FAAMG: Facebook, Amazon, Apple, Microsoft, Google. The big five tech companies.
Why is it FAAMG, and not MAGA (Microsoft, Apple, Google, and Amazon) or FAANG (Facebook, Apple, Amazon, Netflix, and Google)?
The acronym, coined by Goldman Sachs, includes these companies for two reasons. First of all, the big five tech companies make up as much as 13% of the value of the whole S&P500 by market capitalization. Second, those are the the leading companies that bring sociocultural evolution at a big scale and drive social change at full speed.
As it usually goes with all business around the free market world, big corps have two options: grow or perish. And the way to growth is a one-way street. The name of the game: Merges and acquisitions. Since the day they were founded, the big five tech companies have acquired numerous companies and made them subsidiaries. For example, Hotmail being part of Microsoft is pretty much a given. But did you know that Minecraft, the gaming phenomenon, is also under a Microsoft division? What about IMDb or Twitch being part of Amazon?
In a way, the multinationals are their subsidiaries. And that is why they are so important.
The story of every corporation is that of its acquisitions.
So this is the story of the big five tech companies and their big five acquisitions, as in cost of purchase, fame, or historical significance.
The #1 social media platform is not just that anymore. Facebook had initially launched under the name ‘FaceMash’. A little later however they changed the name to ‘TheFacebook’, only to realize that they probably won’t succeed as a rock band and dropped the ‘The’. With more than 2.3 billion active users today, its growth doesn’t stop in its user base. Since its founding, Facebook has been very aggressive with its acquisitions, and it has now become one of the big five tech companies. Despite being only 15 years old, Facebook has purchased over 70 companies. The biggest of these purchases was WhatsApp, with $19 billion being the price of the acquisition.
Purchased on: April 9, 2012
Cost of purchase: $1 billion
Today, the acquisition of Instagram for 1 billion dollar sounds like an obvious and stellar idea, but it was met with skepticism when this happened, in April of 2012. Back then, Facebook hadn’t held its initial public offering yet (this happened a month later). On top of that, Instagram had just 30 million users and $0 in revenue. However, Mark Zuckerberg’s and the rest of the board saw the potential. Today, Instagram has more than 1 billion active users and continues to grow as one of the most popular social media platforms across all ages and locations. According to Bloomberg, it’s estimated to be worth more than $100 billion. This 100-fold return proved that Facebook could turn visions of growth into reality. Today, the market expects from Instagram to generate more than $8 billion in revenue.
Purchased on: April 19, 2014
Cost of purchase: $19 billion
If Instagram’s acquisition was met with some skepticism for $1 billion, then $19 billion for the purchase of an SMS app just two years later could seem like total madness. But, as they say, there is a method to the madness. In reality, WhatsApp was under huge growth. The app had a bigger market reach than Tumblr, Foursquare, Vine, and Google+ at the time. Also, Facebook was interested in its high user engagement, too.
Meanwhile, in WhatsApp’s territory, their product culture was based on 3 “no’s”: “No Ads! No games! No gimmicks!”. This is what was written on the co-founder’s desk, Jan Koum. Given this company culture, WhatsApp making money before Facebook bought it? The messaging company had based its business model on a $1-year subscription, which resulted in $20 million in annual revenue; completely ad-free. And as soon as Facebook bought the messaging app, this no-ad policy was something that one of our big five tech companies didn’t like much.
When WhatsApp was still autonomous, they valued their users’ privacy and didn’t want to monetize on the personal data of their users. Who does that, right? Well, Facebook does. And Facebook does not share the same sensitivities with WhatsApp. For the first few years, this gap in culture hadn’t escalated yet, as WhatsApp was operating largely independently. Later on, in 2016, WhatsApp made an announcement about the app being free. WhatsApp assured its users that the change of subscription fees would not mean the introduction of third-party ads. Instead, they would be testing tools through their audience.
Ultimately, the partnership between the founders of the acquirer and the acquired did not last. In April 2018, the two co-founders of WhatsApp announced their resignation. In the meantime, WhatsApp’s future, as part of one of the big five tech companies, still looks promising.
