The 4 Best Acquisitions In Facebook’s History
And why Facebook will not make any major acquisitions in 2020.
Facebook is the youngest in the restricted club of GAFAM. However, this relative youth has not prevented it from showing a fierce appetite by having already made more than 70 acquisitions during its young history. In what follows, I propose you to return on the 4 best acquisitions in the history of Facebook.
Then, I will explain you why Facebook will not make any major acquisitions in 2020.
Facebook.com Domain Name — 2005
Originally, Mark Zuckerberg’s social network address was thefacebook.com. Not necessarily terrible in terms of simplicity for users. Aware of this problem, Marck Zuckerberg started looking for the domain name facebook.com in 2005. The acquisition of facebook.com was finalized in August 2005 for an amount of $200,000.
As a result of this acquisition, Facebook’s website is moved to this new name and developer teams are taking the opportunity to modify the profile pages to make them more user-friendly.
Nearly fifteen years later, we all say to ourselves that this amount of $200,000 was ridiculous and that the company that sold it must regret not having raised the auction more at the time!
Instagram — 2012
Like other GAFAMs, Facebook’s strategy is to buy out challengers at an early stage, which could eventually surpass them. The goal is to avoid reliving the same story as Yahoo! with Google for example.
In order to preserve its domination in the world of social networks, Facebook remains attentive to all outsiders who would experience very strong growth. When such an outsider is born, Facebook has two usual strategies: either copying the main features of this outsider for trying to make it less attractive or directly trying to acquire it.
In the case of Instagram, Facebook chose the acquisition way in April 2012 for an amount of 1 billion dollars. At that time, the social network for sharing photos on mobile phones was a huge success with more than 50 million users in a few months. Facebook could not risk letting such a competitor grow. History has proven Facebook was right, since Instagram now has more than 1 billion active users and has become very important in Facebook’s turnover.
WhatsApp — 2014
Facebook’s acquisition of WhatsApp in February 2014 follows the same logic as that of Instagram two years earlier. The mobile messaging client already has nearly 400 million active users in 2014 and its success is growing. Facebook is putting the whole package on the table with $19 billion. This was the price to buy a competitor with growing success that now exceeds 1.5 billion active users in 2019!
While it is 2019, Mark Zuckerberg now wants to go further in the integration between Facebook Messenger, Instagram and WhatsApp by unifying these messaging services. This is of course contrary to the guarantees he gave to the US and European regulators at the time of the merger.
Nevertheless, this does not seem to worry him much at the moment and it is part of the integration logic he had since the acquisition of WhatsApp in 2014.
Oculus VR — 2014
In the same way that Apple has understood the need to diversify its revenue sources to be less dependent on a single product, the iPhone in the case of Apple, Facebook is also seeking to diversify outside the world of social networks.
Thus, Mark Zuckerberg’s firm decided to bet on augmented reality in March 2014 by carrying out the acquisition of augmented reality helmet manufacturer Oculus VR.
Facebook has spent $2 billion on this acquisition. So far, it can not be said that it has been a great success. Nevertheless, it was a diversification track that Facebook had to explore to reassure the financial markets. The future will tell us whether Facebook can make Oculus VR a success or not.
The Cambridge Analytica Scandal Was A Turning Point
While Facebook had previously enjoyed a certain amount of political goodwill due to its phenomenal growth, the Cambridge Analytica case, which broke out after the Brexit vote and the election of Donald Trump in 2016, marked a turning point in the history of Mark Zuckerberg’s firm.
Suddenly, the whole world became aware of the danger posed by Facebook in terms of managing users’ privacy and the influence that the firm could have on citizens. In addition, Facebook has been affected by the many cases of undisclosed data leaks.
Since then, Mark Zuckerberg and Facebook have been in the eye of the storm, which has resulted in a large number of fines in both Europe and the US. The latest one being the one the Federal Trade Commission (FTC) imposed on it in July 2019 for its failure to properly secure the privacy of its users.
Now, some Democratic MPs campaigning for the 2020 presidential election, such as Elizabeth Warren, are even proposing an outright dismantling of this giant that has become Facebook.
Facebook Wants To Dominate The Cryptocurrencies’ World With Libra
It is in this very tense context that Mark Zuckerberg and Facebook have chosen to advance their pawns in the world of cryptocurrencies by announcing the Libra.
This is a stablecoin cryptocurrency project that brings together 27 strategic partners (Stripe, Visa, Spotify, …) around Facebook in order to create a decentralized virtual currency controlled by the Libra Association in which Facebook would have the same weight in theory as the other strategic players.
Exchanges on the Blockchain Libra would be possible via the Calibra wallet application developed by Facebook. Libra payments would be offered to all users of the Facebook, WhatsApp and Instagram networks, giving a target of well over 2 billion users.
Of course, as always, Mark Zuckerberg ensures that the privacy of transactions made on the Blockchain Libra would be preserved and that Facebook will not be aware of transactions made by its users. Promises only bind those who believe in them…
Faced with the real threat posed by the Libra to the states, the G7 members seized the issue in the summer of 2019 and are now trying to block the Libra’s progress by all means.
Facebook Will Not Make Any Major Acquisitions In 2020
It is therefore in a delicate context that Facebook will attack the year 2020. On the one hand, Mark Zuckerberg’s company will be under pressure from US and European politicians who are increasingly pushing for the company’s dismantling.
On the other hand, Facebook will be put under pressure by the G7 member countries and the various central bankers of the G7 countries, headed by the Fed President. Their goal being clear and unambiguous: preventing Facebook from succeeding in launching Libra.
Under these conditions, I think it will be tricky for Facebook to add fuel to the fire by trying to make a major acquisition in any field. Regulators would have been quick to retool Mark Zuckerberg.
Instead, Facebook will have to show white paw and try to reassure regulators in order to repel the threats of dismantling that hang over the firm. Besides, Facebook will try to get Libra’s launch back on track, although this seems already compromised for 2020.