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Facebook to step up acquisitions, look at product-driven deals

November 28, 2010 Leave a comment Go to comments


Social networking company particularly interested in location-based services, online currency, mobile products.

Facebook Inc. plans to step up the pace of its acquisitions and increasingly consider companies that have developed products, as the social network giant looks to broaden the set of services it offers members.

Vaughan Smith, Facebook’s head of corporate development, said Facebook will look to acquire startups with developed products or services in areas the social network is targeting for growth. Those could include location-based services, online currency and mobile products, he said.

“It’s probably more likely that we will see situations where it’s better for us to buy a service rather than build it,” Smith said in an interview with Dow Jones Newswires.”I expect there will be more product-driven acquisitions.”

For example, Smith said he’d take a close look at any startup that had developed a product or service that made it easy for members to buy items with Facebook Credits, the company’s virtual currency, on their mobile phones.

Smith’s comments signal an evolution in Facebook’s acquisition strategy, which has so far focused on startups with fewer than 10 employees. Those companies typically have not developed products, but are staffed by talented entrepreneurs and engineers who are expected to thrive within Facebook’s flexible corporate structure. One example is Chief Technology Officer Bret Taylor, a Google Inc. veteran who arrived at Facebook via its acquisition of FriendFeed last year.

Smith stressed that talent acquisition would continue to be a priority for Facebook’s small M&A team in the coming year.

The Palo Alto, Calif.-based social networking company, which lets users share messages, photos and other information with their friends, topped 500 million users earlier this year and has become a Silicon Valley heavyweight. While Facebook remains privately held, the company’s pre-IPO stock trades on secondary markets at prices that give it an implied market capitalization of as much as $41 billion. Facebook’ potential make those shares a potent currency for acquisitions.

Smith, who drove eBay Inc.’s international expansion and PayPal acquisition before joining Facebook in late 2008, said he plans to “step up” the pace of acquisitions next year, an acceleration that has already started. So far this year, Facebook has bought 10 companies, up from just one in 2009.

Smith, 43, did not specify how many acquisitions he thought Facebook might make in 2011, but he indicated the company should be doing more.

“Every one of our acquisitions has gone well,” Smith said, juxtaposing Facebook’s experience with studies that show 80% of acquisitions fail.”That’s probably an indication we aren’t doing enough of them.”

Smith’s comments also come against a backdrop of growing competition for talent between Facebook and Google. The jousting could now push onto a new stage.

Facebook, which employs about 1,700 people, has generated attention by poaching hundreds of Google engineers, product managers and sales staff over the past few years. But several venture capitalists said they have not seen Google and Facebook go head-to-head over an acquisition target.

Google completed 40 acquisitions worth $1.6 billion during the first nine months of 2010, as the Internet search giant ramped up its investments in talent and new technologies. The company, which has a $33 billion war chest, has indicated it will continue to aggressively pursue acquisitions.

Smith steered clear of comparing Facebook’s acquisition track record to that of Google, which has more than 23,000 employees. But Smith said Facebook’s relatively small staff is a drawing card because talented employees can have a “disproportionate impact” at the company and quickly see their products reach million of Facebook’s users around the world.

Originally posted on: http://www.totaltele.com/view.aspx?ID=460416&G=5&C=2&Page=0

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