It’s no secret that Facebook is one of the most visited sites on the Internet. In fact, according to the Alexa rankings, which measure website traffic, facebook.com is ranked second after only Google.com. With this much exposure, and the emanated revenue that comes from this kind of traffic, it has become important for the world’s largest and most successful social network to scout out and eliminate possible competitors, many times before those companies even consider themselves potential competitors.
Facebook is obviously not the only major corporation to take on this strategy, but the staggering amount of money they’ve spent over a relatively short amount of time makes it more noteworthy than, say, a major gasoline manufacturer that strategically merges with companies that focus on supplying the masses with green energy. Facebook is only ten years old, after all. In all Facebook has spent over $22 billion acquiring companies over eight years. Here are five major acquisitions they’ve made (in chronological order).
- Snaptu (March 20, 2011) – $70 million – Snaptu was an Israeli-based mobile application platform designed for development and use on mobile phones. Originally known as Mobilica, Snaptu developed mobile solutions for other major social networking sites such as LinkedIn and Twitter before their merger with Facebook. The company was absorbed into Facebook shortly after the acquisition.
- Instagram (April 9, 2012) – $1 billion – Instagram started in San Francisco in 2010, and launched in October of the same year. Just over a year later, Facebook was putting together a package that made the 13 employees that Instagram employed at the time $100 million, and the CEO Kevin Systrom around $400 million. This acquisition left Instagram’s future in Facebook’s hands, but left the photo-sharing site to operate as a stand-alone company. It was the first time that Facebook had decided to commit to grow a business they had acquired independently. The merger led to enhanced integration between Facebook and Instagram. With over 100 million active users, Instagram continues to be a popular interface in which to send and share photos.
- Face.com (June 18, 2012) – $100 million – First established in Tel Aviv in 2009, Face.com was designed as facial recognition software for photos on the Internet. Before the merger, they had made two products for Facebook, Photo Finder and Photo Tagger, that allowed users to more succinctly integrate their friends into their Facebook lives by giving them the ability to tag people. By acquiring Face.com, Facebook has absorbed the team behind these programs and allows them to build new, more dynamic facial recognition software to integrate into the Facebook offering.
- WhatsApp (February 9, 2014) – $19 billion – In what is the largest application acquisition in the history of the Internet, Facebook bought the communications company, WhatsApp for $19,000,000,000. WhatsApp is a cross-platform application that allows people to message the world over for $1 year. Users can send text, images, video, audio, and location to users over the Internet and has over 450 million active users throughout the world, and it will continue to be run as a stand-alone application. With this knowledge people still wonder why facebook would buy a messaging program when they have one integrated with their service? That is an excellent question, and many theories have come about, from the expansion into emerging markets to the photo-messaging capabilities, to protecting their market share. When asked about the acquisition, Facebook said, “to make the world more open and connected.” Whatever the reason was, it is, by far, the largest investment Facebook has ever made.
- Oculus VR (March 24, 2014) – $2 billion – The virtual reality technology company, Oculus VR, which is located in Irvine, California, producers of the prototype VR headset, Oculus Rift, was purchased by Facebook for $2 billion. As with the WhatsApp purchase, many technology and finance pundits have wondered why Facebook has begun investing in technologies in which their core service would seemingly have no correlation. After all, a head-mounted virtual reality interface isn’t a pragmatic way to view some kid douse her grandmother for the ALS ice-bucket challenge.
The reason for Facebook’s interest in acquiring these seemingly impractical companies is simply put: diversification. Facebook is wildly popular now, but if the fates of AOL Instant Messenger and MySpace are any indication, even the most popular Internet service today can fall out of favor quickly. By covering their bases, they are making a company that isn’t just delivering social media; it has become a player in innovative technologies going forward.
You may already use Facebook for your business, and if you don’t, you should. After all, a good majority of your potential customers are members. Beyond Facebook, you should consider putting together a comprehensive social media strategy for your company. The integration of social media will extend your reach and provide your organization with a forum where you can present information that can get people back to your company website and start your sales funnel.
Do you think that the utilization of social media is a game changer for small businesses? Leave your thoughts in the comments.
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