Microsoft laid the groundwork for an expansion of its $200 million facility in West Des Moines last week when it gained approval for tax credits from the Iowa Economic Development Board, according to the Des Moines Register. The state board said Microsoft could invest another $200 million in construction and server hardware, and create at least 10 additional jobs.

The West Des Moines project was announced in August 2008, but Microsoft never outlined a firm construction timetable. After the economic crisis took hold in the fall of 2008, Microsoft put the project on hold as it said it would reduce its investment in its data center expansion, citing the economic slowdown and the need to cut expenses.

In June 2010 the project was back on, and Microsoft began construction. The project appears to be nearing completion, but Microsoft has not made any announcements about its progress or production timetable in West Des Moines.

Microsoft’s effort to add data center capacity isn’t limited to the U.S. Last month Irish media reported  that Microsoft “is planning a multi-million Euro investment in an expansion of its $500 million data center in Dublin.” The paper said plans call for building a 120,000 square foot single-story data center alongside the existing 303,000 square foot facility.

• Force 10 demonstrates at Interop. Force 10 Networks partnered with AFORE Solutions and Sun Microsystems at INTEROP in New York last week to demonstrate data center virutalization products and cloud computing initiatives focused on driving greater network agility. The 3 vendors demonstrated virtualized resource allocation for cloud-oriented applications as well as the AFORE ASE3300 Virutalization Extension Platform.  The ASE3300 and Force 10 switch and router solutions combine to enable a multi-site, virtual data center enabling migration to cloud computing environments.
• Avocent upgrades data center management software. Announced at Interop last week, Avocent is upgrading its MergePoint Infrastructure Explorer to include several new management capabilities.  The company said these enhancements will provide a unique view into capacity planning, bringing additional return on investment and total cost of ownership benefits.  Avocent CTO Ben Grimes said that the software will allow “customers to know where their assets are, as well as plan for different ‘what if’ scenarios, and manage their data centers to reduce risk -  all while bringing improved ROI and total cost of ownership benefits to customers.”  New features include rack timeline and an enhanced change management and capacity search capabilities.

• Deutsche Telekom Buys Strato: Deutsche Telekom has acquired German web hosting provider Strato from Freenet, the companies said on Friday. Deutsche Telekom reportedly paid $409 million for Strato, which hosts 4 million domains, “This step boosts our position on the highly interesting market for hosting solutions,” said Niek Jan van Damme, Member of the Board of Management of Deutsche Telekom for fixed-network and mobile business in Germany. “Strato complements our activities in the hosting area perfectly and will make a positive contribution to net profit and free cash flow from the very first day of consolidation,” said van Damme.
• Social Networks: Facebook, Twitter, MySpace. Several news stories shed light on popular Web 2.0 sites last week.  Bloomberg estimates that common stock valuation for Facebook jumped 42% in the past four months to $9.5 billion.  The valuation comes after increased trading activity on stock service sites that allow current and former employees to sell shares of stock. Twitter COO Dick Costolo spoke at a conference last week and said that Twitter is getting more than $4 million a year in revenue from companies that use Twitter data.  Costolo also said that “you will see an advertising strategy from us in the very near future.” Cnet News reports that MySpace has aquired social-networking music site Imeem. Sources with knowledge of the deal say it is worth $8 million.
• Meanwhile, original web power-house company AOL has cut local headcount in northern Virginia by 2,400.

Fox Interactive Media (FIM) says its new mega-database will support monetization efforts for its network of social media sites, which includes MySpace, Photobucket, the IGN network of gaming sites and the movie review hub Rotten Tomatoes. The data warehouse was built using a Sun Fire x4500 storage server (known in storage circles as the “Thumper”) and specialized software from Greenplum for processing petabytes of data.

FIM said the new system will provide it with “complex, real-time analysis in support of FIM’s advanced targeted advertising systems. “ That’s an important priority for MySpace, which is one of the Internet’s largest sites (with more than 75 million unique users in July), but has proven difficult to monetize. Even Google, the acknowledged master of targeted advertising, has struggled to effectively match ads and content on MySpace. In January Google said its “social networking inventory is not monetizing as well as expected.” Google has a $900 million deal with Fox to serve ads in MySpace.

User-generated content can be tricky for advertisers, who yearn to reach the youthful core demographic for social media sites but remain wary of “upload risk” and having their brand appear next to objectionable content. As a result, ad deals for MySpace and other social networking sites have typically been sold at lower CPMs (cost per thousand impressions) than other web sites. Better targeting and performance would help raise CPMs across the millions of page views served by MySpace.

Fox believes improved data analysis can help it find the right combination of content, ads and advertisers. Arnie Gullov-Singh, EVP of Product, Technology and Operations for FIM, said Sun and Greenplum “are at the cutting edge of data collection and analysis” and can help Fox “put our data to work in new ways that will improve both the user and advertiser experience on our network of sites.”

Fox says FIM sites have nearly 190 million active users generating new content every day, creating “one of the world’s most demanding analytical workloads,” according to Bill Cook, the CEO of Greenplum. Cook said the Fox data warehouse provides “a perfect example of how companies can differentiate themselves, and change the game by intelligently leveraging their own data.”

Greenplum specializes in database software that can analyze terabytes of information faster and more cost effectively than traditional data warehouse solutions.

Bebo’s downtime has increased significantly lately and has had by far the most downtime of the 14 social networks we monitored for this survey. More than 12 hours of downtime in less than two months is a lot, and it could possibly be caused by the new open application platform that Bebo launched in December, allowing third-party developers access to its platform, Facebook style. It could be putting more strain on Bebo’s systems than they anticipated.

LinkedIn, which is widely used among business professionals, has had 4 hours of downtime in 2008. How does your favorite network fare? Check out the results of Pingdom’s research.

And yes, infrastructure and bandwidth costs were a factor in the deal, according to Valleywag:

The popularity of Photobucket’s free service among users of the News Corporation social network took the service to 17m unique visitors per month, according to Comscore, making it the web’s most popular photo site, ahead of rivals such as Yahoo’s Flickr. But the venture’s rising bandwidth costs have eaten up most of its revenue growth, according to people close to the transaction.

Some analysts predicted this deal, and see other opportunities for News Corp. to take advantage of the “MySpace economy” of sites that have built huge audiences by offering widgets, layouts and page-pimping tools. Could this be the first move in a “block them and buy them” strategy for MySpace?

Rosenblatt, who now heads domain advertising specialist Demand Media, was among the speakers at Paid Content’s EconSM conference, and discussed the valuation of social media properties. The conventional wisdom (at least via 20/20 hindsight) has been that Rupert Murdoch got a sweet deal in buying MySpace for $580 million, since he was able to sign a $900 million ad deal with Google a few months later. But Rosenblatt suggests MySpace may not have been bargaining from a position of strength:

“MySpace was in an interesting stage of its development (when News Corp. acquired it),” he said. “It had a different type of capital structure and we weren’t able to make the type of investments (necessary) for the infrastructure. Ultimately if we hadn’t sold to News Corp., MySpace wouldn’t be around today.”

Back in January we discussed an account of the growth of the MySpace infrastructure. While the site has faced constant data center challenges due to its rapid growth, the biggest budget buster was probably bandwidth, since MySpace has always swapped large amounts of video and image files, especially with YouTube and Photobucket.

Last year MySpace shifted much of its LA equipment from the Garland Building (where it was felled by a power outage) to Equinix, where it was better able to use peering relationships to manage its bandwidth relationships with other networks and social media services.

Peering allows two providers exchanging large volumes of traffic to save money by connecting directly, rather than routing traffic through their paid Internet connections. Peering does not provide access to the entire Internet, only the other provider’s customers. Peering is often free as long as the amount of traffic exchanged is not out of balance, providing substantial cost savings for bandiwdth for high-traffic sites and networks. The best way to peer is to find a facility like Equinix’s data centers, point where multiple networks run through the same data facility and can easily exchange traffic.

One problem is that MySpace is pushing Microsoft’s Web technologies into territory that only Microsoft itself has begun to explore, Benedetto says. As of November, MySpace was exceeding the number of simultaneous connections supported by SQL Server, causing the software to crash. The specific circumstances that trigger one of these crashes occur only about once every three days, but it’s still frequent enough to be annoying, according to Benedetto.

Last summer we tracked the power outages at the Garland Building in Los Angeles that led to lengthy downtime for MySpace. Apparently in 2003 the site had problems when internal network traffic reached a volume that it was triggering anti-DDoS measures. As with the recent scalability study on eBay, there may well be information in the MySpace experience that can help others dealing with rapid audience growth.

The winner in the MySpace technology shift was Equinix, whose peering capabilities were a major factor in the social networking hub’s decision to lease space in the new Equinix data center in Los Angeles.

“MySpace’s (video streaming) announcement was all about the value of peering in an Equinix facility,” Peter Van Camp, CEO of Equinix, said in the company’s recent analyst briefing. “MySpace wants to manage their own content distribution, so they are moving to more of a peering model in the way they deliver their content. By being in our data centers and next to all these other networks, they can get their content onto these downstream networks, which is really what the CDNs did for them.”

Equinix operates interconnection facilities, which allow networks to make physical connections with one another to exchange traffic, known as peering.

“By offering a unique, network-rich environment with access to more than 200 networks, Equinix enables us to directly interconnect with the networks serving our end-users, providing a more streamlined path between content and users,” said Aber Whitcomb, CTO of MySpace, when announcing the move into Equinix’ LA site. “This model not only enhances our site performance, but also enables MySpace to peer with end-user networks and exchange traffic in a way that circumvents the traditional method where content providers were required to pay for transit to reach end-users.”

Peering allows two providers exchanging large volumes of traffic to save money by connecting directly, rather than routing traffic through their paid Internet connections. Peering does not provide access to the entire Internet, only the other provider’s customers. Peering is often free as long as the amount of traffic exchanged is not out of balance, providing substantial cost savings for bandwidth for high-traffic sites and networks.

An illustration: In recent months, MySpace and video hub YouTube have swapped an enormous amount of traffic, with each site sending between 6 and 7 million visitors a month to the other. Thus, a direct peering relationship between MySpace and Google (YouTube’s new owner, and an Equinix customer) could in theory be cheap or even free, and thus less expensive than reaching those Google users through transit or a CDN.

While direct peering offers advantages over CDNs in some situations, MySpace’s move is not likely a harbinger of doom for major CDNs like Akami, Limelight Networks or Cable & Wireless.

“All the major CDNs are customers in our major facilities as well, ” said Equinix CEO Van Camp. “They can get you to networks that aren’t across the (interconnection) room. That approach (using peering and CDNs) really gives the most coverage.”

“MySpace, which is expected to constitute 31% of revenues in the third quarter, has conveyed to us its intent to develop its own in-house streaming capabilities,” VitalStream Chairman and CEO Jack Waterman said in a press release. “Although MySpace continues to use certain VitalStream services, we expect to experience a significant reduction in revenue from MySpace commencing in the fourth quarter. Our third quarter gross margins were negatively impacted by MySpace-related business, consequently we expect gross margins to increase in the fourth quarter.”

The comment about lower margins indicates that VitalStream was providing its streaming services to MySpace at a significant discount to its standard pricing. I suppose if you have 75 million users, it’s a lot easier to negotiate a nice bulk discount. Partly because of those pricing issues, VitalStream expressed confidence that it can “replace and exceed our lower margin revenues from MySpace with growth from our core content delivery business and growth of our advertising solutions in both North America and Europe.”

VitalStream didn’t provide any additional information on MySpace’s plans for its streaming operation, but the phrasing of the statement indicates that it is an in-house project, rather than simply a switch to another streaming provider. It wasn’t immediately clear if the announcement had implications for Limelight Networks, the content distribution network which also counts MySpace among its customers. The Fox TV network, which like MySpace is owned by News Corp., recently began streaming free, ad-supported episodes of several fall series on MySpace, making the web portal the center of its national streaming strategy.

VitalStream has data centers in Los Angeles, Shburn, Va., Amsterdam and Irvine, Calif., connected by a worldwide network.

For those curious about the backend driving the MySpace site, there’s an explainer at How Stuff Works.