In 2012, Facebook made waves when it announced the purchase of mobile photo sharing application Instagram for a jaw dropping $1 billion. At the time, critics of the deal felt that Facebook had vastly overpaid for a company with less than 50 employees and essentially zero physical assets. Proponents of the deal argued that Facebook was paying for Instagram’s user base, both present and future, as the application’s popularity was rapidly increasing – particularly among adolescents, who have been leaving Facebook in droves. In the end it opened up a discussion about acquisitions in tech, and if the sky-high valuations of these startups were indicative of another tech bubble similar to the one dotcom boom and bust of the late 90s and early 2000s.
Since then, major players in tech have made even more ludicrously expensive acquisitions. Google has invested in a plethora of innovative companies in the business of developing futuristic products such as Boston Dynamics (advanced robotics), Nest (home automation aka ‘smart home’), and DeepMind Technologies (artificial intelligence). Apple has acquired Dr. Dre’s ‘Beats by Dre’ brand, in a deal that received a fair bit of criticism. Facebook has made moves of their own. After being turned down by Snapchat, the company turned around and bought Oculus VR for $2 billion, a company that’s designing a virtual reality headset, and instant messaging service WhatsApp for a mind boggling $19 billion – yes, billion – making it the largest venture capital acquisition to date.
Whether you believe that we’re living in a tech bubble or not, there’s no denying that there has been some serious moving and shaking in the tech business these past few years, and it’s a trend that looks set to continue into the second half of 2014. The one thing that many of these previous blockbuster deals had in common was their relative secrecy prior to completion. You would expect huge deals like this to be exposed through some kind of leak, but the legal professionals and investment bankers involved have kept surprisingly quiet. In practice, this means that the announcement of these deals have come, for the most part, out of the blue – but that doesn’t mean analysts were always caught off guard. There are always signs to look out for, and if you know where to look and who to talk to you can see the winds of change coming. Here are 5 potential tech acquisitions that we could see finalized by the end of the year.
#5 eBay buys Etsy
Etsy, the venture capital-backed online market for handmade and vintage goods, would go hand-in-hand with a similar E-commerce service like eBay. Etsy was founded in 2005 and slowly but surely picked up steam as the place to go online to look for vintage and artisanal goods. By late 2013 the site had 30 million users and over 1 million active sellers, with total annual transactions around the 1$ billion mark. eBay for their part, have cooled down over the past few years after exploding into the global consciousness in the early part of the 21st century. Users of eBay have been frustrated with the inconsistent approach it takes to moderating cases of fraud and a lack of proper security – which was highlighted by May 2014 security breach that exposed the confidential information of some users to the assailants.
Etsy would be a logical choice for eBay to acquire simply because their business models are so similar. Theoretically, an eBay owned Etsy could operate as the vintage and artisanal arm of the online auction titans business – either independently or through a simple merger with the Etsy user base. Whether it would be a viable candidate that eBay would consider remains up in the air, but many experts have noted that if Etsy were open to the possibility, it’s a deal that would make sense for all parties involved – except for the Etsy users, some of whom would certainly be disappointed.
#4 Visa buys Square
Jack Dorsey had already the hit home run of a lifetime when he helped co-found Twitter, an endeavor that made him one of the hottest names in tech and a billionaire to boot. Most people would either stay at the helm of their original creation or take early retirement and do whatever they want to do for the rest of their life, but Jack Dorsey is a serial entrepreneur. He founded Square in 2009, a company focused on mobile payment technology. Square uses a device called the Square Reader to accept debit and credit cards on smart phones, and has even recently been optimized for bitcoin use. Visa is already an investor in Square, which has raised $300+ million in funding from venture capitalists and has been valued at approximately $5 billion. Square seems like a company that’s been built to be acquired, and a company like Visa would be an ideal destination for the burgeoning payment company. At this point it’s a question of whether Visa wants to or not – we all know they have the cash on hand.
#3 Yahoo! buys FourSquare
Location-based social networking company FourSquare has remained independent for a relatively long time in the tech world, especially considering all the hype it was getting at launch. The company was founded by Dennis Crowley and Naveen Selvadurai in 2009, who wanted to implement a way for people to interact with their physical world using their mobile phones. FourSquare allows users to ‘check-in’ at particular locations like businesses, parks, or other particular spots of note. This ‘check-in’ is then compiled and is visible to your friend list, so your friends know where you are and where you have been. Yahoo! CEO Marissa Mayer is rumoured to be a fan of the service, and because Yahoo! is in a somewhat transitionary phase as they look to expand beyond their current business it would be a logical choice as an acquisition.
#2 Google buys Uber
The future of tech seems to be shifting from out of our pockets and onto the road. The rise of the self-driving car means that technologies that complement the inevitable takeover by smart cars are in a position to be extremely profitable. Uber, a company that specializes in transportation networks and ridesharing technology, has made quite a splash recently. Its system allows people to order rides using their smartphone and then check in real time where the car is and how long until it reaches the customer. The process has been described as ‘software eating the taxi industry’, and indeed it’s been heavily protested by traditional cab drivers. Reported interest from Google makes perfect sense, as Google’s been pioneering their vision of the smart car for quite some time. Uber’s service mixed with smart cars and Google’s geo-location technology would be an absolute juggernaut in the emerging field of smart transportation.
#1 Apple buys Tesla
Full disclosure; this one is a very speculative. All that’s known for sure is that there were confirmed meetings between Tesla CEO Elon Musk and Apple executives in Cupertino in late 2013. What exactly came out of those meetings is anybody’s guess, as both parties have refused to comment on it. For those unfamiliar, Tesla is the new kid on the block in the automobile world. Their luxurious, 100% electric cars have proved to detractors that automobiles can still be sexy and powerful while moving on from fossil fuel use.
Although at the moment they’re very much out of the price range of the average consumer, that’s looking to change. Musk has made it clear that Tesla intends to move down the ladder, first by capturing the luxury goods market and then segueing into the price range of the average consumer – much like Apple did with the iPhone once upon a time. Since the death of Steve Jobs, Apple has noticeably lacked that innovative edge that brought them to where they are today, and with the smartphone and tablet market in the western world maturing, they need to find new sectors of growth. Acquiring Tesla would no doubt be tremendously expensive, but it might allow Apple to open up a brand new and wildly profitable sector.
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