Silicon Valley is like the Wild West lately as tech companies duke it out in a sort of gold rush to stake their claim on the next big thing, grabbing tech startups at any price.
The news that social messaging icon Facebook is buying mobile messaging company WhatsApp for $19 billion is the latest in a wave of recent acquisitions by it and rivals Yahoo, Google and Apple. Whether the goal is deeper penetration into the mobile space or greater connectivity among the world’s young and restless, their moves signal each company’s strategy to remain vibrant going forward.
Here are what some of the recent deals in Silicon Valley tell us about the future of the Internet and technology.
Facebook gets half of its revenue from advertising on mobile devices, so its purchases and attempted buyouts are aimed at expanding its user base. Facebook CEO Mark Zuckerberg has global ambitions to develop more popularity in emerging markets and WhatsApp is the partner that could help it grow internationally, even if it still needs time to create more ways to generate revenue from its users. Zuckerberg also reportedly made a $3 billion buyout offer to purchase mobile messaging application Snapchat, which that company rejected.
Critics say Facebook is losing sway with younger consumers because older generations are using the social network, but the company continues to grow for now. Zuckerberg’s purchases of mobile applications are in part a move to eliminate competitors and avoid the decline that MySpace experienced, says Brian Blau, a research director at Gartner information technology market analysis firm.
“Facebook is being aggressive expanding its business in multiple directions that are complementary to the core but are not the same, like with its purchase of Instagram,” Blau says of the company’s expansion into mobile photo messaging with Instagram, and now texting with WhatsApp. “Facebook does not have the luxury of lots of apps and services to compete against the other tech companies.”
Even an institution like Apple is trying to diversify its business.
Apple’s reputation for innovating must-have devices like the iPod and the iPhone is a double-edged sword, as the company has fewer products than many businesses. That is driving Apple to search for new markets to enter.
Apple “had conversations” with electric car maker Tesla Motors in 2013, Tesla CEO Elon Musk recently told Bloomberg, adding that a sale is “very unlikely.”
Apple’s interest in buying or partnering with Tesla reflects a desire to take advantage of the growing demand for cars that connect with mobile phones to allow users to check texts, make calls, navigate directions and listen to music through voice commands. Apple’s digital assistant Siri is available in cars including those built by Chevrolet and Honda.
Apple might not need to own a car company when collaboration on mobile application design could be a less expensive move, says Carolina Milanesi, strategic insight director with the consumer research firm Kantar Worldpanel.
“The Mac, iPad and the iPhone are with us every day, but the car is the next big thing,” Milanesi says of Apple’s goal of expanding its connected car ecosystem. “If you look at the core customer for Apple I think you will find a lot of similarity with people who are interested in Tesla. They target the same market since they sell premier technology products.”
The company also is competing with Google in the wearable technology space, preparing wearable devices to tackle the high bar of innovation the company sets for itself.
Apple has a reputation for taking its time to develop game-changing innovations that are more than a “me-too product,” Milanesi says. Because Apple spends time making the perfect product Google may beat it to develop a smart watch first, especially since it has already designed the Google Glass visor..
The two companies are increasingly competing on the same turf. The Google Android operating system is Apple’s main competitor in the smartphone and tablet universe, but the auto market is also becoming a battleground for these titans.
Google is spending enough dough to compete with nearly every sector of Silicon Valley. The search engine has approximately $58.7 billion in cash, which it has used to execute more deals with other companies than any business in the world during the past three years, according to data from Bloomberg.
Google even reportedly tried to purchase WhatsApp for $10 billion, sources told Fortune magazine, and later tried to offer more than Facebook’s buyout of $19 billion, according to The Information. Google’s Android is the most widely used mobile platform in the world and the company likely wanted to keep its popularity on mobile devices with help from WhatsApp’s users in emerging markets.
With its vast user base Google has built a diverse suite of services on its Web platform, a goal that its younger competitor Facebook aims to accomplish. Google plans to expand the popularity of its Android mobile platform onto connected cars with services including navigation and hands-free phone calls. Google’s 2013 purchase of mapping-location software Waze helped boost that navigation service.
Google’s recent purchase of smart-thermostat maker Nest Labs indicates the company may eventually apply its Android ecosystem to help manage connected devices in homes along with cars.
The Google Glass visor shows how the Mountain View-based giant is serious about wearable development, Chromecast shows its interest in streaming video, and its secretive Google X lab is working to invent the next big thing with innovations that include a smart contact lens that tests tears for people with diabetes.
It is hard to pinpoint what Google will do next because it runs numerous strategies at once, but equally difficult to predict is whether Yahoo will stage a successful comeback to compete with its search engine rival.
Yahoo CEO Marissa Mayer has been working hard to return the company to its former spot at the top of the search engine space, but her shopping spree for companies and employees still leaves a mystery for many as to what her grand strategy is. Part of it is the general mission to combine relevant advertisements with quality content.
The Web portal has acquired dozens of companies and startups since appointing Mayer as CEO in July 2012, including the purchase of photo sharing website Tumblr and news story summarizing mobile application Summly.
During the Consumer Electronics Show in January in Las Vegas, Summly founder Nick D'Aloisio presented the Yahoo News Digest application built with help from his service that provides a collection of top stories tailored for a user's interests that include concise text posts with maps, photos, tweets and other visuals.
"Digital magazines are a core part of our long term vision," Mayer said during the CES, describing a goal of creating online news relevant and engaging enough to cure the "too long, didn't read" stigma of Web articles.
Yahoo has a search engine partnership with Microsoft Bing, but Mayer has bigger plans, and is searching for a new strategy to replace that deal, according to tech blog Re/code, which cited sources inside Yahoo and a speech she gave during a Goldman Sachs conference on Feb. 11.
“When I look at things like contextual search, I get really excited,” Mayer said. “The amount of information available to build a service on is just incredible.”
Contextual search is a sort of holy grail sought by Google and other search engines. The goal is to upgrade the engine algorithm by matching keywords with a user’s location and what they are doing to help paint a more complete picture of online behavior, which could be invaluable for search convenience and relevant advertising.
Yahoo could build its new search strategy using recent acquisitions including Aviate, which organizes the home screen of applications on a mobile device based on what the user is doing. Mayer’s efforts have not gone unnoticed by Wall Street, and during her tenure Yahoo’s stock has reached the highest it has been in six years.
In the end, the tech giants are racing to dominate a world in which devices become an intrinsic part of everyday life, whether helping people find a nearby takeout or helping them manage chronic diseases. And that’s a world of everywhere, from home to office to car.