Facebook’s Key to Success

imageFacebook has adapted over the years through changing their platform and adding enticing features in order to keep users engaged. However, its interesting that not all or even most of these features were created by the internal team. Facebook’s M&A has fueled a substantial portion of their innovations, which I will outline in this post. This post will showcase Facebook’s foresight and a trend in technology known as an “acquihire”. I will highlight significant acquisitions and briefly describe smaller ones so you get a sense of all the features that are a result of M&A.


Let’s start where it all started with Facebooks first acquisition in 2007 of Parakey for an undisclosed amount. What does Parakey do? It was a web operating system that makes image, video and text uploading easier/faster. This isn’t a very exciting acquisition by Facebook, but it was the first example of Facebook buying the technology instead of trying to figure it out.

Up next we have Facebook’s 2009 acquisition of FriendFeed in 2009 for $50 million. This acquisition has proved pivotal for Facebook because of how instrumental it has become to their business. FriendFeed of course became NewsFeed, which is the homepage where everyone now lands on Facebook. While this sounds obvious now, it was the result of an acquisition. The integration of which turned out to be very controversial for Facebook even sparking boycotts and protests for Facebook to revert back to the old homepage. I won’t go over all of the reasons why Newsfeed is so important, but one of the most significant reasons is the number of advertisements you are able to view on one static page. Again, this sounds obvious now – but at the time it was a revolutionary idea and adoption. Even now you see very few companies able to capitalize on advertising so well because Facebook is able to deliver you completely new engaging content with every scroll.

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Going to skip over a few boring acquisitions, but they include Octazen, which is basically a friend finder and contact importer. Divvysho, which helps the platform identify photos from the same event for tagging purposes. Friendster for $40 million (for their patents), so Facebook could add a bunch of basic features without getting sued.

Zynga partnership in 2010. Now this wasn’t M&A, but it was a 5-year contract with the company to create addicting games for users. Think back to when you were in high school or college and were playing Mafia Wars, Farmville, Words with Friends and a few others. This fad for Facebook came and went, but was a necessary step for the company because it showed how engaging Facebook could be even if people weren’t using it for its intended purpose. These games also increased user sign ups in a short period because of the hype created around the games.

Again going to skip a few boring ones including Sharegrove, Nextstop, Hot Potato, Snaptu, Sofa and Drop.io. Chai Labs was kind of a cool acquisition in 2010 because it gave birth to Facebook Pages and Facebook Places, but those have faded in obscurity. Rel8tion was one of their great forward looking acquisitions in January 2011 because it was a mobile advertising platform to assist with monetizing user information.

I doubt anyone has ever heard of the application Beluga, but it was acquired by Facebook in 2011 and is the predecessor to Facebook Messenger. Beluga was basically a watered down version of what Facebook Messenger has become, but Facebook poached the team and IP to create Facebook Messenger. This is a significant acquisition because this is the only acquisition that has resulted in the creation of an entirely separate application. This was such a forward thinking acquisition that now a lot of people only have Facebook Messenger installed on their phones and don’t have Facebook itself. A few months later Facebook announced a partnership with Skype, so that there Messenger application could be well-rounded. Facebook had the foresight  to acknowledge that videochatting is not a moneymaker, so instead of creating it in-house – they just partnered with the leader in the industry.

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Back to a few boring acquisitions – Pushpop Press, Friend.ly, MailRank, and Gowalla…

Instagram in 2012. Facebook bought Instagram for $1 billion and people were confused. Many people didn’t fully understand what Instagram brought to Facebook because they thought it was just another photo sharing application. However, the psychology behind Instagram users proved different enough that it garnered a cult following. Facebook snatching up Instagram for $1 billion is now a steal. This is a significant acquisition because it’s one of the few that people actually know happened. It is also significant because Facebook noticed the mobile trend early in that people wanted to upload photos immediately rather then uploading in bulk on a desktop.

A few other miscellaneous acquisitions happened such as Tagtile, Glancee, Lightbox, Karma, Spool, Bolt and Pieceable were all pretty boring. Face.com was a pretty cool one because it allowed Facebook to start recognizing faces and it would automatically tag people.

Whatsapp. Here is another one of the marquee acquisitions by Facebook. I still don’t personally see where all the value will come from other then the international user-base, but this wouldn’t be an acquisition summary if I didn’t include Whatsapp for $16 billion. I’m interested to see how Facebook utilizes this because it has not fully been realized in the market yet.

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Oculus. Very cool acquisition and it’s awesome that we got a preview of what this will mean for Facebook at a recent conference. I’m going to write a whole separate post about this because I think it’s a part of Facebooks play to really bring the world together in the same room. But this $2 Billion acquisition will be the future of Facebook and social networking.

Before I conclude I also wanted to note that Facebook tried to buy Snapchat for $3 billion in late 2013, but it was rejected. At the time people thought Facebook was crazy for offering that much money and that Evan Spiegel was even crazier for turning it down, but now Snapchat is worth over $20 billion. This is just another example of Facebook catching onto a trend before it really takes off, even if they aren’t successful in their purchase.

The rest of the companies can be found on Crunchbase – check them all out.

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