Purchased on: March 25, 2014
Cost of purchase: $3 billion
Oculus VR is a young brand. Founded in 2012, the tech company is best known for Oculus Rift, a virtual reality headset hardware, designed for video gaming. Before Facebook’s acquisition, Oculus had gone full indie to find money for their headset. For that, they launched a Kickstarter campaign to develop this demanding piece of equipment. The campaign was more than successful, as it raised a little over $2.4 million – ten times the original goal of $250,000.
Remember when Facebook purchased WhatsApp? Facebook didn’t want to stop at mobile messaging; it now wanted to buy into gaming as well. The social media platform knows that the future of virtual reality market is prosperous and it wishes to capitalize on that. And so, it bought Oculus VR.
Since then, the Oculus VR has made multiple acquisitions of its own. The most prominent of these acquisitions was the 2015 purchase of Surreal Vision, a UK-based startup specializing in 3D scene mapping reconstruction. Another major acquisition was that of Pebbles Interfaces, the Israeli-based company that specializes in hand-tracking technology.
A few months ago, Oculus Go, an all-in-one standalone headset also made its debut. According to Mark Zuckerburg, after developing immersive VR gaming experiences, the goal is now to expand to all sorts of virtual experiences, including social networking.
Purchased on: June 18, 201
Cost of purchase: $100 million
Since Facebook acquired Instagram, it became more interested in photos and the technology involving them. This fact explains the purchase of Face.com, a facial recognition technology company from Israel. The company allowed the integration of facial recognition for Facebook’s photos. Face.com is responsible for two Facebook applications: Photo Finder and Photo Tagger. If you are familiar with notifications such as “Your friend added a photo you might be in” or perhaps tag suggestions considering your face, you now know where Facebook acquired this technology from. It was Face.com.
The use of recognition technology applied on a massive scale is something new for us people. And thus, the general public met this kind of technology with skepticism. In April 2018, ConsumerAffairs reported that Facebook was sued, with plaintiffs alleging that the company’s Tag Suggestions feature violated users’ privacy by storing biometric info without their explicit consent.
Since then, a random e-commerce company has taken over the Face.com domain, and the whole system regarding deep face facial recognition is today running under the name DeepFace. Not only did the face recognition system give value to Facebook, but Facebook also upgraded it. Its system is now said to be 97% accurate, compared to 85% FBI’s system for face recognition (NGI).
Purchased on: August 10, 2009
Cost of purchase: $47.5 million
FriendFeed, although no longer in existence, is worth mentioning due to its historic significance for Facebook, as well as being a core component for Facebook’s UX. Without FriendFeed, Facebook would not be the same today – and possibly not one of the big five tech companies either.
FriendFeed was founded in 2007, and Facebook had its eye on it since the beginning. In practice, it was a real-time feed aggregator with one mission: “to glue together the web”. Up to this day, FriendFeed’s influence on the #1 social media network is still present. For example, the ‘Like’ button traces back to the need of FriendFeed to create a mechanism that would let users know that their friends appreciate what they post.
Facebook acquiring FriendFeed, meant, first and foremost, adding the FriendTeam amongst its ranks. All four founders were former Google employees, who were involved in projects including Gmail, AdSense and Google Map. Besides, it managed to do something Google hadn’t even dreamed of: create a real-time web experience. Ultimately, the purchase of FriendFeed was the purchase of a real innovator in the web landscape and a pivotal moment for Facebook and the tech world in general.
As the story goes, Amazon started as an eCommerce store selling books in the mid-’90s. Nowadays, it is the biggest retailer globally, surpassing Walmart. It’s also the world’s largest internet company by revenue. The multinational has gone beyond the eCommerce industry, and it now focuses on artificial intelligence and cloud computing as well. It’s clear that no market is safe from the ever-expanding empire of one of these big five tech companies.
Purchased on: August 25, 2014
Cost of purchase: $970 million
Twitch is a relatively new brand, founded in the first years of the 2010s. Twitch is a live streaming video platform and by far the most popular one for that matter. In the US, it accounts for nearly 2% of all traffic during peak hours, following Netflix, Google, and Apple.
Day to day, more and more content is produced and uploaded on YouTube to be watched on demand. Likewise, more content is streamed online. Regarding video-on-demand, Amazon has a service called Amazon Instant, which comes with Amazon Prime membership. For steaming, however, the world’s most powerful online retailer didn’t have a service, but it surely wanted one. Enter Twitch.
