How is Facebook ever going to make money from its recent acquisitions?
Shortly after Facebook acquired the popular messaging service WhatsApp for $19 billion USD it acquired the the company developing the Oculus Rift VR for $2 billion USD.
Whenever Facebook acquires a new company, some vocal users on the Internet announce that they won't be using the product anymore. This has not hindered the growth of WhatsApp apparently, which jumped to 480 million active users worldwide up from 430 million users two months earlier.
Reactions to Facebook's acquisition are similar this time around. Users claim that they won't buy the device anymore, and at least one prominent developer, Minecraft creator Marus Persson, revealed openly that Minecraft won't be coming to the Oculus because of Facebook's acquisition.
Whenever I read about another multi-billion Dollar acquisition by Google, Facebook or Microsoft, I wonder how they are going to make money out of it.
If you take WhatsApp as an example. The current user base is about 450 million users. If each user would pay the one-year subscription price, WhatsApp would generate about 450 million Dollars a year (it is less than that but less round it up to that).
Even if the user count grows to 1 billion in the next one or two years, it would still generate only a fraction of what Facebook bought the company for.
The same for Oculus. Buying a company for $2 billion that has not even released a product yet?
While Facebook may bet big on its two recent acquisitions, the main reason why the company bought the two other companies lies in the future.
WhatsApp's growth combined with plans to add new features such as voice calls to the app may improve the applications revenue generation in coming years. If you only look at the current user count and revenue generation, you cannot possibly justify the $19 billion that Facebook paid for the company.
But if you take into account the future vision, to become a messaging application that covers all bases, then it is quite possible that these additional features may either be bought as add-ons or that the current yearly subscription price may be increased once those new features launch.
And for Oculus, it is the same thing. If you take into account the future applications that the Oculus and its improved versions that will come out in the next decade offer, then you may be able to justify the price that Facebook paid.
If we are going to spend time using virtual reality devices in the near future, then it can very well be that the Oculus may play a major role in that.
Mark Zuckerberg hinted at some of it on Facebook where he announced the acquisition officially.
But this is just the start. After games, we're going to make Oculus a platform for many other experiences. Imagine enjoying a court side seat at a game, studying in a classroom of students and teachers all over the world or consulting with a doctor face-to-face -- just by putting on goggles in your home.
This is really a new communication platform. By feeling truly present, you can share unbounded spaces and experiences with the people in your life. Imagine sharing not just moments with your friends online, but entire experiences and adventures.
I cannot really see it work well in its current form though as it is a rather clumsy big device. But improvements will be made to make it lightweight and more attractive to the general public.
So, what is your take on this? Is Facebook burning money here, or is the company setting itself up for the next decade?Advertisement