Facebook vs. Yahoo!

Today’s Wall Street Journal jumped right out at me.  facebook is rumored to be acquiring Waze for $1 billion, while Yahoo! Acquired Loki Studios for an undisclosed—read much, much, much smaller amount.

Does facebook only make $1 billion acquisitions?

To contrast, so far this month, Yahoo! has announced four much smaller acquisitions:  Loki Studios, MileWise, GoPollGo and Astrid.

  • Loki Studios:  mobile gaming
  • MileWise: coupon for travelers
  • gopollgo:  social polling
  • Astrid:  to-do lists (may be closed down)

Yahoo! is acquiring apps and talent, on its way to eyeballs, while facebook is taking a direct route to acquiring eyeballs.

As an aside, any company acquiring Waze is a winner.  That particular app is magic and has saved me unimaginable time on my commutes into Boston, and just recently driving on Sunday afternoon between New Jersey and Connecticut, navigating the New Jersey Turnpike, the George Washington Bridge, and the Cross Bronx Expressway.  Any Northeasterner knows how excruciating and miserable those drives can be.

Obviously, both Yahoo! and facebook are focused on the mobile world:  the War for the Micro Screen.  Initially, I speculated that the differing acquisition styles were due to the companies’ relative market capitalizations.  But they are in the same order of magnitude:  Yahoo! at $28.7 billion vs. facebook at $64.7 billion (still below its IPO price).  What about cash?  facebook has $9.6 billion on hand, while Yahoo! has $2.7 billion.

Yahoo! has a much more diverse business, so the smaller targeted acquisitions for product and talent make sense.   It’s also a more risk averse strategy.

facebook business is much more concentrated.  I’d be hard pressed to name more than one business line.  Which is why the $1 billion acquisition of Instagram was justifiable.  Photo sharing is the killer app for facebook:  it’s what draw its viewers and users.  The Company must have a top notch photo sharing app.  What they had was insufficient.  Yahoo! has Flickr, which they have since up dated, so they didn’t have the same urgent need for Instagram.   Of course, everyone was thinking Google might make a run for Instagram.

Also, Yahoo! Mayer is at ease with technology, she’s an engineer by training and practice.  Zuckerberg is a liberal arts drop out, and is more interested in the application and financial results rather than the bits and bytes.  His forte is not in navigating the path from small acquisitions to larger businesses.  We wouldn’t accuse him of being a manager, as opposed to a strategist.

Also, both companies have fundamentally different challenges.  facebook must stay on the bleeding edge and justify their $67 billion market cap, while Yahoo! has to figure out how to grow revenues and increase profitability.

Different strokes for different folks?  It appears, yes, both in life and on the acquisition trail.

Do you think Yahoo! should break out of their mold and make more significant acquisitions?  And who should buy Waze?