Before Amazon bought Twitch, Yahoo and Google both had tried to acquire the streaming site. All companies failed to come to an agreement with the live streaming platform though, except Amazon. In his thank you letter to the community, Emmett Shear, the CEO of Twitch explained why he chose Amazon as the parent company for his brand.
“We chose Amazon because they believe in our community, they share our values and long-term vision, and they want to help us get there faster. We’re keeping most everything the same: our office, our employees, our brand, and most importantly our independence. But with Amazon’s support we’ll have the resources to bring you an even better Twitch.” – Source
Purchased on: April 27, 1998
Cost of purchase: $55 million
One of the company’s most popular subsidiaries, IMDb is the biggest online database for information regarding films, TV, and streams. In 2002, IMDb released its first service, called IMDbPro. Aimed at professionals in the show biz, IMDbPro allows subscribers to post their own resume and photos. The users also gain access to the agent contact information for any actor, producer or director that has an IMDb page.
Only a couple of months ago, the subsidiary announced a video-on-demand service, the IMDb Freedive. The new service is a free, ad-supported streaming video channel, currently available only in the US.
So what does this acquisition really offered to Amazon? With IMDb (Freedive) and Twitch at its disposal, Amazon is now a protagonist in the video industry, serving the demand for video-on-demand and live streaming videos alike.
Alexa Internet Inc.
Purchased on: May 23, 1999
Cost of purchase: $250 million
Not to be confused with Amazon’s virtual assistant that came out in recent years, Alexa Internet Inc. is an analytics provider. It is an assistant for keyword research, competitive analysis, and website ranking by providing vital data. You must have noticed by now in this very article that under the basic info of each of the big five tech companies, there is its global -Alexa- rank.
Alexa was one of the early acquisitions of Amazon that cost $250 million in stock. As of May 2018, Alexa Internet’s tooltip calculates the Global Rank from a combination of daily visitors and page views on a website over a 3-month period. Alexa Internet ranking is considered to be a standard global internet metric.
Purchased on: August Jan 31, 2008
Cost of purchase: $300 million
A little bit of history first. More than 20 years ago, Audible released the first portable audio player designed specifically for listening to audiobooks. Given that there were no MP3 players, Audible had to make its own hardware – the Audible Player. The Audible Player became the very first portable digital audio player in volume production. Not only that, but its service was also web-based. Innovation was strong with Audible.
Back to today, the publishing industry is on the decline.
And it’s been like this for the last decades. Amazon caught on that early on and envisioned the bright, and lucrative, future Audible could have. It would also make a good asset and a great addition to Amazon’s digital store. In the dire competition with Apple’s iTunes, Amazon had signed deals with major music companies like Vivendi’s Universal Music Group and Warner Music Group Corp. Audible, with more than 80,000 programs at the time would assist Amazon’ digital store furthermore.
These days, partly due to acquiring Audible, audiobook sales are booming.
Whole Foods Market
Purchased on: August 28, 2017
Cost of purchase: $13.7 billion
When Whole Foods Market, the American organic supermarket chain was bought by Amazon, it was the #1 brand in the organic business – but it was struggling. Sprouts Farmers Markets, Kroger, Trader Joe’s and the rest of its major competitors were gaining ground. Whole Foods had already started to decline. So one day, in full secrecy, the CEO of the soon-to-be subsidiary reached out to Jeff Bezos, and they eventually came to an agreement for 13.7 billion dollars. Since then, the impact of the deal on the supermarket chain hasn’t gone unnoticed. The supermarket chain stores look different, their shelves include more small brands than they used to, and Amazon has renewed efforts to deliver fresh food.
Also, the acquisition of Whole Foods Market gave a bigger brick-and-mortar presence to one of the big five tech companies, through more than 300 physical stores across the US. Moreover, Amazon now has more insight than ever before, as it combines data from online and offline purchases of its customers.
With the exception of Beats Electronics in 2014, all purchases from Apple are counted in the millions, not billions. In contrast with the rest of the big five tech companies, Apple prefers acquiring small companies which can easily integrate into its line of products. Apart from the top five Apple’s acquisitions that follow, other common business categories are software, machine learning, and semiconductors. Today, rumors say that investors of the tech company want Apple to do a big acquisition; the names Netflix, Sonos, and Activision Blizzard are those that are heard the most.
