On Monday the blog Inside Facebook broke the story that the Facebook-only application Favorite Peeps had been acquired by slideshow creator Slide (and Slide confirmed to me yesterday that they had reached an agreement with the creator of Favorite Peeps). The rumored acquisition price was $60,000. This is the second Facebook app buy-out reported by Inside Facebook in the past week. Last Friday, they reported that the Extended Info application had been acquired by travel startup SideStep, who make a top 50 Facebook app called "Trips."
These acquisitions are fairly significant because they affirm how seriously companies are taking the fledging Facebook platform. Just about a month old, the Platform is already attracting about 1,000 new developers per day who have created hundreds of applications that reach millions of people. The top 25 applications alone collectively reach over 55 million users (though, obviously with a good deal of overlap). Because these apps have yet to make any money, and whether that will be possible remains an unanswered question, these acquisitions are about the users or the developers.
Two of the most aggressive companies in the Facebook application space are rival online slideshow apps Slide and Rock You. Slide owns the most popular application, Top Friends, which reaches 7 million users, and the third most popular, Fortune Cookie. RockYou's Horoscopes and X Me apps, meanwhile, are the fifth and sixth most popular. Together, the companies' Facebook forays reach at least 21 million users. It's easy to see why investing in the Facebook platform is an attractive gamble for these companies, even if many of these apps never turn a profit. It's all about eyeballs.
In the case of SideStep's purchase of Extended Info, which on the surface seems odd -- it is a popular app at 130,000 users, but it is not among the elite Facebook applications, and it has nothing to do with SideStep's core business of travel -- it appears the acquisition was more about buying a talented Facebook developer, than about acquiring users. Extended Info's creator, Trey Philips, will reportedly be leaving school to joining the SideStep team in Santa Clara, CA.
So will Facebook acquisitions continue? I think that's probably highly likely. With more than 38,000 developers already using the Facebook Developer app (which helps you create applications for the platform), buying popular apps is a good way for companies looking to get into the Facebook ecosystem to screen developers. And with the Facebook platform continuing to grow in popularity among its rapidly expanding user base, it seems inevitable that companies will try to buy their way to the top, especially given the relatively cheap price of purchasing Facebook apps (Favorite Peeps, for example, was had for only just over US 4 cents per user).
Who's next? My bet would be Graffiti, which is a slick app that lets people draw directly onto users' profiles and commands 3.7 million users. Or the 1.7 million user strong Honesty Box, which allows users to send anonymous messages to each other, and is the app that I have been asked by friends to install the most. What do you think? Will Facebook acquisitions continue or is this a passing fad? If you think more apps will be bought, which one is next?
Listed below are links to blogs that reference this entry: Facebook Acquisitions: Fad or Proof of Platform Success?.
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I use all three applications from zuPort and they are all very tight. I especially like their Flickr app which imports Flickr photos. Their zuPort: Boss is quite funny and I think will be a hit. I know one of the developers and I understand that they are working on many other apps that bring in content from other social networks. Will they get bought? Not sure, but I do think that they would be in the mix.
Posted by: Albert Jame | June 27, 2007 12:57 PMMost definitely the next acquisition:
Posted by: Dan Grossman | June 27, 2007 1:47 PMhttp://www.dangrossman.info/photos/misc/sun.jpg
John -
We will definitely continue to see the rise of Facebook application acquistions. Where else can an online company accumulate over 1M users for $0.04 per user?! For comparison, the average acquisition prices for many other sites with ad-based business models are going for between $20 - $50 per user! To me, it seems that these small acquistion prices for Facebook apps are a bargain (since we do not know the price that SideStep paid to acquire Extended Info, we can't be sure that $0.04 per user is a "normal" valuation). I also do not feel that these application implementation by Facebook users are a fad, though I do anticipate a sharp decline in the adoption growth rate of these applications by users as the space becomes saturated.
It will be very interesting to see how these acquistion prices change over time, and if the Favorite Peeps price was way off value market pricing.
If companies are in the least bit currently considering acquiring a Facebook application, it is my belief that they should pull the trigger now, because as the popularity of Facebook app buyouts increase, so will the prices. $0.04 per user for 1.3 M users & eyeballs. Think about it.
Brandon Mullins
Posted by: Brandon Mullins | June 27, 2007 2:27 PMCo-Founder/CEO
BookMesh.com
John -
One additional thought that I would like to add to my previous post is that the counter-argument to my claim that the $0.04 per user of a Facebook application is an outrageous bargain is that these users are actually "owned" by Facebook, since the user base is not active on the application owner's own servers & website. Zuckerberg & Co. have clearly stated that any type of revenue model can be implemented through these apps, including ad-based ones(unlike MySpace as we all know), and while it seems that very few, if any, application developers have figured a way to mosy effectively monetize these users (even through advertisements), I would bet that 50% of these application users can be persuaded to join the application owner's own website & service with the correct branding & marketing of the application.
Even if only 30% of an acquired Facebook application's user base decide to join and use the company's actual service & website, this would still equate to: 1.3M * 30% = 390k users @ $60k (acquisition price) = $.15 per user. Still a bargain if you ask me.
Brandon Mullins
Posted by: Brandon Mullins | June 27, 2007 3:32 PMCo-Founder/CEO
BookMesh.com
My apologies; I realized your name is Josh :)
Posted by: Brandon | June 27, 2007 3:37 PMiLike looks like a sweet, juicy target to me - especially considering the recent sale of Last.fm. Their user base has exploded since joining the Facebook platform, as they were one of the first on board.
Others to watch for include Picnik and Twitter (yes, Twitter).
Cheers,
Posted by: Aidan Henry | June 27, 2007 6:14 PMAidan
www.MappingTheWeb.com
I dont subscribe to your FB hype verdict. The reason they are being acquired is twofold:
1) acquiring users that you have correctly stated
2) recruiting (60K for 1.3 million users plus a developer - think about how hard it is to find engineers in the Valley)
Would love to see a little less hype focused piece that focuses on the hiring creativity that these companies are showing.
Posted by: neal24 | June 27, 2007 7:13 PM@neal24 #7: I'm pretty sure those are the exact reasons I gave. To quote myself... "these acquisitions are about the users or the developers." ;)
Posted by: Josh Catone | June 27, 2007 7:35 PMNeal24, that is precisely what Josh said in his post.
Posted by: Richard MacManus | June 27, 2007 8:13 PMit might also be noted that i'm not leaving school or anything, just taking a summer internship.
Posted by: Trey Philips | June 27, 2007 10:01 PMCorrection made. :)
Posted by: Josh Catone | June 27, 2007 10:16 PMOops guys - I did miss those points (was I really reading this post?). :)
Posted by: neal24 | June 28, 2007 9:37 AMSeeing as we are only 2 months in with the api it's a little early to make predictions, the market needs to settle and I think the questions regarding app overload are valid - there's a really first to market effect here.
We're looking to develop some Facebook apps for the media industry and are looking to talented devs- where they be hiding??
amartin {at} pfd {dot} co.uk
Posted by: Adam Martin | July 20, 2007 6:29 AM