A Look Back at Acquisitions and Investments Around Facebook in 2010

Like any large company, Facebook is forming an entire ecosystem of merger and acquisition activity. While Facebook itself has been buying an increasing number of small companies, primarily for talent, the market leaders and and venture capitalists operating on or around its platform have continued to make bigger deals.

In our most recent Facebook Quarterly Review, released last week, we listed 24 significant investments and acquisitions that have taken place recently, including among Facebook rivals. Two notable events were the Hi5 funding round by Crosslink Capital and the Slide acquisition by Google, detailed below.

Hi5

In retrospect, Hi5’s $14 million funding round led by Crosslink Capital in December looks even more interesting today. Hi5 has sought to convince game developers that social gaming on Facebook will be a short-lived phenomenon because Facebook is mismanaging how the platform serves users. Yet the whole time it has been trying to turn itself from a social network into more of a social gaming platform.

Other investors also saw opportunities beyond Facebook. In the same month as the Hi5 investment, December 2009, Union Square Ventures, an early investor in Zynga, led a $3 million round into Heyzap, which specializes in cross-platform distribution for games on the web. Meanwhile, existing developers like RockYou and Zynga looked for positioning in Asia, where Facebook isn’t strong.

Despite some MAU decreases among the top five developers on Facebook, there’s no sign of Facebook failing as a gaming platform yet. But there is still room for revenue growth, and expansion to other platforms. Facebook and other sites on the broader web can coexist as social gaming destinations — in fact, Facebook’s growing influence with Connect suggests that it will continue to play a part, wherever gaming goes.

Slide

Bought for $182 million in August by Google, Slide fell far short of the $2 billion exit founder Max Levchin originally said he wanted. But the company will still play a vital role in Google’s plans to take on Facebook, with Levchin becoming a vice president of engineering.

Slide’s specialty is in social sharing and virality, the much needed human-touch that could make Google a viable competitor. With other Google investments, Slide begins to look like part of a team. Google was responsible for five of the 24 deals we counted, spending hundreds of millions of dollars and covering its bases with buys like Jambool (virtual currency) and SocialDeck (cross-platform gaming).

For now, social games companies still look reasonably pricey, due to Disney’s up-to-$750 million July acquisition of Playdom, while investors are wary of the constant changes taking place on Facebook. However, we’re still expecting to see more M&A activity in the coming quarter; Facebook is simply too large, and too fast-growing, to scare away investors for long.

The second and third quarters of 2010 saw dozens of funding and acquisition events, each noted and detailed in the Facebook Quarterly Business Review. The Facebook Quarterly Business Review provides a comprehensive overview of hundreds of individual changes and developments, from in-depth looks at the subjects mentioned to including strategy, investments, important executive appointments, competitors and acquisition activity. The Quarterly Business Review is available through Inside Facebook Gold.