Purchased on: September 24, 2018
Cost of purchase: $400 million
Historically speaking, the music discovery app is one of the oldest apps in the App Store, as it debuted the day the App Store launched, in July 2008. Within ten years, Shazam counted 10 million downloads in 150 countries. The day Apple bought Shazam, the vice president of Apple’s Music made an announcement:
“Apple and Shazam have a long history together. Shazam was one of the first apps available when we launched the App Store and has become a favourite app for music fans everywhere. With a shared love of music and innovation, we are thrilled to bring our teams together to provide users even more great ways to discover, experience and enjoy music.”
In 2015, Shazam moved beyond audio identification and introduced visual identification. In addition to identifying objects, Shazam developed visual recognition technology, as a platform for marketers who seek to engage with audiences. At this moment, the app has been downloaded more than 1 billion times, and it even has its own show on American television, called ‘Beat Shazam’. Since iOS 8, Siri incorporates Shazam, and there are connections with Apple Music in the Shazam app. Further integrations between Apple and Shazam are also most possibly coming.
Purchased on: August 1, 2014
Cost of purchase: $3.0 billion
Apple’s investment in the music industry is now pretty much a given. Hence the largest acquisition for the company, to this day, comes as no surprise. Also, Apple’s successful marriage of technology with culture was what had inspired Beats Electronics since the beginning. Apple acquiring Beats was a vital solution to its revenue growth, as it had slowed sharply in the last few years. ‘Beats by Dr. Dre’ price tag at $450 and manufacturing cost at just $14 to make, meant a high-profit margin. This acquisition also managed to make Dr.Dre the first ‘hip-hop billionaire’.
Fast forward five years later and Apple’s most expensive subsidiary today wasn’t exactly a game changer. For one, Apple shut down Beats’ music player, Beats Music, as it integrated with iTunesRadio and became redundant. However, what Apple did with Beats’ software, didn’t do with Beats’ hardware. The core headphone brand is producing headphones to this day, including the Beats Studio 3, and the Powerbeats Wireless headphones, which incorporate the technology of AirPods.
Purchased on: July 1, 2002
Cost of purchase: $30.0 million
One of the most key early acquisitions by Apple was that of Emalogic. Emalogic was a German music/hardware company known for its digital audio workstation (DAW) Notator Logic, or just Logic. After buying Emagic, Logic was no longer available for the Windows OS, and its name also changed to Logic Pro. From there on, an essential version at a reduced cost, based on the same interface and audio engine launched under the name Logic Express. Based on Logic’s audio engine, another product came. The new DAW was part of the bundle iLife, a software suite for macOS and iOS.
Since December 2011, the production of the boxed versions of Logic Pro and Logic Express stopped. They are now available only through the Mac App Store.
Purchased on: February 7, 1997
Cost of purchase: $431.5 million
When Steve Jobs was overthrown from Apple in 1985, he had money, time, wits, and a lot of ambition. The perfect ingredients for a business venture. In the case of Steve Jobs, the venture was more than one. His energy was channeled into two different activities: computers, just like before, and an uncharted territory – digital animation. He bought a division from LucasFilm, called Graphics Group and renamed it to the now-known studio Pixar. Steve Jobs remained the CEO and majority shareholder of Pixar until it was sold to Disney, in 2006.
Next, it was NeXT. In 1985 Steve Jobs founded this small computer and software company. Only three years later, the company released the first NeXT computer hardware which was relatively affordable. The computer was primarily designed for higher education and business applications. But NeXT computers never made it to commercial success.
However, one particular user acquired the NeXT computer and changed the course of history. That man was Sir Timothy Berners-Lee, who invented the World Wide Web while operating the OS NeXTSTEP on a NeXT Computer at CERN.
In the meantime, Mac OS was getting old; Apple wanted to do something about it. And so, Apple decided that Steve Job’s NeXTSTEP’s foundation was what it was looking for. Ergo, in 1997, Apple made its most expensive acquisition for nearly two decades, gaining both the Man and the Machine. The man, Steve Jobs returned to one of the big five tech companies that he co-founded in 1976. There he would fill in the role of the consultant until he became the CEO in 2000. As for the machine, some of NeXTSTEP’s interface features were used in Mac OS X. In addition, NeXTSTEP’s processor-independent capabilities were retained in Mac OS X, leading to both PowerPC and Intel x86 versions.
