Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

The Deal: M&A Reflects Shift for Social Networks

Tickers in this article: CMCSA FB
NEW YORK (TheStreet) -- 

It seems like just last year that Facebook and Twitter were making ambitious deals to snap up nascent competitors they feared could invade the spaces that each company dominates in the social network stratosphere.

That's because it was just last year.

In the hyper-real time Silicon Valley petri dish of product development, startups can go from white-hot to negative Kelvin almost overnight, and Facebook - closing in on 18 months as a public company - and Twitter - hot on CEO Mark Zuckerberg's heels with an IPO of its own - are moving away from M&A transactions that simply better engage network users and more toward monetizing their habits.

Facebook's acquisition on Monday, Oct. 14, of Israeli mobile and data analytics firm Ovago - reportedly for $200 million, or about a fifth of what it paid in pre-IPO stock for Instagram Inc. - is the company's biggest buy this year to date and also the best example of the monetization race.

Facebook has struck more than a dozen deals since its acquisition of Instagram, and its IPO, but little has been spent in terms of capital and to focus on doing more to get users online. This is a take-off from the company's strategy as a private entity. Back then, Facebook bought startups like FriendFeed Inc. and Snaptu Ltd. as it was in hockey stick growth mode, tucking in peripheral apps that better organized and connected users. At more than 1.1 billion users, Facebook can now back away from that buffet.

Deals like Glancee and Threadsy still showcase Facebook's need to tuck in assets to bolster the user experience. But other buys, like Osmeta, Parse, Spool or Atlas Advertiser Suite, are focused on improving how Facebook's app performs within different operating systems, managing and presenting content to users, and, of course, ads.

Twitter is no different - except for the little matter of not yet turning a profit, a feat Facebook finally managed.

CEO Dick Costolo's "Instagram moment," similar to Facebook, was the micromessaging network's acquisition of Vine Labs Inc., the six-second video app, which it hastily integrated into its platform. The cost was a paltry $30 million, or about 1% of the size of the Instagram buy.

Twitter has laid out substantially more than $30 million in the time since it bought Vine - but it has focused not on adding more filters and followers, but instead on developing the company's new revenue lines.

There have been a number of different avenues for Twitter to develop lines of business outside of advertising, which currently makes up the lion's share of the company's revenue. Twitter's deals have includes startups in the geotargeting and app development spaces, two arenas with limited competition and substantial growth opportunities. And the company's decision to make deals and find partners in the mobile broadcasting space could do more to enhance its analytics platform.