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How much are networks worth?

On Monday September 15th, 2014, tech giant Microsoft purchased the game Minecraft for $2.5 billion.  Minecraft is an extremely popular game that surpassed 100 million registered users several months ago, and it can be played on multiple platforms, mainly the PC, Xbox 360, Android and iPhone. Several sources revealed that the main reason for this acquisition was to bring the game, which is becoming extremely popular on mobile devices, to the Windows Phone.  The Windows Phone is struggling in popularity because it has fallen very far behind in the minds of mobile users due to its lack of applications compared to the Android and iPhone markets.  This acquisition shows how desperate Microsoft has become regarding the mobile market.  They were unable to convince developer Mojang to create an app for their devices and had to resort to buying the game outright to get Minecraft on their devices.

There are over 100 million people that are connected through Minecraft.  There are hundreds of blogs and communities online regarding the game and people automatically have a connection to each other because of Minecraft.  This entire Minecraft can be modeled as a network, possibly with stronger ties and edges to people close by or family that play the game, and weaker ties to people they interact with on the online communities.  Microsoft is attempting to use these connections that people have through the game to lure them to use their Windows Phone.  This begs the question, how valuable are these networks to companies?  This question can only be answered with time by looking at how popular the Windows Phone becomes when they develop a Minecraft app, and how Microsoft’s market share increases in the mobile and gaming markets.  They also must look at how balanced and strong these networks are, because if they are weak and they try to lure people with the game and they are unwilling to switch, they will substitute a similar game and it would be a wasted investment.

This is not the first time in recent memory that a company has purchased something for their large network.  Earlier this year Facebook purchased the mobile messaging app WhatsApp for $19 billion.  However, WhatsApp has over 600 million active users that probably has much stronger connections and edges in the network because it is a messaging app and requires a more personal connection to the people you interact with.  It’s unclear how this investment will pay off for Microsoft, but it seems to be more and more popular now for companies to purchase entire networks with the hope that they can use them to increase profits and market shares.



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September 2014