Purchased on: April 27, 2010/ $1 billion
Cost of purchase: $150.0 – $250.0 million (undisclosed)
If you are an iPhone user, you need no introduction to Siri. But maybe you need one for some parts of its history. The personal assistant with the exceptional voice recognition technology was originally developed by SRI International Artificial Intelligence Center. Being a defense research project, it was funded by, well, US taxpayers – for $150m in total.
But how can the cost of a single mobile app be as much as 1 billion dollars? An article from 2010 published by xconomy, The Story of Siri, from Birth at SRI to Acquisition by Apple explains:
“The Siri app itself isn’t expensive; in fact, it’s free to iPhone, iPad, or iPod Touch users. The algorithms that make the app work, however, are the product of years of defense-sponsored research.” […] “It’s about the artificial-intelligence insights behind it: the chain of machine-learning, natural-language processing, and Web search algorithms that swing into action with every Siri query. When you can access these algorithms from a mobile device like the iPhone, and prime them with a bit of contextual awareness such as a GPS location reading or an understanding of the user’s preferences, you have a powerful personal tool that Norman Winarsky, SRI’s vice president of ventures, licensing, and strategic programs, likes to describe as a “do engine” rather than a search engine.” Source
The oldest of the big five tech companies, Microsoft Corporation, made its acquisition debut in 1983. It started with a company best known for its developers who made what is now Microsoft PowerPoint. Since then, the MS Corporation has purchased an average of six companies a year. All these years, through its successful strategic acquisitions and merges, Microsoft has prevailed and continues to deepen its dominance in many technology fields.
Purchased on: December 8, 2016
Cost of purchase: $26.2 billion
LinkedIn’s acquisition by Microsoft is not only the biggest for Microsoft, but for our list, too. It’s also one of the five biggest tech deals of all time, along with Dell buying EMC Data Storage ($67.0 billion), Avago merging with Broadcom ($37.0 billion), IBM acquiring Red Hat ($34.0 billion), and Softbank taking over Arm ($31.4 billion).
The beginning of 2016 and the end of the same year had little in common for LinkedIn. At the start of the year, the social network’s revenue forecast fell far short of expectations. As you can imagine, Wall Street wasn’t too happy about it. As a result, LinkedIn’s stock price plunged by 46.5% and sank to a three-year low of $110. In a pure deus ex machina moment, Microsoft put an end to all of this.
For Bill Gates’ company, this acquisition meant, first and foremost, data. The business social media platform’s massive database, with millions of members, passing on Microsoft, meant that the latter company could now compete with Facebook and Google in the data game. All this time, Microsoft had no real insight into the ultimate end users of most of its products it was selling. It was time that changed.
On the other side of the deal, LinkedIn also looked pretty satisfied. In the words of Jeff Weiner, CEO of LinkedIn, this acquisition results in the combination of the world’s leading professional cloud and network. It connected the professional world, with more than 1 billion Microsoft users and more than 467 million members on LinkedIn, with a common goal: “to create more connected, intelligent and productive experiences”.
Purchased on: May 10, 2011
Cost of purchase: $8.5 billion
The purchase of the telecoms app that specializes in video chat came a bit out of the blue. The reason being that Microsoft hadn’t made any new subsidiaries for quite some time. Not only that, but the MS enterprise already was well-established in the real-time communication and instant messaging space with many different apps and programs: MSN Messenger, Windows Live Messenger, Windows Messenger, Xbox Live and Lync, which Skype for Business replaced later on. As with anything regarding the tech and business world, there is a good explanation.
An unnamed Business Insider source revealed that it was part of Microsoft’s plan to make a bigger move in the IP comms, similar to how Microsoft bought aQuantive for $6 billion in 2007. Skypes’ user-base, counting more than 660 million at the time, was an excellent audience for Microsoft to sell many of its products. Last but not least, rumors that other companies like Cisco, Google, and Facebook were interested in Skype put pressure on the tech giant. A couple of years later, Cisco, in particular, lost court challenge to Microsoft’s takeover of Skype.
I don’t know about you, but Windows Live Messenger is possibly the #1 I miss the most about the tech of the past. That and the Windows 95 startup sound.
