Facebook: A Year in Review

Michael Teague |

Facebook_on_Nasdaq The first anniversary of Facebook’s (FB) IPO occasioned a number of retrospectives about the social media site that, ostensibly at least, counts some 1/7th of the world’s population among its registered users. In particular, a great deal has been made about the fact that the company’s shares have yet to match their IPO price.

As much trouble as the company has had with share price since the partially-botched IPO last year, the bigger story for Facebook is to be found in the great number of tech companies it has acquired since that time, that goes hand in hand with the company’s desire to drastically increase the amount of revenue it gets from mobile advertising.

Presumably, if Facebook successfully continues to make significant gains in mobile as it has been doing, the gap between its current share price of $26.25, and its IPO price of $38 would not be a difficult obstacle to overcome.

In April of 2012, shortly before the IPO, Facebook acquired the mobile photo-sharing service Instagram for some $715 million. This was and still is the company’s most high-profile acquisition, but by no means its only one.

Since the Instagram buyout, Facebook has acquired Glancee, a mobile-based location app that alerts users when others with similar interests are nearby; Lightbox, an Android-based company similar to Instagram, was purchased right around the time of the IPO as well. Facebook hired the Lightbox team, and then shut the company down.

Karma was acquired the same day that Facebook began trading on the Nasdaq. Karma was a mobile gift service that was eventually incorporated into Facebook Gifts, which has become an increasingly prominent feature of the site’s newsfeed.

There were many others the company made after last year’s IPO: Bolt Peters was a San Francisco-based design firm that also did research on user-experience. The company had previously done work for Twitter, Zynga (ZNGA), Pandora (P), and others; Pieceable Software made software that allowed for developpers to demo iOS apps on the web; Face.com was an Israeli facial recognition technology company that Facebooke acquired last June.

Spool, purchased by Facebook in July, was a service that allowed users to bookmark web content for later offline viewing on mobile devices; Acrylic was a development studio that made software for iOS and Mac. Threadsy, acquired by the company last August, was a marketing service, and they also hired the team who started Carsabi, a used car price comparison site.

So far in 2013, the company has purchased advertising services firm Atlas Advertiser Suite, as well as the web and software design agency Hot Studio, and made one of its most significant acquisitions in mobile software developer Parse.

This year, Facebook also picked up Northern California mobile software startup Osmeta, and most recently, the Israeli company Waze, the developer of a very clever mobile mapping software.

Two aspects of all these purchases stand out the most. In the majority of these acquisitions, Facebook was at least as concerned with getting the talent behind the companies as it was the companies themselves. Indeed, many of the new employees it took on as a result of these purchases have prior experience at every important tech company: Google (GOOG), IBM (IBM), VMWare (VMW), and Yahoo! (YHOO), among others.

The second aspect that stands out, and that overlaps with the first, is the focus on mobile. According to the company’s most recent earnings report, the number of users on its website increased 23 percent to 1.11 billion from the prior year period, with mobile use up 54 percent to 751 million, about two-thirds of the total number of users.

Furthermore, according to the research firm EMarketer, Facebook will take 13 percent of all mobile ad-spending in the United States in 2013, a 3.5 percent increase on the previous year. And while the company spent a lot of money to achieve this result, achieve it they did, with mobile raking in some 30 percent of all ad revenues during Q1.

For all the talk about how far the company’s stock has fallen from its IPO price, it is hard to dismiss the fact that one year ago, Facebook had no mobile ad revenue at all. Still, despite the seemingly inevitable success in mobile, there has been room for skepticism with regard to some of the company’s strategic decisions, most recently with the release of the HTC smartphone. Released not six weeks ago, the product that debuted to so much fanfare at the company’s headquarters was just last week dropped by AT&T (T) due to weak sales.

Whether the phone may turn out to be a costly mistake, or one from which important lessons can be extracted remains to be seen, but the recently reported increase in mobile ad revenue happened irrespective of the HTC and Home releases.

Mobile search and display advertising was an $8.4 billion dollar market in 2012, having more than doubled in size from the previous year, and is expected to increase to nearly $13.6 billion in 2013. If Facebook’s year of acquisitions may seem from the outside like a mad dash to snap up anything mobile-related that it can, a reasonable move given the growing competition for mobile dollars, and especially the advances that some of its competitors, primarily Google, have on it. A look at the talent alone that the company has brought on board, however, would seem to suggest a more deliberate approach, even if that approach is still in its early stages.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

Companies

Symbol Name Price Change % Volume
FB Facebook Inc. 117.43 2.03 1.76 20,200,090
IBM International Business Machines Corp 159.84 -0.18 -0.11 3,447,052
P Pandora Media Inc. 13.37 0.04 0.30 11,042,144
VMW Vmware Inc. Class A 80.21 1.45 1.84 1,289,174
GOOG Alphabet Inc. 762.52 12.02 1.60 1,394,158
ZNGA Zynga Inc. 2.95 0.09 3.15 8,295,535
YHOO Yahoo! Inc. 40.20 0.13 0.32 4,408,407
T AT&T Inc. 38.63 0.02 0.05 20,773,441
FLTX Fleetmatics Group PLC n/a n/a n/a 0

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