Social media sites are among the most trafficked websites on the Internet, and innovations driven by social media often have far-reaching implications for the marketplace as a whole. Social media exits often lead the technology deals for a given year, but sometimes it is hard to understand what those high prices really mean.
Here are the top seven social media acquisitions of all-time and how these purchases changed the game. Let's count them down.
7. Yahoo buys Tumblr ($1.1 billion)
Yahoo's purchase of Tumblr was the Uma Thurman adrenaline needle to heart of the dying web giant—an attempt to bring Yahoo back from the brink of death. Okay, that might have been overstated, but purchasing Tumblr was a strategic move made by CEO Marissa Mayer to bring Yahoo up to speed with social.
Mayer bought quite a few startups for Yahoo at that time, but Tumblr brought with it an established community and active users. The purchased seemed like a good idea at the time, but Tumblr's traffic is stagnating. Yahoo remains a major force in web traffic, but the web is an "innovate or die" environment. Even with Tumblr in its stable, if Yahoo doesn't get out in front of the next few social media trends, it is still in danger of losing relevance.
6. Microsoft buys Yammer ($1.2 billion)
Much of Microsoft's identity is tied up in its enterprise user base, and with the next generation of tech-savvy, social-dependent young people entering the workforce they needed to up the "cool factor" with enterprise social capabilities. Microsoft bought Yammer in 2012 to address these concerns with an established brand.
At the time of the acquisition, Yammer had roughly 8 million users with many of their client companies in the Fortune 500. Microsoft said that Yammer would be integrated into their Microsoft Office Division. Microsoft's decision to purchase Yammer adds weight to the idea that employees need a variety of software and services to help them be productive beyond just the tools to create documents.
5. Twitter buys Vine ($970 million)
Twitter buying Vine didn't crack the $1 billion mark, but it is important because it helped to define a new type of video sharing. Vine's six second clips go hand-in-hand with Twitter's 140 characters and the acquisition defined the parameters for social video sharing. Twitter's purchase of Vine turned six second silent videos into the standard for social media.
Another interesting aspect of the deal was that Twitter bought Vine (and their three-man team) before the startup had even released its public-facing product. In June of 2013, Vine had 13 million users. By August, it had topped 40 million. Vine's growth has been explosive, and its competitors have not been able to catch up, partly because Vine has become synonymous with mobile video sharing.
4. Google buys Waze ($966 million)
Israeli startup Waze was purchased by Google in June 2013, and it wasn't clear, at first, why Google thought the company was worth almost one billion dollars. Waze, the crowdsourced mapping startup, built a community around localized mapping and routing, and Google wanted to keep that out of the hands of its competitors.
Although Apple's take on maps was initially a disaster when they switched the native maps app from Google Maps to Apple maps, Google lost more than 20 million iOS Google Maps users. Google finally had a competitor to deal with, and they couldn't let Tim Cook and the gang get their hands on what Waze was working on.
The deal wasn't just to keep it away from Apple, either. In Q2 of 2013 Google Maps was used by 54 percent of global smartphone users, and adding features that weren't previously available in Google Maps. In addition to helping Google, along with Google's purchase of SlickLogin, the Waze purchase helped bring light to the booming startup scene in Israel.
3. Facebook buys WhatsApp ($19 billion)
Let's go ahead and clear the air—Facebook's purchase of WhatsApp could go down as the dumbest acquisition in the history of social media. However, the $19 billion sale of a WhatsApp—a company that only ever hit a $1.5 billion valuation—had broader implications for the startup world.
The Facebook/WhatsApp deal is the biggest exit of a venture-backed company ever. Even though the deal has yet to be finalized, the collateral damage of that purchase has already begun affecting the IPO and M&A markets. This deal helping to drive a greater trend of valuation gaps between the highly-valued startups and the companies looking to acquire them.
WhatsApp usage has been declining for iPhone users, potentially since proprietary features like iMessage became readily available. While WhatsApp was purchased on the back end of its popularity, its purchase will change the game for venture-backed companies looking to exit.
2. Facebook buys Instagram ($1 billion)
Possibly one of the best instances of anticipating the market is the Facebook purchase of photo-sharing app Instagram. The deal was announced before Facebook's IPO in 2012 and was met with mixed reviews. Facebook's user data showed them the importance of photo sharing in social activity and how quickly Instagram was going to grow.
At the time, Instagram had around 30 million users. Now, they have 150 million users and they average 55 million photos posted per day. Facebook knew photo-sharing was the future and, by purchasing Instagram, they stepped up their photo game, got access to tons of new data, and established a better mobile presence.
At a time when Facebook was facing challenges with younger demographics, it bought Instagram, in part, for its users. By purchasing Instagram, Facebook was able to count all of Instagram's youth among their flock. A Forbes article mentioned that when it bought Instagram, "Facebook bought itself 30 million hipsters, and all of their wonderful hipster cool."
1. Google buys YouTube ($1.65 billion)
At the point of this purchase in 2006, Google was only eight years old and YouTube was still an unprofitable startup. The purchase was the biggest in Google's history and it accomplished three things:
- It kept YouTube alive
- It helped legitimize video streaming
- It gave Google another revenue and marketing arm
When YouTube started in 2005, the conversation around internet piracy was just coming into adolescence. Only a few years after the Napster-Metallica beef, YouTube gave the world a new way to share copyrighted content, and the legal issues quickly came raining down. At the time Google bought YouTube, it was about six months away from being sued out of existence. Google stepped in, paid settlements, and struck deals to keep the site alive and keep the content available.
Streaming video became a legitimate service as Google set up a system of safeguards for companies to flag pirated video clips. Once the piracy and licensing issues were sorted out, Google was able to open a new channel for marketing and advertising. By purchasing the most well-known name in video streaming before video streaming really took off, Google was able to gain access to a platform that allows them sell ads while simultaneously marketing their brand and cross-promoting their products.
Conner Forrest has nothing to disclose. He doesn't hold investments in the technology companies he covers.
Conner Forrest is a Senior Editor for TechRepublic. He covers enterprise technology and is interested in the convergence of tech and culture.