Recently Facebook has purchased a virtual headset maker, Oculus Rift, for 2 Billion Dollars. This is only couple of weeks after Facebook spent a ludicrous amount of money on WhatsApp. And even if we go further back, we see a pattern when Facebook bought Instagram for 1 Billion Dollar. Now the question rises, why is Facebook buying them?
In other words, these deals have become more outlandish each time. Firstly, by buying Instagram, Facebook was destined to squash. For WhatsApp the story becomes stranger, as they spent a huge amount of dollars for a company with 52 staff members and while the messenger has seen incredible growth it remained half size of Facebook Messenger. Finally, spending 2 Billion dollars on a company from a completely different industry which didn’t released any commercial product yet, is something perplex.
According to the article, they present the purchase of WhatsApp as being a strategy to access to the next billion users. For the Oculus purchases, they argue that Facebook wants to enter the gaming sector and even offer a virtual reality networking experience. This sounds like having some strategy behind the acquisitions, however, when they purchased Instagram, it looked like they paid a billion dollars to improve its photo sharing.
This article argues that all these answers respond to the wrong “Why”. The question is not what projects might Facebook dream up for its disconnected gaggle of overpriced companies, but rather why it has a gaggle of overpriced companies in the first place?
The author claims that Facebook does this because it is a conglomerate, meaning a combination of multiple corporations, often engaged in very different businesses, which fall under one corporate group, as Pfizer for example.
So my question to the class is: What do you think about Facebook’s strategy of their highly overpriced acquisitions? Do you agree with the author or do you have different ideas?