Purchased on: December 31, 1997
Cost of purchase: $500.0 million
It’s hard to imagine Hotmail before the takeover of one of the big five tech companies. Hotmail was founded in the summer of 1996, and the very next year it was already a division of Microsoft. Even before Microsoft though, the webmail service is a growth case study material, for it managed to get 12 million subscribers in the span of such a short time. The best part was that it did so by building brand awareness with $0. The term growth hacking didn’t exist then, but what Hotmail did is a growth hacking case study. Since it was acquired, Hotmail’s been through many phases: MSN Hotmail, Windows Live Hotmail, and its final transition, and current form, Outlook.com.
From 2MB to 15GB, and 23 years, Hotmail has come a long way.
Purchased on: October 26, 2018
Cost of purchase: $7.5 billion
This is another one of the big Microsoft acquisitions. After Github’s 10-years independent run, its streak broke. This was not the first time that the Microsoft enterprise faced the open source world. The last time this happened however, it was more of a collision. What I’m talking about is the notorious Halloween Documents, a series of confidential Microsoft records regarding free software and open-source software. The documents leaked by open-source software advocate Eric S. Raymond in 1998. Those documents identified open-source software, and in particular the Linux operating system, as a major threat to Microsoft’s domination of the software industry, and suggested tactics Microsoft could use to disrupt the progress of open-source software.
The former CEO of the enterprise from 2000 to 2014, Steve Ballmer, was known for his secretive nature when it came to software building. Nonetheless, things have changed since then. His replacement, Satya Nadella has a whole different philosophy which changed the stance of Microsoft’s openness, or lack thereof, by 180 degrees. If it hadn’t been for that shift of perspective, we wouldn’t talk about this acquisition today.
As a matter of fact, Microsoft’s investment in Github had started a few years before it even acquired it. According to a case of “Microsoft acquiring GitHub is a good thing,” the former company genuinely tried to win over the dev community multi ways:
It open-sourced all of the .NET framework on GitHub
It built out rich, system-level Windows features to bring a rich Unix shell to the platform to make development easier
Github began and continues to maintain one of the best open-source code editors available for every platform out there
It became the largest contributor to open source on GitHub.
Microsoft’s whole Windows 10 platform is now built on open-source Progressive Web App technology
Currently, corporate open source programs are on the rise. For Microsoft, companies that embrace open source technologies usually do better than those which prefer isolation. Managing an open source program comes with benefits such as: Awareness of open source usage/dependencies, increased developer agility/speed, and better/faster license compliance
TechCrunch confirms open-source software is taking over the world:
Red Hat is being acquired by IBM for $32 billion (3x times its market cap from 2014); MuleSoft was acquired after going public for $6.5 billion; MongoDB is now worth north of $4 billion; Elastic’s IPO now values the company at $6 billion; and, through the merger of Cloudera and Hortonworks, a new company with a market cap north of $4 billion will emerge.
Needless to say, in the case of GitHub, this purchase secured its future and a big part of the future of open-source software.
Purchased on: November 6, 2014
Cost of purchase: $2.5 billion
You may haven’t heard of Mojang, but you definitely know its biggest product: Minecraft. Minecraft is one of the best-selling video games of all time, with 154,000,000 sales, coming second only to Tetris. Despite its huge early success, the game developer/publisher responsible for the cultural phenomenon ruled out being sold or becoming a public company, as he valued independency pretty high.
Within a few years, this had changed. In 2014, through a tweet, Mojang’s founder Markus – Notch – Persson let people know that he was fed up with the business drama and wanted to go back to just making games.
Anyone want to buy my share of Mojang so I can move on with my life? Getting hate for trying to do the right thing is not my gig.
Colossal video game companies such as Activision Blizzard and Electronic Arts expressed their immediate interest. But in the end, Mojang chose Microsoft. How come Microsoft invested so much though in a game though? HoloLens, the still-under-development augmented reality smartglasses, was a key driver for the acquisition of Mojang and Minecraft. Unlike Apple, Microsoft is open to augmented reality gaming on the HoloLens.
For the time being, the franchise of Minecraft hasn’t lost its impetus, and it looks very promising. Apart from the multiple VR and AR projects in development, there is an upcoming computer-animated TV series, called Minecraft: The Series, and an upcoming Swedish-American film, Minecraft: The Movie.
