Strategic acquisitions have been important to the growth of Facebook (FB). Mark Zuckerberg founded the company in 2004, and since then it has acquired scores of companies, ranging from tiny two-person start-ups to well-established businesses such as WhatsApp.  For 2019, Facebook reported 2.5 billion monthly active users (MAU) and $70.69 billion in revenue.

Here we review the most important acquisitions that have brought added functionality, features as well as talent to Facebook.

Key Takeaways

  • Facebook acquired photo-sharing platform Instagram for $1 billion in 2012.
  • Its largest purchase to date is text messaging company WhatsApp, which ultimately cost $22 billion.
  • In 2014, Facebook purchased Oculus VR, a virtual reality company, for $2 billion.
  • In 2019, Facebook paid an estimated $500 million to $1 billion for CTRL-Labs, which is developing interfaces that would allow users to control a computer with their brains.

Initial Acquisitions (2007-2009) 

Parakey

Facebook made its first acquisition in 2007, buying this small startup for an undisclosed sum. The principle assets of Parakey were the programming talents of its founders, Blake Ross and Joe Hewitt, who joined Facebook to develop its platform and website. Ross and Hewitt were previously known for creating the Firefox web browser.

FriendFeed

In 2009, Facebook acquired FriendFeed for an undisclosed sum, though reports later said Facebook paid $15 million in cash and $32.5 million in stock.  FriendFeed was a social media feed aggregator with many features that Facebook copied, including a Like button and News Feed. As part of the deal, all 12 employees of FriendFeed joined Facebook, including its four founders, who played key roles in developing Google (GOOG, GOOGL) products such as Gmail and Google Maps.

Website and Core Offering Improvements (2010)

FB.com

In November 2010, Facebook acquired the FB.com domain to give its employees FB.com email addresses. The American Farm Bureau Federation, which still owns FB.org, was paid $8.5 million to relinquish the name.

Octazen Solutions

Facebook acquired this two-person Malaysian company for its programming talent. Octazen Solutions had developed a web service that offered contact importing and viral invite scripts to enable users to invite contacts from other services (such as email providers or other social networks).

Divvyshot

Divvyshot was a group-sharing photo site that allowed multiple users to edit shared photo albums. Like Parakey, FriendFeed and Octazen, this purchase was about acquiring talent. After the purchase, Divvyshot was shut down, and the company's three employees joined Facebook to develop its photo-sharing application.

Friendster Patents

Facebook acquired a portfolio of Friendster patents from MOL Global in a deal valued at about $40 million. The portfolio consisted of seven patents and 11 patent applications that covered concepts such as social media sharing and the social graph. The purchase was seen as largely defensive. Acquiring the intellectual property would reduce the risk of potential lawsuits, putting investors at ease ahead of a planned initial public offering (IPO).

Chai Labs

Facebook bought Chai Labs for $10 million. The purpose was mainly to acquire the talents of its founder Gokul Rajaram, a former AdSense executive at Google, in order to ramp up Facebook's advertising revenue. Dubbed the "Godfather of AdSense," Rajaram was later poached by mobile payments company Square.

Hot Potato

Another talent acquisition, Facebook paid $10 million for Hot Potato, a social activity and check-in service. Following the purchase, Hot Potato shut down and its employees went to work for Facebook.

App and Mobile Technology (2011)

Snaptu

Facebook acquired this Israeli app developer for an estimated $70 million. Its founders and team were charged with redesigning and deploying Facebook's mobile app. Within two years, the app had been downloaded onto 100 million phones.

Rel8tion

This small start-up was acquired by Facebook after only nine months of operation. Rel8tion had been working in stealth mode on a hyper-local mobile advertising service. Terms of the deal were not disclosed.

Beluga

This is the predecessor of Facebook's mobile messaging app, featuring group messaging. In addition, Facebook gained more highly skilled and experienced ex-Google employees.

Each North American user of Facebook is worth about $140 in revenue to the company over the course of a year.

Online Photo Sharing (2012)

Instagram

Perhaps Facebook's most famous purchase, Instagram was acquired for $1 billion. Facebook's acquisition of the photo and video-sharing social media platform was its largest purchase at the time.

Instagram's photo-sharing social network still operates under its own brand and has 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, 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 originally reported to be worth $100 million, though that figure was later revised to $55 million to $60 million. 

Improving Advertising Revenue Model (2013)

Atlas Advertiser Suite

Acquired from Microsoft (MSFT) for just under $100 million, the company helped close the gap in Facebook's advertising revenue model. 

Onavo

Facebook acquired Onavo, another Israeli tech company, for its suite of mobile analytics applications. The deal was valued at $100 million to $200 million and also came with office space, giving Facebook a foothold in tech-savvy Tel Aviv. It was later discovered that Onavo technology was used to gather data on how teens spent time on their mobile phones. 

Big Acquisitions in Uncharted Territory (2014-19)

WhatsApp

Facebook announced in February 2014 it would buy WhatsApp for $19 billion, a deal that eventually cost $22 billion by the time it closed in October that same year.  The acquisition remains Facebook's largest to date. The popular free mobile messaging app has more than 2 billion users. Although some criticized Facebook for overpaying for a free service, it gained access to a large new user base, especially overseas.

Oculus VR

In March 2014, Facebook bought virtual reality tech company Oculus VR for $2 billion. According to Mark Zuckerberg, the goal was to develop immersive VR gaming and then expand to include all sorts of virtual experiences, including social networking.

Ascenta

Facebook bought this British designer of solar-powered unmanned aerial vehicles for $20 million in March 2014 as part of efforts to beam the internet to developing countries.

CTRL-Labs

In September 2019, Facebook announced it was buying CTRL-Labs in a deal estimated to be worth $500 million to $1 billion. CTRL-Labs is building interfaces that would allow users to control a computer using their thoughts. The acquisition dovetails with Facebook's efforts to develop augmented reality applications that use a brain-computer interface.

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.