Facebook Inc. (FB), the social networking website started by Mark Zuckerberg in 2004, has evolved into a massive company. The company began as FaceMash before changing its name to TheFacebook and, eventually dropping "the" from its name, to Facebook. Zuckerberg and his Harvard University roommate Eduardo Saverin launched the service for their classmates, quickly expanding the service across other Ivy League institutions and then farther afield to other schools. The social network platform eventually became available to corporations and individual users age 13 and up with valid email addresses. After becoming profitable in 2010, Facebook had its IPO in 2012.
Since its founding, Facebook has been led by Chairman and Chief Executive Officer Mark Zuckerberg. Facebook's Chief Operating Officer is Sheryl Sandberg, its Chief Financial Officer is Dave Wehner, its Chief Technology Officer is Mike Schroepfer, and its Chief Product Officer is Chris Cox.
As one of the most pervasive and ubiquitous companies around the world, Facebook consistently generates headlines. In terms of the company's recent mergers and acquisitions, it has recently completed the acquisition of blockchain service Chainspace (it's first acquisition in the world of blockchain) and retail computer vision services developer GrokStyle, both in February of 2019.
Facebook's Revenue Growth
Facebook has a market cap of over $460 billion as of March 1, 2019. On January 30, 2019, the company released its year-end 2018 financial figures.In that period, Facebook reported total revenue of $55.84 billion, an increase of 37% over the $40.65 billion of 2017. The company's diluted earnings per share for 2018 was $7.57, 40% higher than the 2017 EPS of $5.39.
Since its founding, Facebook has taken an aggressive strategy when it comes to acquiring different companies. The most famous of Facebook's purchases were Instagram in 2012 and WhatsApp in 2014. Let’s take a look at the top companies that Facebook has acquired over the years.
[Fast Fact: Facebook purchased Instagram for $1 billion on April 9, 2012.]
Although Instagram was not generating revenue when Facebook purchased it in 2012, it has recently been estimated to be worth $100 billion. Instagram is a social media photo- and video-sharing platform that has generated money through on-platform advertisements since 2013. It is not an exaggeration to say that the purchase of Instagram transformed Facebook. First, some estimates indicate that Instagram generates more advertising revenue than its parent company, with some indicators suggesting that the company generates $8 billion or more in revenue per year. Further, Instagram helped Facebook to shift its user base from the original web browser service to an app-based service, which has also coincided with dramatic growth in the overall number of Instagram app users over the years.
[Fast Fact: Facebook acquired WhatsApp for a reported $19 billion on February 19, 2014.]
WhatsApp is a messaging and calling service available throughout the world. Founded in 2009, WhatsApp was designed as a low-cost alternative to SMS services. As of this writing, WhatsApp allows users to message and call other users of the app for no cost, regardless of location around the globe. As of February of 2018, WhatsApp had surpassed Instagram's user base, with about 1.5 billion active users.
For much of its history, WhatsApp generated revenue only through its initial purchase price of $1 or, in some locations, a yearly $1 upkeep fee. Some estimates place WhatsApp revenue at as high as $5 billion by 2020. However, the process of monetizing the app beyond the initial cost and regular fees is unclear; aside from these costs, WhatsApp remains a free messaging and calling service, and the app does not support advertising.
3. Oculus VR
[Fast Fact: Facebook acquired Oculus VR on March 25, 2014 for a reported $2.3 billion in cash and stock.]
Founded in 2012, Oculus VR is a technology company and one of the leaders in the emerging virtual reality technology space. The company is best known for Oculus Rift, its virtual reality headset hardware that was designed for video gaming. More recently, the company has launched Oculus Go, its first stand-alone virtual reality headset which does not require a console attachment. Although Facebook has not revealed a revenue breakdown for Oculus, it seems clear that the company is interested in capitalizing on this purchase in an attempt to dominate the virtual reality software and hardware market.
Since Facebook's purchase of Oculus VR in 2014, this subsidiary has made multiple acquisitions of its own. Perhaps the most prominent of these acquisitions was the 2015 purchase of Surreal Vision, a company specializing in 3D scene mapping reconstruction.
[Fast Fact: FriendFeed was one of Facebook's earliest acquisitions. This company was purchased for $47.5 million in cash and stock on August 10, 2009.]
Although not currently an active brand of Facebook's, FriendFeed nonetheless represents a crucial acquisition in the company's history. FriendFeed was one of the first companies that Facebook purchased. FriendFeed served as an aggregator, drawing together information from social media sites, blogs, and RSS-type feeds. FriendFeed was eventually shut down in 2015, but its services and aesthetic live on in many of the features of Facebook's News Feed, a core component of the Facebook user experience.
[Fast Fact: Facebook purchased LiveRail on August 14, 2014 for somewhere between $400 million and $500 million.]
Facebook acquired video ad tech company LiveRail in 2014, perhaps most likely in an attempt to seek out new sources of revenue. LiveRail provides publishers with data and technology related to video advertisements in order to assist them in best targeting and reaching motivated customers. After purchasing the company, Facebook shifted some of its focus points: it gradually diminished LiveRail Central, the company's bidding network, and subsumed some of LiveRail's other projects into the Facebook brand. There has been speculation that the integration of LiveRail into the Facebook umbrella did not go as quickly or as smoothly as initially anticipated.
Recent Acquisitions and Acquisition Strategy
Now that Facebook has entered its mature phase, management is continuing to search for 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. Besides its purchase of Oculus VR in 2014, that year the company also bought Ascenta and ProtoGeo Oy. 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. In 2018, the company acquired Vidpresso, a video software company for an undisclosed sum and Redkix, a team messaging app, for $100 million. Facebook announced in late January 2019 that it intends to unify its messaging apps, Instagram, Whatsapp and Messenger, on one platform.