture capitalist who wants to make 20 Million friends in 3.4 seconds.

In my opinion, Facebook should do neither. True, Facebook has succeeded in acquiring the attention of users through “institutional” networks (Corporations, Schools and Colleges). True, Facebook has also succeeded in creating an advertising model that users have accepted and, in some cases, rejoiced over. The one x-factor is what happens once either Google or Microsoft attempt to change that model?

Here we arrive back at the original point about your information. The main way in which Facebook has been able to distinguish itself is by starting off with a secure membership model that required users to be a part of an existing network, educational or otherwise. It has slowly pealed back that security in order to expand its user numbers and in doing so has aligned itself with the model that led users to fall out of favor with MySpace and Friendster before that.

In considering each offer, Zuckerberg should indeed be focused on how he can create the member-information based model. However, he should also remember that his customers, particularly the Generation Y or “Millennials” users that make up the base of Facebook’s profiles are highly attuned to mass marketing overtures.

In this case, its a choice between being too popular or being just popular enough. Either way, in the balance lies where we will spend our free time online.

Technorati Tags: advertizing, facebook, Microsoft, Millenials, Working Capital