Since they overtook mySpace a few years ago, Facebook has been the dominant force in the social network market. With a userbase that is now approaching 600 million people, Facebook has become the single most important content sharing platform on the web and one of the biggest revenue generators of any advertising company.

Conventional wisdom about any market leader is that they will be replaced.  A more innovative, aggressive and agile competitor will be able to give their customers more for less, and they will be replaced. It doesn’t matter whether you look at the 1900s or the 2000s, eventually, every market leader goes into a period of decline.

People have been asking for years what the Google killer is, and despite the best efforts of Cuil, Blekko, Clusty and others, Google is still there at the top of the pile, and grabbing more business each month.  Despite this, Microsoft Bing has been slowly chipping it’s way into the market, and thanks to the Yahoo tie up, Bing is now a credible competitor.

Microsoft have played the long game in search, and it is starting to pay off.  Could they do the same in social?

When you look at the software market, Microsoft managed to establish themselves well in every vertical from OS to gaming thanks to a philosophy of making things work better together.  For all the criticism of the company for their business practices and the occasional dodgy product, the fact is that without doing something that is largely better than the competition, they would not be so dominant.

Gaming too – XBox was a great console.  xBox 360 is better.  Both have been successful, and with Kinect, it may well take over from Wii as the biggest seller.

The thing about Microsoft products that is most exciting from a user perspective is that they fit together so well.  Whether you are sharing data across programs in Office, transferring music from xBox to Zune, or editing photos, the fact is that Microsoft helps.

Indirect Benefits

Interconnecteness is a big thing for Microsoft.  The more people are tied into their products, the harder it is for them to switch to an alternative provider.  By overlaying social media, and cloud storage onto their productivity suite, Microsoft are able to better retain their client base.  Social is all about the indirect benefits that it brings to the company, rather than the direct benefits of simply providing a bit of fun.

The chances are that you have a Live account already. There are around 360 million active accounts that people use to cover Xbox live, MSN, Zune, hotmail, Office Live and MSDN.

Microsoft are no stranger to Social Media – they were touted as a possible suitor for Facebook at one time, and have a pretty big advertising tie up with Facebook thanks to the two way Bing integration.  Microsoft also get people.  They might not be beloved within certain parts of the tech community, but that’s mostly because certain people have a long memory, and aren’t that keen on Microsoft’s closed source software.

However, ignoring this bogeyman reputation of Microsoft in the tech community, people do love them (grudgingly).  They buy Windows PC, invest in Office for their business, use Bing, read the news on MSN, and share thoughts on Messenger.

All of these services are tied together well – SkyDrive offers 25B of online storage, which is more than you would ever need for your photos.

The challenge for Microsoft would be to convince users that Live was a social network to rival Facebook.

Facebook are going to IPO soon, and it is at that point where they will suddenly experience a need to monetise their users more aggressively, because they will be answerable to their shareholders.  At that point, user experience will almost certainly suffer, and potentially push users into the waiting arms of Microsoft, who have alternative ways of building a revenue model around users.

Microsoft provide collaborative solutions for businesses, with a philosophy of keeping a tight rein on their customers to retain them.  I don’t doubt that they could do the same with consumers in a social network.

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