Facebook Inc. (FB), the social networking website started by Mark Zuckerberg in 2004, has evolved into a huge company. After becoming profitable in 2010, it had its IPO in 2012. The company has a market cap of over $458 billion as of April 2018. Since its founding, Facebook has purchased many different companies, the most famous of which were Instagram in 2012 and WhatsApp in 2014. Let’s take a look at the top companies that Facebook has acquired over the years.
As a young technology company, Facebook needed to stay innovative and continue developing products and services that its clientele didn’t know they needed. Most people don’t remember a Facebook without the “like” button or the newsfeed, but before borrowing these technologies from FriendFeed, Facebook was just a place you went to individually check out each of your friends' profiles. This acquisition also resulted in new employees for Facebook, including some ex- Alphabet Inc. (GOOG) staff members.
Facebook also acquired both Karma and face.com to improve its social networking service. Karma was a gift-giving service that has since been used to develop Facebook Gifts, and face.com had technology that Facebook now uses to recognize faces and find your friends whenever you upload new pictures.
Facebook wouldn’t be what it is today without the software engineers who challenge themselves to create new technologies. Starting in 2007, Facebook began to snap up companies that employed talent that they wanted. FriendFeed, as mentioned above, is one example of this strategy.
Nextstop, Drop.io, and Hot Potato are some of the better known companies that Facebook has purchased for their employees and quickly shut down. Nextstop was a site that used social recommendations to increase users’ travel experiences, Drop.io was a file exchange service similar to DropBox, and Hot Potato was a site that allowed users could “check-in” to a place or event.
Social networking sites these days absolutely must have mobile platforms. When Facebook was first founded, however, most people didn’t have mobile phones, and no one had an iPhone. Perhaps because of its beginnings, people didn’t consider Facebook to be a mobile company. Now people use the Facebook app but, until recently, the company was still primarily known for its website.
That all changed in 2012 when Facebook paid an astounding $1 billion to acquire Instagram. The Instagram acquisition let investors know that Facebook understood where the market was headed and was prepared to pay money to stay relevant to its clientele.
In 2014, Facebook bought WhatsApp for $19 billion. WhatsApp is a social messaging service that enables users from all over the world to send free messages to one another over WiFi or data connection. These two purchases might not seem profitable on the surface but they are immensely valuable to Facebook in terms of personal data and as proof that the company is staying on the edge of technology.
Now that Facebook has entered its mature phase, management needs to find new ways to make money. Facebook’s strategy to grow earnings is through diversification. Since 2014, Facebook has made acquisitions that are far outside the realm of what you’d expect a social networking company to buy. For example, in 2014 Facebook bought Oculus VR, Ascenta, and ProtoGeo Oy. Oculus VR, perhaps the most interesting of the acquisitions, is a company that produces virtual reality headsets. Ascenta is a drone-maker that Facebook plans to use to bring the internet to remote places of the world. And finally, ProtoGeo Oy will be used to help Facebook enter the fitness and health monitoring market.
The Bottom Line
Facebook’s story is famous: Mark Zuckerberg started a website in his dorm room that soon became the popular place for Harvard students to connect with one another. From humble beginnings, the site is now completely engrained in our society and our everyday lives. These four categories of acquisitions and the companies presented show how big, and how rich, Facebook has become.