Google had a motto for its corporate code of conduct: “Don’t be evil”. If it had to go for another one, it would most likely be “If you can’t create it, buy it”. Google’s list of acquisitions is a long list indeed, counting more than 200 purchases since 1998 when it was founded. Google may have started as a search engine, but today it is a giant in the technology industry and one of the big five tech companies.
Purchased on: October 9, 2006
Cost of purchase: $1.65 billion
In 2005, Google released its video hosting service, Google Video. All videos were hosted on Google’s servers and could embed on other websites. This allowed webmasters to host and share videos on their websites without having to worry about their storage or bandwidth. During the same year, three former employees of PayPal made their own video hosting platform: YouTube. The original idea of YouTube’s format was an online dating service, through video. In the absence of enough dating videos, the initial plan changed and “anything-goes” videos were now ON.
YouTube surpassed Google Videos since the beginning and kept gaining more and more market share in the video wars. It did some things differently that made it succeed more:
Youtube was more open towards the information it gave for every video, such as the number of views.
It had more focus on the community with features like apost section with comments.
It had the option to create lists with favorite videos and playlists.
YouTube was now at the top. Meanwhile, Google Videos ceased to exist, little by little.
With YouTube’s acquisition, Google didn’t want to make the same mistake twice, like it had done with MySpace by not buying it. You read that right; Google almost-buying MySpace, the acquisition that never happened, was considered to be a “mea culpa” in the tech world back then.
Now, YouTube has become the tech goliath we all know. In Alexa rank it’s the second-most popular site, following, well, Google. With one billion hours of content being watched on the platform every day, YouTube has become TV2.0.
Purchased on: August 15, 2011
Cost of purchase: $12.5 billion
The biggest acquisition from Google could not happen without some behind the scenes action and a little corporate drama. At the time, Motorola was the market leader in the home devices and video solutions business. A market leader that was bleeding money, however, and had a fifth straight quarter of losses. Google, the white knight, put Motorola up on its shiny horse. But Knighthood alone doesn’t justify a $13.7 billion dollars acquisition, does it? So what could justify such a purchase? Largely, there were two main reasons that lead to this purchase, namely patents and Samsung.
Regarding patents, Motorola had 17,000 patents, with 7,500 patents more pending – worth a few billion dollars in total. By acquiring Motorola, Google managed to build up the company’s patent portfolio which enabled it to better protect Android from anti-competitive threats.
And then, there was Samsung. Samsung was the driving force behind Android, being the operating system’s main host. But that wasn’t enough for the South Korean tech company. Methodically, it was hiding Android’s existence through its interface, mainly through TouchWiz. The Samsung interface released in 2010 and featured a full touch user interface. At the end of the day, its bloatware was wasting storage space and slowing the operation of the Android. Despite all that, Samsung didn’t stop there. It degraded Android’s performance furthermore, by switching out vast parts of the software – phone dialler, calendar, email client, contacts, notification center, music and video player, voice control and much more – for its own apps.
Google had grown tired of Samsung’s bloatware, skins, and gimmicks. Thanks to the Motorola acquisition, and all of its mobile-making capabilities, Google was about to teach a lesson in smartphone manufacturing. And it did. In 2013, Google made ‘its own Galaxy S4’, it increased production of its Nexus flagship phone and released a handful of well-received Motorola handsets which ran almost completely plain versions of Android.
Samsung learned its lesson, and at the beginning for 2014, Google and Samsung signed a new 10-year global patent agreement. Thanks to this deal, Google and Samsung would pave the way for deeper collaboration on research and development. This way, the two companies also showed to the industry that “that there is more to gain from co-operating than engaging in unnecessary patent disputes”. In any case, Google managed to convince Samsung to tone down its skins and gimmicks and focus on core Android apps. Two days later, Google sold Motorola Mobility to Lenovo for 2.9 billion dollars. Mission accomplished.
Despite everything, think about this for a moment: Was all of this enough to justify a $10 billion loss by one of the big five tech companies? In reality, this number is the outcome of a misreported myth, which results from subtracting Motorola’s $2.91 billion sale price from its $12.5 billion purchase. Yet this calculation doesn’t take into account the $3.2 billion Motorola had in cash, another $2.4 billion saved in deferred tax assets, and two separate Motorola unit sales totaling $2.5 billion in 2013. Google never “lost 10 billion dollars”, and most likely no tech giant ever will.
