Tag Archives: acquisitions

(Revised) Facebook’s Next Acquisition; a Prediction

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The above screenshot is from an interactive infographic that can be found in a Tech Crunch article, Visualizing 15 Years of Acquisitions by Apple, Google, Yahoo, Amazon, and Facebook. For perspective, that huge blue bubble in the bottom corner is the much talked about 19 Billion dollar WhatsApp acquisition by Facebook earlier this year. Scrolling through some of these acquisitions, I recognized many names including Tumblr, Instagram, and Youtube, among others. This got me thinking about some of the apps or web services that I have used or heard about that may be next on the list of companies to be acquired by one of these tech giants, given their seemingly unquenchable thirst to buy up these smaller web services and apps.

The first that came to mind was the new Cyber dust app (currently only available for iPhone but their website promises an android version soon). The messaging company is somewhere in between text messaging and snapchat. The basic idea is that once you send someone any message or image, it disappears 30 seconds after they open it. Given snapchat’s popularity, I can see this app getting similar levels of attention. While they are too new to have published any data on number of users or anything like that, I can see them growing quickly.

I am sure that any of the companies included in the info-graphic above (Apple, Yahoo, Amazon, Facebook and Google) would be interested in acquiring this company, I would expect Facebook to make an offer if my prediction on the app’s user base growth is correct. Facebook had offered three billion dollars in cash for snapchat late last year, so they have an interest in this “disappearing digital footprint” fad. Given heightened privacy concerns of many mobile users, these kinds of apps are very popular. Since snapchat rejected Facebook’s offer, I wouldn’t be surprised if Facebook is quick to make an offer to purchase cyber dust.

The service, whose tagline is “Every spoken word isn’t recorded. Why should your texts be?” is owned by Shark Tank’s famous Mark Cuban, who says he doesn’t think it will replace texting, only supplement it but that Cyber dust does allow you to stay in control of your messages. With standard texting, you lose control as soon as you hit send. While there are some obvious sketchy uses for cyber dust that come to mind, I have used it to send my login information for my Netflix account to my brother. While that isn’t the most sensitive information out there, I don’t really want him to tell all his friends at school and have 300 high school freshmen using my Netflix account. Cyber dust prevents him from leaving that information on his phone when he takes it to school. Other more innocent uses for the app that come to mind are coordinating some kind of surprise birthday party or complaining about your boss to coworkers.

While there are a lot of “what ifs” about Cyber dust’s growth, I think that my prediction is a reasonable one. I don’t know much about Mark Cuban’s goals for holding onto or selling the service, so whether or not cyber dust is actually sold if an offer is made is another discussion entirely.

Facebook’s Next Acquisition; a Prediction

While scrolling through some articles for some inspiration for a blog post, I came across a tech crunch article that included a very good interactive info-graphic on acquisitions made by tech companies over the last fifteen years (screenshot below).

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For perspective, that huge blue bubble in the bottom corner is the much talked about WhatsApp acquisition by Facebook earlier this year. This got me thinking about some of the apps or web services that I have used or heard about that may be next on the list of companies to be acquired by one of these tech giants, given their seemingly unquenchable thirst to buy up these smaller web services and apps.

Cyber dust instantly comes to mind. The messaging company is somewhere in between text messaging and snapchat. The basic idea is that once you send someone any message or image, it disappears 30 seconds after they open it. Given snapchat’s popularity, I can see this app getting similar levels of attention. I couldn’t find any data on their current number or users or anything like that, but I have no doubt that this relatively new app will take off quickly.

While I am sure that any of the companies included in the info-graphic above (apple, yahoo, amazon, Facebook and google) would love to acquire this company, I would expect Facebook to make an offer if my prediction on the app’s user base growth is correct. Facebook had offered three billion in cash for snapchat late last year, so they have an interest in this “disappearing digital footprint” fad. Given heightened privacy concerns of many users, these kinds of apps are very popular. Since snapchat rejected Facebook’s offer, I wouldn’t be surprised if Facebook is quick to make an offer to cyber dust.

The service, whose tagline is “Every spoken word isn’t recorded. Why should your texts be?” is owned by Mark Cuban, who says he doesn’t think it will replace texting, only supplement it so that you can stay in control of your messages. With standard texting, you lose control as soon as you hit send. While there are some obvious sketchy uses for cyber dust that come to mind, I have used it to send my login information for my Netflix account to my brother. While that isn’t the most sensitive information out there, I don’t really want him to tell all his friends at school and have 300 high school freshmen using my Netflix account. Cyber dust prevents him from leaving that information on his phone when he takes it to school. Other more innocent uses for the app that come to mind are coordinating some kind of surprise birthday party or complaining about your boss to coworkers.

While there are a lot of “what ifs” about cyber dust’s growth, I think that my prediction is a reasonable one. I don’t know much about Mark Cuban’s goals for holding onto or selling the service, so whether or not cyber dust is actually sold if an offer is made is another issue.

 

Explaining the Tech Acquisition Frenzy

Authors Reed Albergotti and Rolfe Winkler try to explain the acquisition frenzy that is currently occurring in the tech marketplace. According to the article they published in the Wall Street Journal titled, “Cash, Paranoia Fuel Tech Giant’s Buying Binge,” the major tech companies are currently experiencing a “combination of fear and primal ambition leading to one of the biggest buying and investing sprees since the dot-com era of the late 1990s.” This article comes after the unexpected acquisition from Facebook of the virtual reality headset maker Oculus VR for $2 billion. (WSJ – Facebook to Buy Virtual Reality Firm Oculus for $2 Billion.)

These acquisitions come in the midst of the struggle for these tech companies to maintain their dominance in the industry and control the entire tech spectrum. Due to the high amounts of cash that these companies are currently sitting on, many of these executives are willing to risk paying premium prices on companies that dominate a high growth niche in the tech market. According to the article, for many of these tech companies, such as Facebook and Google, their business models are based on the information they can obtain from their users and sell to customers in the form of ads. Essentially the more information they can obtain about a user, the more money they can make from advertising to that user.

In my opinion there are two distinct potential outcomes from acquisitions and overall technology expansions. The outcome that it appears many tech executives are using is the Nokia example. Less than a decade ago Nokia was the top mobile phone maker in the world; they sold more handsets than any other company by a longshot. The executives believed that smart phones would be a small market niche that would never scale further due to high costs, so they decided to invest minimally in their smartphone handsets and continue to focus their attention on affordable flip phones. As smartphones took off, Nokia was left in the dust by Apple and Samsung and have struggled to break back into the handset market with their new Windows Lumia line. This side of the story shows a company that was too set on their old ways and was left behind in the fast growing market.

The contrarian example is the Yahoo acquisition of Mark Cuban’s Broadcast.com in 1999. Yahoo made the biggest tech acquisition at the time ($5.7 Billion) and put all their chips on the bet that online video streaming and audio broadcasting would be the future of the internet. By making this one-sided bet on Broadcast.com, Yahoo neglected their fundamental business component – their search engine. As their focus wore off their search engine capabilities, Google was able to surpass Yahoo and seize valuable market share in the search engine market. Yahoo’s misguided acquisition of Broadcast.com has negatively impacted Yahoo to this day as they gave up valuable market share in their most key business component.

Time will tell whether or not these recent acquisitions will pan out for these tech giants. I believe that acquisitions made in order to stay on the cutting edge of technology is essential in the tech industry, but as these companies are willing to risk more and more capital on high risk acquisitions in order to diversify their landscape it will become inevitable at some point that one of these risky investments will prove to be disastrous for the longevity of a company.