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Facebook’s $5 billion IPO will give the company the capital boost to expand into new services and make some larger acquisitions it might not want or be able to do while private, analysts agree.
Gartner analyst Ray Valdes believes Facebook might use its new capital to acquire larger companies than it has in the past. Facebook spent $68 million on small acquisitions in 2011, acquiring companies such as Beluga, Snaptu and Gowalla for engineering talent.
Facebook could depart from such so-called “acquhires” to buy something big and game-changing. Like what? Like Netflix, which faces significant challenges from Amazon.
The e-commerce giant is reportedly planning to add a paid subscription service to Amazon Instant Video streaming service. Netflix could find itself squeezed between the e-commerce giant and Hulu’s streaming TV service.
Facebook, which already showed an interest in testing social movie-watching, teaming with Warner Bros. to screen “The Dark Knight” right in the social network, could be the soft landing Netflix would need.
“That’s the kind of thing that Facebook could do,” Valdes agreed. “They could move into television, into entertainment, into games, into hardware, into mobile.”
Should Facebook acquire Netflix it would gain a massive vault of movies and TV shows to serve users. Facebook could charge them per view, or on a subscription service as consumers currently purchase movies from the streaming services.
Facebook could also make some significant acquisitions in mobile to compete with Apple iOS and Google’s Android platforms. The company noted in its S-1 filing Feb. 1 that mobile remains a vast, untapped market for the company, despite the fact that more than half of its 845 million users access the network from mobile devices.
However, Facebook’s options in the mobile market appear muddier. Research In Motion, considered an acquisition target, is troubled on many levels. HP, which gave up on making mobile phones and tablets, is open-sourcing webOS.
Facebook IPO Presents New Options for Social Network
Altimeter Group analyst Rebecca Lieb said she sees Facebook expanding into data management and analysis, using big data on consumers to improve its own services and boost advertising bucks.
Lieb pointed to Facebook “actions,” the frictionless sharing approach in its Timeline user interface. This service lets users choose to integrate social applications, such as Netflix, Foodspotting, Spotify and some 60 others to Facebook.
When users add the applications on Facebook, “stories” about activity users engage in with those apps is automatically published on Facebook.
For example, when a user watched a movie or TV episode on Netflix, a “story” about that activity would publish in the user’s news “ticker” activity stream. The idea is that users don’t have to manually share every time they read a news story, listen to a tune or watch a flick.
Lieb believes that the big data about users can be leveraged by Facebook to translate into highly targeted ads, enabling Facebook to suggest restaurants, music and movies, among other products and services, to each user in their Timeline.
Of course, it remains to be seen who will stick around Facebook for the long haul. Once the company goes public this year it will trigger so many “instantly minted, young millionaires,” Lieb noted.
“That’s not going to happen overnight, but it will over the next couple of years,” Valdes said, adding that Google went through a similar situation.
Ultimately, Lieb and Valdes both foresee the emergence of a “Facebook Mafia,” a group of entrepreneurial-minded leaders within Facebook who go off to launch or fund their own companies.
Facebook’s Mafia would be modeled after the PayPal Mafia. This group included Chad Hurley and Steve Chen, who went off to create YouTube, and Max Levchin, who built Slide. Ironically, both YouTube and Slide were acquired by Google.