When Facebook Inc (NASDAQ:FB) shelled out $1 billion to acquire Instagram back in 2012, the deal raised a few eyebrows. Chat and picture-sharing wasn’t a core piece of the social networking site’s strategy. It was “only” a billion dollars, though. So most owners of Facebook stock were on board with the experiment.
The $22 billion purchase of WhatsApp in 2014 was a tougher pill to swallow. Although Facebook had expanded Instagram into something interesting, the price tags for these experiments were getting bigger, fast.
The deals made the March 2014 acquisition of virtual reality outfit Oculus all the more alarming to FB shareholders. After all, what in the world was CEO Mark Zuckerberg going to do with virtual reality goggles?
In retrospect, while they were odd purchases at the time, all three deals have shown real promise.
Maybe diversification isn’t so out of vogue after all.
3 Industries Facebook Could Take Over Next
The premise of a tight focus on doing one thing well was all the rage not that long ago. However, students of the market will recognize a preference for diversification and a preference for focus are at the opposite ends of the same spectrum. And the pendulum swings back and forth between the two on a rather regular basis.
That pendulum is currently swinging in favor of diversification.
Take Amazon.com, Inc. (NASDAQ:AMZN), arguably the poster child for seemingly crazy business ventures that ended up working out. When the e-commerce giant got into the cloud storage business, some shareholders were concerned it would a waste of time and resources. It has turned out to be quite a success.
In the meantime, Microsoft Corporation (NASDAQ:MSFT) acquired professional networking venue LinkedIn Corporation (NYSE:LNKD). Telecom Verizon Communications Inc. (NYSE:VZ) is going to own Yahoo! Inc. (NASDAQ:YHOO) soon.
Lines are being crossed. That’s OK.
With that as the backdrop, and knowing Facebook is being smart in its willingness to look beyond ad sales as revenue source, here’s a closer look at three businesses Zuck could start with relative ease, leveraging its existing technologies and existing Facebook users to get them up and running.
#1: Digital Video/Television
Mark Zuckerberg has made it abundantly clear Facebook is not a media company. It’s simply the middleman that connects individuals with the media, and he has no plans on getting into the film and video business. Thing is, Netflix, Inc. (NASDAQ:NFLX) and Amazon weren’t media companies, either … right up until the point in time they both became one.
It wouldn’t be a huge leap no matter which direction Zuckerberg might want to take it. FB already shares revenue with some digital content providers, confirming the YouTube model works for it. More recently, the company upped its limit on how long a live video stream could last. The cap is now a whopping four hours.
A subscription-based model (even content not created by Facebook) is within reach, adding the social dimension to TV watching that Netflix doesn’t have.
#2: Virtual Reality Filming Hardware/Software
GoPro Inc (NASDAQ:GPRO) was never a bad company. It was just never going to live up to the hype — action cameras are a niche market, and one with slow upgrade cycles. GoPro also never really answered the question of “what do I do with the video I shot?” Ditto for virtual reality cameras, only perhaps even more so on all three fronts.
While Facebook can’t single-handedly make the virtual reality (or VR) camera market bigger than it really is, it can make it better in that it’s the developer of the Oculus Rift — hardware explicitly designed to immerse users in a virtual world.
If Facebook can seamlessly connect VR content creation and VR usage — something GoPro has yet to do well even with non-VR media — it could become the proverbial gold standard in that business, coming and going.
#3: Cloud-Based Storage
Last but not least, though it’s a highly competitive business, cloud storage and cloud computing is a proven business.
Yes, Microsoft, Amazon and others are well ahead in this race, but Facebook has an edge neither of those players has when it comes to making the cloud useful for the average consumer. That is, Facebook has 1.13 active users logging in and checking their feed out every single day.
They may well appreciate being able to access a document, video, music or even backup data while they’re perusing the site.
Don’t look for Facebook to wade into any of these waters anytime soon, if it wades into them at all. On the other hand, don’t be shocked if one or more of them happen sooner or later. A lot of things seem unlikely right up until they became reality.
Indeed, the advent of Facebook itself is one of them. FB toppled a dominant MySpace shortly after MySpace was being hailed as a monopoly.
In the grand scheme of things, getting into cloud storage of deeper into virtual reality would be relatively small potatoes for Facebook.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities.