Facebook’s M&A Strategy: Committed To The Core

By on April 29, 2014

facebookMobile Apps And Analytics Expand On Social Core

Facebook $19 billion acquisition of WhatsApp raised a few eyebrows, but beyond the price tag there was nothing surprising about it. Facebook has had a sustained, consistent string of acquisition activity, going back to 2010.

Averaging nine deals per year, the company has sought to grow its talent pool and product spread. And unlike Google (which invests in everything from robotics to green tech), Facebook has always focused on its core: expanding and bettering its social reach.

What should be of interest to potential acquirees is the transparency of its strategy. International markets, new social pools, and massive audiences and untapped revenue potential rule the day. And as WhatsApp showed us, if the audience is big enough, money is no object.

And as WhatsApp showed us, if the audience is big enough money is no object.

And now, with $2 billion (Oculus VR) and $19 billion deals already under its belt, Facebook may be on its way to its biggest year yet. Exitround has done an analysis of Facebook’s 2013 acquisitions, based on publicly available data and SEC Filings, and filed this report.

Strategy

All of Facebook’s 2013 was aimed at expanding core competencies and gaining new consumers, and generally fell into three categories: Social and gaming, mobile-social analytics, and mobile as a platform.

The WhatsApp acquisition is a useful illustration. The messaging company is closing in on 500 million active users—more than 350 million accessing daily—and has grown to that staggering number faster than any social app in history, including Facebook itself. That kind of organic, rapid growth, and its access to emerging markets like Russia, Mexico and Brazil, mean a constant stream of new users and access to untapped revenue streams.

December’s SportStream acquisition is also a useful study. While Facebook’s recent purchases allow connectivity and daily interaction with customers, SportStream is something new: real-time. The sporting content is secondary. The more and faster the data, the better Facebook can predict user activity and drive ad revenue.

Expenditures

While only three of the acquisition prices for Facebook’s 2013 deals have been reported, each was near $100 million. Atlas (of the eponymous advertising suite) is reported in the $50 million to $100 million range, Parse came in at $90 million, and Onavo at $150 million. By contrast, the vast majority of its past acquisitions have come in at less than $50 million or undisclosed. Facebook is more willing to spend its coffers.

The $1 billion Instagram purchase was its biggest purchase to date. Then 2014 brought $2 billion for Oculus and $19 billion for WhatsApp. 2014 may be the year that that steady climb in prices takes a big jump higher.

Products and Acquihires

Most of Facebook’s 2013 acquisitions were for talent as much as product. Five of the nine purchases were true acquihires, with three other deals done on undisclosed terms. The only company that was sold and remained intact was the Bay Area’s Parse, the maker of a mobile backend as a service (mBaaS) platform. With emerging markets accessing the Web almost exclusively on mobile devices, Parse could be Facebook’s answer to Android and iOS. By letting the Parse team innovate and develop, Facebook could soon have a competing platform. And it’s likely that new tech is next. To wit:

“Mobile is the platform of today, and now we’re starting to also get ready for the platforms of tomorrow. To me, by far the most-exciting future platform is around vision or modifying what you see to create augmented and immersive experiences,” Zuckerberg said. “Today’s acquisition [Oculus] is a long-term bet on the future of computing.”

So the strategy is: acquisitions to give better access into how and where users digest social information and connect, both now and in the future.

The average company age of Facebook’s 2013 acquisitions is 4 years old.

Staff Size

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Geography

Facebook’s strategy is to focus on domestic technology and talent. Seven of its nine 2013 acquisitions were domestic, with Israel’s Onovo (mobile analytics) and England’s Monoidics (auto-verification software) as the exceptions. And even Monoidics has an office in Seattle. While emerging markets are the target, Facebook is still most comfortable buying domestic companies to help break in. Interestingly, the number of companies in the San Francisco Bay Area vs. elsewhere in the U.S. is evenly split. Buying in its Menlo Park backyard seems to be less of a concern, possibly because Bay Area companies have higher visibility and may sell at a premium.

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One thought on “Facebook’s M&A Strategy: Committed To The Core

  1. […] VR 和WhatsApp被纳入麾下,今年可能会成为Facebook史上并购最多的一年。Exitround根据现有公开数据和SEC的文件分析了Facebook […]

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