Facebook's Acquisition Appetite: Which Startups Are On The Menu?

Posted in: Sector and Company Insights, Google, Facebook, liverail, whatsapp, Benchmark, facebook acquisitions, Facebook for Work, geotracking, health apps, Internet.org, Microsoft, quickfire, Sequoia Capital, solar-powered drones, wavegroup sound, wearables, wellness apps

[vcrow][vccolumn width="1/1"][vccolumntext]

Facebook has acquired more than 40 companies since its formation. Facebook acquired Friendster its patents, AboutFace.com for the domain facebook.com, FriendFeed for the Like Button, and HotPotato for its talent. There are clearly more acquisitions to come, according to Facebook CFO Dave Wehner:

We believe that we have very substantial growth opportunities in front of us, and we plan to invest aggressively to capitalize on those opportunities, as such, we plan on 2015 being a significant investment year.

[/vccolumntext][vcemptyspace height="24px"][vccolumntext]

Historically, Facebook acquisitions were often to buy functionality or the competition, like Instagram. Acquisitions like (Audio), QuickFire (Video uploads), and LiveRail (See Prague the Next Silicon Valley) brought critical capabilities in-house. These kinds of acquisitions helped Facebook beat Google in mobile video ads; they could generate more complete user profiles to improve targeted ads.

[/vccolumntext][vcemptyspace height="24px"][vcsingleimage image="7859" bordercolor="grey" imglinktarget="self" alignment="center" link="http://mashable.com/2014/05/30/facebook-acquisitions/"][vcemptyspace height="24px"][vccolumntext]To stay up-to-date follow our Facebook Acquisitions List.

However, Facebook’s latest acquisitions, including its largest purchase, WhatsApp, paint a different picture. They lay the groundwork to dominate the internet.

While most analysts have believed the WhatsApp purchase was to acquire users, it has far greater potential. For example, with WhatsApps’ popularity in emerging markets, the acquisition, combined with Facebook Messenger, could provide a strong backbone for a payments app. Facebook has already hired former PayPal president David Marcus to run the messaging services.

Facebook has staked out four other buckets for future growth:

  • Mobile Devices/Wearables
  • Facebook Health
  • Facebook for Work
  • Connect the World

Mobile Devices and Wearables

Apple proved that mobile devices with powerful applications are an attractive combination. All the players want into this game: Google, Facebook, Microsoft and the dozens of device makers.

Facebook let’s everyone’s smartphone do the device work. Sensors already built into most modern smart phones mimic the capabilities of stand-alone wearable devices like Fitbit, Jawbone Up and the Apple Watch.

Facebook’s acquisition of Helsinki-based mobile app maker ProtoGeo adds Moves to its capability. Moves can track users as they walk, run, bike or ride public transportation. It works in the background and quietly gathers loads of data from the phone’s accelerometer.

Moves works nicely with Facebook’s recently added feature, Nearby Friends, which notifies users when they’re near other friends. Next on the menu could be a wearable acquisition or build on the geo-tracking capability it has gained with Move.

Follow the Geotracking List and Wearables Market List

[/vccolumntext][vcemptyspace height="24px"][vcsingleimage image="7860" bordercolor="grey" imglinktarget="self" alignment="center" link="https://datafox.co/lists/robinlterrell/wearables/"][vccolumntext]

FACEBOOK HEALTH

Wearables integrated into the growth strategy supports another interest for Facebook... Healthcare. Facebook insiders have indicated the company has set up a research and development unit to test new health apps for support communities and preventative care apps that help people improve their lifestyles. Last year, a study at Boston Children’s Hospital used Facebook’s geodata to analyze obesity in various communities.

The unexpected success of Facebook's "organ-donor status initiative," may have buoyed the trust relationship with users. A 2013 study in the American Journal of Transplantation showed the day Facebook allowed members to specify their organ donor-status on profile pages, 13,054 people registered to be organ donors online in the United States. The daily average had been 616 registrations.

Medical device provider A&D found that more than half (56%) of respondents want to monitor their health with connected health devices that automatically send information to their doctors. Could Facebook be the next success story in this market segment?

Explore who’s in this space by following our Mobile Health and Wellness List, which includes a potential Facebook target:

[/vccolumntext][vcemptyspace height="24px"][vcsingleimage image="7862" bordercolor="grey" imglinktarget="self" alignment="center"][vccolumntext]

Facebook Powers Workers

Millions of people already use Facebook at the office. From comScore, last December 36% of Facebook users in the US visited from a work computer.

Facebook for Work has the staple features such as newsfeeds, groups, and chat. Users can connect with professional contacts, share, and work together. Users will be able to keep their personal profiles completely separate from their work profiles.

Others have tried to tackle this market - Microsoft (Yammer), Salesforce (Chatter), SAP (Jam), IBM (Connections), Google (Wave – discontinued), and Cisco (Webex Social – discontinued) with limited success.

Facebook for Work is free, which could boost shadow IT adoption, whether companies officially support it or not.

Look for Facebook to find collaboration apps to make Facebook for Work more compelling.

Facebook Connects The World

As the largest country on the planet, Facebooklandia wants to connect people in developing countries with the power of the internet.

[/vccolumntext][vcemptyspace height="24px"][vcsingleimage image="7863" bordercolor="grey" imglinktarget="self" alignment="center" link="http://www.huffingtonpost.com/2015/01/28/facebook-biggest-countryn6565428.html"][vccolumntext]

Facebook has been on a $1 billion mission to bring the Internet to the 5 billion people on Earth who cannot access it. Last year, Facebook partnered with 6 phone companies such as Samsung and Nokia to launch Internet.org, which will build and bring cheap but high-quality smartphones to increase global Internet access.

A recent acquisition, Wit.ai, a Y Combinator speech recognition startup, offers a different piece to the strategy. Facebook stated, “Wit.ai has built an incredible yet simple natural language processing API that has helped developers turn speech and text into actionable data.”

Technology that understands natural language can play a big part in connecting the world. Wall Street Journal writer Reed Albergotti speculates that Facebook might also look at ways for the technology to access data on users from their speech messages.

Next, remote connectivity. Facebook unveiled plans to beam broadband connections through satellites, lasers and unmanned drones. The Ascenta acquisition, a maker of solar-powered drones, was executed after Google beat out Facebook in the purchase of New Mexico’s Titan Aerospace. Facebook’s Connectivity Lab is a direct challenge to Google's Project Loon, which will launch high-altitude balloons over New Zealand.

Remote connectivity is yet another benefit of the WhatsApp purchase; a basic version of the app could function on the drone Internet signal, potentially billions of users connected with Facebook at very little cost.

Who Will Be Facebook's Next Acquisition?

Given the many directions in Facebook’s acquisition strategy, future targets are a tough call. The biggest VC winners in the Facebook feeding frenzy were Sequoia Capital and Benchmark. Their investment portfolios may reveal what’s next on the Facebook menu:

[/vccolumntext][vcemptyspace height="24px"][vcsingleimage image="7864" bordercolor="grey" imglinktarget="self" alignment="center"][vcsingleimage image="7865" bordercolor="grey" imglinktarget="self" alignment="none" title="Snapshot of Sequoia Capital's Investment Portfolio" link="https://datafox.co/lists/robinlterrell/facebook-acquisitions/"][vccolumntext]Want to dive deeper into Facebook's potential acquisitions and see all of Sequoia Capital's portfolio, signup for a 14-day trial here.[/vccolumntext][/vccolumn][/vcrow]