For many people, Facebook equals pet pictures, status updates and birthday congratulations. But did you know you can learn a lot about strategic growth and mergers and acquisitions by closely studying the business itself?
Since its founding in 2004, Facebook - now Meta - has acquired more than 90 businesses. The best known of these are Instagram ($1 billion in 2012) and WhatsApp ($19 billion in 2014).
With so many acquisitions on the resume, it's safe to say that M&A is in the business's DNA and there's a lot to learn from the merger and acquisition strategy of Facebook CEO Mark Zuckerberg. Here are Facebook's 5 most important M&A lessons:
#1 Culture matters
Facebook's merger & acquisition activities are characterized by the adagium "culture eats strategy for breakfast. This certainly does not mean that Zuckerberg and his staff do not have a clear strategy behind their acquisitions. But Facebook management is well aware that corporate culture should not be underestimated.
That's why Facebook also focuses on finding businesses that can strengthen Facebook's culture. In addition, acquired businesses incorporate Facebook values and standards early on.
Facebook was founded in February 2004, making it a relatively young business. In fact, almost all the businesses they have acquired since its founding were younger. Its flat structures, capacity for rapid change and innovation mentality that you often see in startups have created a common platform for Facebook's culture and the businesses in its growing portfolio.
A cultural mismatch is often a major cause of a failed acquisition deal. This is why Facebook pays so much attention to the corporate culture of the business to be acquired.
#2 More than one type of acquisition
In most cases in an acquisition, the business acquired is fully integrated ("gobbled up") by the parent company. But there are multiple flavors. The target can also continue to grow under its own name and brand.
This second option is especially relevant when acquiring a strong brand with a large customer or user base. After their acquisition by Facebook, both Instagram and WhatsApp continued under their own names.
Regarding the purchase of Instagram, Zuckerberg says, "We should be mindful of retaining and building Instagram's strengths and features, rather than trying to integrate everything into Facebook. Millions of people around the world love the Instagram app and its brand, and our goal is to spread it and the brand to even more people.'
#3 Stick to your core business
All acquisitions and everything Facebook does serves the company's overall strategy and vision, which is, "To help build a social infrastructure that empowers people to build a global community that works for everyone.
Zuckerberg also has clear ideas about how Facebook links this vision to making strategic acquisitions: 'You can plant lots of seeds and then wait and see what will come out. But that's not how we approach M&A. Our mission and strategy come first, and then we look at what products and services we need to do that. For us, that is the ultimate guideline for the businesses we acquire.
The latter is evidenced by the acquisition of Instagram. Says Zuckerberg, "We try to learn from Instagram's experience to build similar features into our other products: delivering the best photo-sharing experience is one of the reasons why so many people love Facebook. That's why it was worth bringing these two businesses together.'
A similar motivation was also behind the purchase of virtual reality business Oculus VR ($2 billion in 2014). Zuckerberg: "Oculus is a long-term bet for us on the future of computing. Every 10 to 15 years there will be a new big computing trend, and we think virtual and augmented reality are important parts of our future platform.'
#4 Disruption is everywhere
No business is immune to change, including Facebook. And no one knows this better than Facebook itself. The company has repeatedly bought businesses that could be, or could become, competitors. In the process, Facebook has found that strategic acquisitions are a quick and effective way to acquire new, innovative technology.
Therefore, when Facebook realized they were struggling to gain a foothold in the mobile market, acquiring Instagram was a logical part of the solution. The well-established "mobile first" mentality that Facebook and many others now promote makes it hard to imagine how Facebook, with its web-based platform, ever struggled with mobile.
Conversely, Instagram, which started as a mobile app, was light years ahead in terms of user experience and drew many Facebook users away from sharing photos. Facebook has repeatedly demonstrated over the years its ability to recognize where the business is falling short. Then, with the help of a strategic acquisition, it can pick itself back up and reinvent itself if it needs to.
#5 You can't win them all
We've talked about Instagram and WhatsApp a few times now, but Facebook's most famous acquisition story is about the deal that never happened: their repeated attempts to acquire Snapchat. After Facebook initially offered $1 billion, in 2013 - after several rounds of negotiations - Snapchat did not even agree to a $3 billion offer.
With that, the matter was finished for Zuckerberg and he seems to have accepted that Snapchat will not end up in his portfolio. Meanwhile, he has also changed strategy and Facebook is busy developing these services itself and buying businesses with similar products. For example in 2016 with the acquisition of MSQRD, an app that, like Snapchat, allows you to apply masking, filters, etc. in real time to photos and videos.
