4 Potential Reasons Facebook Acquired Octazen

Octazen LogoAfter working with Octazen for an unknown period of time, Facebook has decided to acquire the company which has helped them expand their viral growth efforts. Back in October of 2009 we highlighted the importance of Facebook’s contact importer, the product that Facebook encourages new users to use in order to see which of their friends are also on the site.

Scaling this contact importing process can become extremely challenging. For instance, do other sites want Facebook to take all of their users’ contacts’ email addresses? That’s debatable. However with little buzz around this small, two-person startup, one has to wonder why Facebook acquired the company. Here are four reasons we thing Facebook acquired Octazen:

Simple Talent Acquisition

Facebook needed a team which could constantly monitor changes to third-party email providers to ensure that they retain the ongoing viral growth. Octazen, a company Facebook has already been working with, provided this ability and will help ensure that Facebook’s contact importer will function through part of the company’s most critical growth phase: the race to 1 billion users.

While the company didn’t need to acquire the company, locking in the developers behind Octazen for at least a few years will ensure that Facebook has the developers’ full-time attention (despite not having oversight of the developers who are based in Malaysia and will remain there).

Protect Their Viral Growth

There is a small chance that Octazen currently has information which is extremely proprietary which helps ensure Facebook’s contact importer continues to function. In order to protect that knowledge, Facebook locked in the developers and bound them into an agreement in which their technology could not be used for any other organizations. That would explain the following statement on the Octazen Solutions website:

The Octazen team wanted to let you, our valued customers, know that the company recently received an offer to acquire most of the company’s assets and to employ those assets in a different direction. After carefully evaluating this offer, our team believes this is a wonderful opportunity of which we must take advantage.

As a result, effective immediately, Octazen will no longer accept new service contracts or renew existing service contracts, and will enter a transition period to wind down operations.

A Simple Present Value Calculation

Facebook may have been paying significant fees to the Octazen solutions company. Given that they knew they would be paying those fees for at least the next 3 to 5 years, Facebook decided to do a simple financial calculation and figure out the present value of the future outgoing cash flows to maintain the contact importer. Add a little on top of the present value and you’d get Facebook’s acquisition price which just made financial sense.

All Of The Above

We’re assuming that Facebook took into consideration all of the above reasons, which led them to acquire Octazen. While the company stated internally that the buy was a “talent acquisition”, little else is known about this purchase. The fact that it was a small acquisition is probably one reason Facebook didn’t make any type of formal announcement about the purchase.

While Techcrunch appears to be creating their own conspiracy theory, we believe Facebook’s decision was based on a long-standing history with a company which proved to maintain Facebook’s contact importing functionality.

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