Facebook Plans Mobile M&A To Hit Google

Facebook has got over its traditional nervousness about M&A and aims to double its acquisition rate, planning a score of purchases in 2011 to up the ante against Google, especially in the mobile world.

The social networking leader aims to make about 20 acquisitions this year, up from 10 in 2010, with particular focus on advanced mobile features and improved site design and reliability, said Vaughan Smith, director of corporate development, in an interview. The company has made 13 purchases so far this year, and some, such as the Messenger offering, have already contributed new services to the Facebook platform.

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Focal Points:

• "Two years ago we didn't have a track record in acquisitions," Smith told Bloomberg. "While we expected them to work well, it was still a crapshoot how they'd turn out. We've built a culture that supports entrepreneurs, and it's working incredibly well."
• However, privately held Facebook's purchasing power is dwarfed by that of Google. It has raised more than $2bn from investors, including $1.5bn early this year in a round led by Goldman Sachs, and is expected to generate more than $2bn in EBITDA earnings this year. However, it does have a current market value of $72.5bn. But its arch-enemy has $39.1bn and can target major acquisitions like that of Motorola Mobility, and it is closing in on Facebook with launches like its own Google+ social network (which it is hoping will be third time lucky in the social field).
• Some of the mobile focused purchases have included Beluga, whose technology is the basis of the new Facebook Messenger service, which piped Apple iMessenger to the post and goes head-to-head with RIM's BlackBerry Messenger. Facebook has also bought mobile start-up Snaptu, which brings smartphone-style apps to feature phones.

Editor’s Note:  It’s interesting to note that while acquisitions make headlines in the trade press, there isn’t much about whether or not the acquisitions achieved the initial objectives that triggered the acquisitions.  Regardless of the due diligence performed prior to acquisition, some “investments” will not realize the projected ROI.

IT Executives should remain aware of their strategic partner’s growth objectives and make sure that the results of that strategy are monitored closely – many companies have failed due to uncontrolled, unmonitored growth.