Is Facebook Becoming a Conglomerate?

Facebook has been on a streak of acquiring tech companies with increasingly higher and higher bids as they expand their hold on the technology industry. Over the past few years, Facebook has acquired Instagram, Oculus Rift, and most recently WhatsApp.

First was Instagram, the picture-sharing app. Facebook purchased Instagram in 2012. When Facebook made their purchase, Instagram was valued at $500 million. However, Facebook paid $1 billion, twice the valued price. Then, the little utilized virtual reality headset company Oculus Rift was purchased for $2 billion.

The most recent of these purchases was WhatsApp. WhatsApp, a mobile messaging app that had 450 million users at the time of purchase, was purchased for $22 billion. What is most interesting about the purchase of WhatsApp is the fact that Facebook opened their wallets in a big way. Facebook valued WhatsApp at $6.7 billion, including value they added for the number of non-paying customers and potential news customers—in a $22 billion deal, that’s accounting $15.3 billion of the purchase as essentially good will.

Clearly, CEO Mark Zuckerberg and others at Facebook believe that WhatsApp will be worth the investment. At Facebook’s quarterly conference call, Zuckerberg spoke about the purchase. “For us, products don’t get that interesting to turn into businesses until we get about a billion people using them,” Zuckerberg said.

Some have suggested that Facebook is looking to turn into conglomerate. In a Forbes article from April 2014, it was keenly acknowledged that Facebook might be growing at such a fast rate—and why companies with a large number of users are at a premium—because they acknowledge that not everyone likes Facebook. Given the apparently short life of social media websites (look to MySpace), it makes sense that Facebook would look to invest in technology that would improve their longevity.

Ultimately, only time will tell if these purchases were worth the heavy sticker price.

What do you think about Facebook’s high profile purchases?

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About DevonJ140
I am currently an Accounting Director living in New York City. I love reading and learning more about business, finance, tech, and current events.

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