Purchased on: August 11, 2013
Cost of purchase: $966 million
Waze, the GPS navigation software, was still a small project in 2006. It was named FreeMap Israel and became a company two years later. According to the archives of web.archive, it aimed to create, with the crowdsourcing assistance of community users, a free digital database of the map of Israel in Hebrew.
With that purchase, Google would enhance its navigation services, beyond Google Maps. In a way, it was the same force that lead to YouTube’s acquisition six years prior. Google Videos and YouTube offered more or less the same service. However, YouTube had the community and Google wanted exactly that.
In the case of Waze, the App had a loyal group of users. And so Google would eventually be left with two options. On the first option, another corp would buy Waze. And then Google would have to compete with said corp (possibly Apple or Facebook), which would already have a significant network effect. The second option was what it chose: To buy Waze, and thus to incorporate features that Google Maps lacked, such as blocked roads, accident reports, speed cameras, police presence. In addition, it gained access to a 50 million users database.
Currently, Waze is still a free App for both Android and iOS and operates in more than 25 languages and 60 countries.
Purchased on: October, 2003
Cost of purchase: (Undisclosed)
Apart from being one of the big five tech companies and the #1 search engine, Google is also a verb. To google is to search the Internet for information about a person, a topic, et cetera. As an official word, it was added to the Oxford English Dictionary in the mid-’00s. Yet, there is another internet term born on the net, and we use it daily both as a noun and a verb: blog.
To blog, or “to edit one’s weblog or to post to one’s weblog”, was used as a noun and verb by Evan Williams, the founder of Pyra Labs. If the name Evan Williams rings a bell, it’s because he is one of the co-founders of Medium and Twitter – both of them!
Pyra labs is another obscure company which remained under the shadow of its product. In our case, that product is Blogger. Blogger, the famous blog-publishing service was one of the key internet existences that made blogging as big as we know it today. Along with ‘Open Diary’ and ‘LiveJournal’, Blogger was part of the Holy Trinity of Blogging.
A great concept, lead by a great mind, at the climax of the dot-com boom, could only mean great success, right? Except what followed the dot-com boom was the dot-com bubble burst. The burst hit Blogger hard, being a young company with limited profits and entirely free. Most of the employees left the company while a few stayed and worked just for the cause, without receiving any salary for months. At one point, Evan Williams found himself the only employee of Blogger. But he never gave up. Sometime later, when the online economy began to pick up, the company managed to get funded as some ads also starting appearing on the blogs.
And then Google came along.
The details of the deal remain undisclosed to this day, but what we know is that Google purchased Pyra Labs, Blogger, and its six employees, along with Evan, in October 2003. Later on, Blogger was moved to Google’s servers, the platform was redesigned, and its services became free. It incorporated new features, too. In the end, although the amount of money Google gave to acquire Pyra Labs was relatively small, the purchase of Blogger by Google is a truly historic purchase.
Purchased on: September 21, 2017
Cost of purchase: $1.1 billion
Six years after the purchase of the Motorola Company, Google made its next step in the field of mobile manufacturing. To make it clear right off the bat, Google didn’t purchase HTC entirely, only a part of it. Google and HTC already had a close relationship, like in the case of the Android smartphones Pixel & Pixel XL; HTC was the manufacturer, and Google was the developer and the marketing force.
The HTC portion that Google acquired was the one responsible for the development of several market-leading smartphones, including the original Pixel. This acquisition also meant the change of hands of about 4,000 employees, who mainly worked in HTC’s design and research, as well as non-exclusive licenses to smartphone-related intellectual property held by HTC.
In the words of Rick Osterloh, Google’s SVP:
That’s why I’m delighted that we’ve officially closed our deal with HTC, and are welcoming an incredibly talented team to work on even better and more innovative products in the years to come. These new colleagues bring decades of experience achieving a series of “firsts” particularly in the smartphone industry—including bringing to market the first 3G smartphone in 2005, the first touch-centric phone in 2007, and the first all-metal unibody phone in 2013. This is also the same team we’ve been working closely with on the development of the Pixel and Pixel 2. […] Finally, with the official close of this deal, we’re expanding our footprint in the Asia Pacific region. Taiwan is a key innovation and engineering hub for Google, and Taipei will now become the largest Google engineering site in APAC. – Source