When Microsoft’s purchase of LinkedIn for $26.2 billion was announced, it set off a firestorm of theories about the value of social media companies, and which acquisition would likely be the next (ahem…Twitter). But do these types of buys really contain value?
If history is any indication, yes – sometimes. Here’s a list of the billion dollar buys in recent years (and one a few dollars shy of the 10-figure mark). Read on to learn what the outcomes have been so far.
1. WhatsApp to Facebook
How much: $22 billion (cash and Facebook shares)
And then: In 2014, WhatsApp had 600 million users around the world, but in 2013 made only $10 million and had losses of $138 million. Facebook’s acquisition of the company (apart from making its co-founders quite wealthy) allowed it to pretty much continue operating as usual under the umbrella of an enormous corporation. Facebook got a ready-to-wear social media app with a global footprint. Now users are placing over 100 million calls each day using the app.
2. Skype to Microsoft
How much: $8.5 billion
And then: This one had some people scratching their heads. Skype had already been purchased by eBay, which then sold it to a private consortium, which sold it to Microsoft. At the time of purchase, Skype had a revenue of $860 million but also $686 million in debt. But what it did have was a global, active, and fee-paying user base. Skype now has about 300 million monthly “active “users and is adding more messaging bots. Skype has also had a lot of functionality issues, which seem like they might be getting addressed soon.
3. Oculus to Facebook
How much: $2 billion (cash and stock)
And then: The initial reaction to this deal was not entirely positive and provoked a dip in Facebook’s stock price. At the time, Oculus was only two years old and not that far from its successful Kickstarter campaign. But two years on, this acquisition is beginning to look like an act of genius. VR was looking like it was headed for the exclusive niche club of tech ideas, but with Facebook’s (read: Mark Zuckerberg’s) investment, which also brought its power and validation, interest in VR from developers and consumers took off. Now VR is ready for consumers, and content will, yet again, be king.
4. YouTube to Google
How much: $1.65 billion (stock)
And then: YouTube is still going strong. As an early social startup, it operated in a gray legal area and unprofitably. The company was dealing with multiple legal copyright challenges when Google bought it – and it was only a year old. YouTube still operates autonomously and remains dominant in the video space, with over a billion users.
5. Tumblr to Yahoo
How much: $1.1 billion
And then: When this deal went down in 2013, Yahoo and Tumblr both assured users that the site would remain independent. But Yahoo wanted to figure out a way to monetize Tumblr, which wasn’t an easy proposition considering the way Tumblr was designed (e.g., maintaining anonymity). Two years later and Yahoo took a $230 million write-off on the purchase, and it also hasn’t maintained the corporate distance that was originally discussed.
6. Instagram to Facebook
How much: $1 billion (cash and stock)
And then: Only two years old in 2012, Instagram wasn’t making any money, but it had a $500 million valuation (which almost seems quaint now). When Facebook bought the company, it got a photo-sharing site with 30 million users. Now Instagram is ubiquitous, full of celebrities, 500 million users strong, and a new favorite for social media ad campaigns.
7. Vine to Twitter
How much: $970 million
And then: Twitter bought Vine before the video-sharing startup had even opened for business. (Twitter has done this a few times, including its purchase of Periscope). More recently, Twitter bought Niche, a service designed to garner ad revenue from Vine videos. Since Vine was acquired, all three of its co-founders have parted ways/been laid off from the company. Twitter is looking to expand its video presence and one way is by expanding Vine videos from the original 30-second length to 140 seconds.
The days of social media being solely a marketing function are long gone. Learn why In a Live Business, Social Gets Its MBA.