Facebook (FB) has grown to become the most popular social networking site in the world with nearly 900 million active users. The company started from modest beginnings in the Harvard dorm room of Mark Zuckerburg and has since grown exponentially to command a market capitalization of over $200 billion.
Strategic acquisitions have been key to Facebook's growth and success, and the company has acquired more than 50 companies or properties since it's formation in 2004. These takeovers have been aimed at increasing Facebook's functionality and features as well as gaining access to talented individuals and teams.
Facebook's initial acquisitions
Parakey – Facebook's first acquisition, this small web startup was purchased for an undisclosed sum. It was founded by Mozilla Firefox contributors to create a web-based operating system and improve media transfer between PCs and the internet.
FriendFeed – Acquired for $47.5 million ($15 million in cash and $32.5 million in stock), FriendFeed was a social media feed aggregator with many features that Facebook copied, including the Like button and the News Feed. In doing so, Facebook also acquired their team including former Google (GOOG) employees responsible for creating early versions of AdSense and Gmail.
Consolidation and improvements to its core offerings and website
FB.com – Previously, this domain name was owned by the American Farm Bureau Federation. Facebook purchased the domain name from them for a reported $8.5 million.
Octazen Solutions – A Malaysian tech company, Octazen Solutions offered contact importing and viral invite scripts to enable users to invite their contacts on other services like email providers or other social networks. Facebook bought this company and allowed users to easily find and add their friends from across the internet.
Divvyshot – This group-sharing photo site was integrated with Facebook's photos feature, allowing for more seamless sharing of photo content among users and especially with its mobile app.
Patents owned by Friendster – Facebook predecessor and competing social network Friendster owned many valuable patents related to the social networking space. Facebook paid $40 million to acquire a suite of patents. This was also a defensive strategy to avoid lawsuits for infringement of intellectual property.
Chai Labs – Facebook took over Chai Labs for $10 million. The purpose was mainly to acquire its computer engineering talent, including Gokul Rajaram, the "godfather" of Google AdSense, in order to ramp up Facebook's advertising revenue stream. Rajaram was later poached from Facebook by mobile payments company Square.
Hot Potato – For around $10 million, Hot Potato integrated the ability to check-in at locations and improved Facebook's status updates technology.
Focus on developing the Facebook app and mobile technology
SnapTu – This Israeli app developer was acquired to redesign and deploy Facebook's mobile app from the ground up, including versions used today. The deal was valued at between $40-70 million.
rel8tion – Acquired after only nine months of operation, this small startup gave Facebook access to hyper-local mobile advertising to bolster revenues from its mobile app and enhance its user experience based on location.
Beluga – This is the predecessor for Facebook's mobile messaging app, featuring group messaging. In addition, Facebook gained more highly skilled and experienced ex-Google employees.
Gaining the world's biggest repository of online photos
Instagram – Perhaps Facebook's most famous purchase, Instagram was acquired for $1 billion, Facebook's largest acquisition at the time. Instagram's competing photo sharing social network still operates under its own brand and its own stand alone app, although many features including photo sharing have been integrated with Facebook itself. The same year, Facebook also acquired the smaller photo sharing service Lightbox.com which specialized in mobile, HTML5 and Android photo sharing.
Face.com – This Israeli company allowed integration of facial recognition for Facebook's photos. Uploaded photos could now be tagged using automatically generated suggestions for who that person might be. The deal was valued at $100 million.
Closing the gaps in its advertising revenue model
Onavo – Facebook acquired Onavo, another Israeli tech company, for its suite of mobile analytics. The company has both a consumer-facing product and an enterprise data analysis product. The deal was valued at $150-200 million and allowed Facebook to also acquire their office space giving them a foothold in tech-savvy Tel Aviv.
Big, bold acquisitions into uncharted territory
WhatsApp – Facebook's largest acquisition to date, this deal was valued at $19 billion. WhatsApp was, and still is, the most popular free mobile messaging app worldwide, reaching half a billion people each month. Although some criticized Facebook for overpaying for a free service, it gained access to a large new user base, especially overseas.
Oculus VR – In a $2 billion deal, Facebook acquired Oculus, a virtual reality tech company, and its flagship product Oculus Rift. According to Mark Zuckerburg the goal is to first develop immersive VR gaming and then expand to include all sorts of virtual experiences, including social networking.
Ascenta – This UK-based company designs and builds high-altitude unmanned aerial vehicles (UAVs) and was bought for $20 million. The goal is to bring internet to developing countries by beaming service from UAVs flying high in the sky.
The Bottom Line
Facebook has grown to become an internet giant. It has done so by growing organically, but also through a number of strategic acquisitions. The above list is just a portion of the many takeovers the company has undertaken to date, but it offers some insight into Facebook's strategic plan.
Facebook acquires companies both for their technologies and their teams. It also has changed its focus over time, first consolidating its core product, then developing its mobile offerings, and, most recently, expanding its portfolio to include companies outside of the traditional social networking space with the potential for future integration in ways yet to be seen.