Facebook Buys Oculus VR – Deal Points Here

In 2012 Facebook bought Instagram for $1 Billion. Earlier this year, in February, Facebook paid $19 Billion for WhatsApp, now they just bought another company – Oculus VR. Oculus announced it on their blog “Oculus Joins Facebook“.

Facebook paid $2 Billion for Oculus VR
oculus-vrAccording to Forbes it breaks down as follows:

  • $400 million in cash
  • 23.1 million shares of Facebook stock
  • additional $300 million potential earn-out in cash and stock based on “the achievement of certain milestones.”

So they have $400 million in cash and they obtained a substantial amount of Facebook stock. Giving away stock can be a great way to acquire companies in the short term. In the long term there is a balance between what they believe the stock will be worth and what percentage of the future appreciation will be due to the company they acquired. Bottom line is that they only gave up $400 Million in cash for a $2 Billion purchase. Not a bad deal for Facebook, and I would assume a great deal for Oculus VR.

Zuckerberg’s Vision
An excellent Zuckerberg quote – “Mobile is the platform of today, and now we’re also getting ready for the platforms of tomorrow,”. Oculus stated in their press release:

“This partnership is one of the most important moments for virtual reality: it gives us the best shot at truly changing the world. It opens doors to new opportunities and partnerships, reduces risk on the manufacturing and work capital side, allows us to publish more made-for-VR content, and lets us focus on what we do best: solving hard engineering challenges and delivering the future of VR.”

Facebook Mobile made $640 Million in 3 Months

facebook earningsThe most recent earnings report for Facebook was their second quarter earnings. Total revenue for the trailing 3 months was $1.81 billion and 41% of that was mobile advertising (according to this CNBC post).

$640 Million in Mobile Ad Revenue
The math works out to be about $640 Million in mobile advertising revenue for Facebook in one quarter. That is quite impressive. As many companies are trying to figure out how to monetize their large mobile audiences, it appears Facebook has.

Active Users
Mobile active users for each day stands at 469 million on average (that was in June). That is quite impressive. Their monthly active users on mobile stands at 819 million. Depending on the overlap, it is possible that of that 469 million they have a userbase that is addicted to them.

Earnings
Earnings were at 19 cents a share verse 12 cents the prior year and the estimates were around 14 cents.

Patent Holder Sues Over Facebook Like Feature

As a prior patent attorney dealing with method patents (aka process patents or loosely called software patents) this is a very interesting case to me. These are the types of patents involved with online businesses. Obviously Facebook, like any large company, may attract lawsuits due to their success. However some may have merit. This particular lawsuit against Facebook is very interesting.

Potentially Infringed Patents

There are two patents in question:

The first patent 6,289,362 is entitled System and method for generating, transferring and using an annotated universal address and patent 6,415,316 is entitled Method and apparatus for implementing a web page diary. Both list the inventor as Joannes Jozef Everardus Van Der Meer.

Lawsuit

From what I read in the BBC Article this individual has passed away. The patents were assigned to a holding company named Rembrandt Social Media. The case against Facebook was filed in the Federal Court in Virginia. This particular court is known as the Rocket Docket because after you file you can be in front of a judge, and jury, much faster than any other district. The patents were filed in 1998 and were issued in 2001 and 2002.

How to Read the Patent
Every patent has the same sections, such as the abstract and the description. The most important part is what is known as the Claims. Think of the claims as defining what is protected, much like a fence around a yard. Some claims are broader than others and therefore protect more much like a larger fence around a larger property. The patent ending in 316 discusses what they call a ‘diary’. I do not want to speculate on the case itself but as it unfolds I will provide what I find.

While most of what I have read discusses the “like” feature I am guessing there may be more features involved in this suit.

Instagramed and Instamine

Person 1: “ You have Been instagramed!
Person 2: “ What seriously? ooh come on
Person 1: “ Yep, I have made your cool picture insta-mine and sold copies of it, I am keeping the money from the sales of the copies too.

instaours

Two New Terms Courtesy of Instagram
To quote the article by cnet entitled: Instagram says it now has the right to sell your photos, they state “Instagram said today that it has the perpetual right to sell users’ photographs without payment or notification”. Instagram just announced this policy change and if you have an account and do not agree to the terms you need to delete your account before January 16, 2013. See their TOS for yourself.

instagramed

[instah-graham-ed]
verb
to be told one thing then later told another, make a dupe of; to be deceived; to be tricked.
Origin:
Instagram, December 2012 – January 2013; < English;

Related forms:
in·sta·gram·able , as in “that person is instagramable. let’s tell them we will store their stuff for free, make copies of it and then sell the copies when they are not looking so we do not have to pay them”

instamine

[instah-mine]
verb
to have something of yours instantly become the property of someone else and to not receive compensation for it;
Origin:
Instagram, December 2012 – January 2013; < English;
as in “that painting is nice, I declare it insta-mine and will now make copies of it to sell, oh and by the way I am not sharing any of the revenue with you because all the revenue is insta-mine as well”

Thoughts
It is similar to eminent domain, however unlike the government Instagram is not bound by the fifth amendment to repay you for taking your property, and the property will not be used for the public benefit, in fact it will be used so Facebook (the acquirer of Instagram) will be able to increase their revenue. So on second thought I guess it is nothing like eminent domain.

instagram-kinda-free

You have been Instagramed !

Facebook Zynga and GroupOn Stock Going Down

The world of social media and public companies has had a wild ride recently. Take a look at Facebook, Zynga and GroupOn who have lost billions in market value. Here are their recent closes and 52 week highs to give you some perspective.

  • ZNGA had a Thursday close of $3.18. The 52 week high is $15.91.
  • FB had a Thursday close of $26.84 and has dropped to $23.12 as of the writing of this post. The 52 week high is $45.
  • GRPN had a Thursday close of $6.61. The 52 week high is $31.14.

Not all of the stocks that they like to call ‘social media’ stocks have been going down. LinkedIn is not too far off from it’s 52 week high. The difference is quite simple, no matter what they business or how ‘cool’ you many think it is, it has to make money. The recent changes in stock price and valuations of each company are due to their business models and revenue. Always do your own research before considering purchasing a company no matter how fun or cool you think their products and services are.