Following the Money

It’s becoming increasingly hard to keep abreast of the rapidly changing world of online and search. In the same day that Microsoft sold a good chunk of recently purchased AOL patents to Facebook, Google announced that it spent $5 million on lobbying in the first quarter of this year, and apparently it’s almost impossible to get funded as an online start up in China nowadays. The common thread weaving through these (and many other) stories: law and regulation.

Facebook is accumulating a war chest of patents to use in its ongoing battle with Yahoo and most likely soon-to-be waged battle with Google. On a side note, it was terribly nice of the Microsofties to sell them to the Facebookers when I’m sure, if they had been asked, the Googlies would have been happy to check their pockets behind the sofa to find the half billion Facebook shelled out. Somebody is eventually going to buy Yahoo whether it’s Microsoft, Facebook or someone else. The status and cost of the ongoing legal mess is going to be a contributing factor.

Google is under fire in the U.S. and overseas for its monopolistic business practices and privacy, and spent $5 million to defend itself in Q1 2012. By comparison, Google’s largest rivals, including Microsoft, Apple, Yahoo and Facebook spent $3.6 million in the first quarter on legal fees.  Conservatively speaking, Google spent 10,000 hours of serious lobbying or about $7,000 for every member of the house and senate…

China used to be the darling of the online universe. If it was cool, it was happening in China. The law of gravity did not apply where the smart money was made. The VC playbook: build the business in China and exit through an IPO in the U.S. However, the fiscal mayhem that has become endemic in China of late has meant that the opportunity to cash out through IPO or acquisition has pretty much vaporized.

With the financial exits mostly barred, the smart money has dropped off by 85% in comparison to the same period last year. There is still money to be had, but it’s much more cautious and with a backdrop of financial scandal, lawsuits and an imposing legislative tightening of the screws. Things ain’t what they used to be.

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