M&A Alert—April 25, 2013
Facebook to Acquire Mobile Backend App Development Platform, Parse
Author: Tom Brehme
Transaction Size: $85mm
On April 25, 2013, Facebook (NASDAQ: FB; market cap: $63.9b) announced the acquisition of mobile backend app development platform, Parse. The purchase price is rumored to be $85mm.
Parse’s cloud platform simplifies the process of web and mobile app development by taking care of server-side technical aspects, allowing developers to focus on other areas such as user experience and design. Parse’s mobile backend-as-a-service platform (mBaaS) offers push notifications (Parse Push), social integration (Parse Social), data storage (Parse Data) and the ability to add rich custom logic to an app’s backend (Cloud Code). With Parse, developers can add a scalable and powerful backend in minutes and launch a full-featured mobile or web app in record time without worrying about server management.
Most smartphone apps today use server-side functionality for many common features including setting up user accounts, push notifications, data storage, real-time updating, social integration and more — but the knowledge required to implement these features tends to be completely different from the skills needed to build consumer facing features. With Parse’s tools, implementing these backend features is much simpler.
Founded in 2011 and a participant in Y Combinator, Parse has raised $7.0mm in funding from Data Collective, Google Ventures (Wesley Chan), Ignition Partners (Chris Howard, John Connors), Menlo Ventures, SV Angel, Start Fund and investors Yuri Milner, Aaron Iba, Garry Tan, Justin Kan, Chris Fanini, Sean Knapp, Don Dodge and David Rusenko. Parse is headquartered in San Francisco.
Parse states that apps developed on its platform will not be affected in any way, existing contracts will be honored and developers will not be forced to integrate with Facebook.
Facebook is the world’s leading social network, with more than a billion monthly active users and 618mm daily active users as of December 2012. Approximately 82% of Facebook’s MAU’s are outside of the U.S. and Canada. Facebook allows users to stay connected with friends and family, discover what’s going on in the world and to share and express issues of interest.
Last week, Facebook hosted its first mobile developer conference, where it launched several new products and features such as Open Graph APIs, a standard mobile share dialog, faster login and a Technology Partners program to help developers find third-party technical solutions (Parse was announced as one of ten partners). Facebook also recently unveiled Facebook Home, which is a user interface layer for Android-compatible smartphones designed to be a drop-in replacement for existing mobile home screens. Users can view display notifications via the lock screen and can chat via Facebook messages or SMS from any app.
Facebook’s Director of Product Management, Doug Purdy, was a key sponsor of this acquisition.
Facebook is rumored to be paying $85.0mm, in a mix of cash and stock, to acquire Parse. TechCrunch reports that this figure does not take into account any employee retention.
Transaction Value: $85.0mm
Transaction Value/Invested Capital ($7.0mm) 12.1x
Comparable transactions in the app development space include Appcelerator’s acquisition of Cocoafish, IBM’s acquisition of Worklight, Motorola’s acquisition of Rhomobile, Adobe’s acquisition of Nitobi, Intel’s acquisition of Mashery and Keynote’s acquisition of DeviceAnywhere. Parse competitors include Stackmob, Kinvey and FeedHenry.
Parse’s mBaaS platform will enable developers to directly integrate with the Facebook platform as they rapidly build apps that are compatible across all mobile platforms including iPhone, Android and Windows devices.
Architect Partners’ Observations
Facebook understands how critical applications are to the mobile experience – just like they are to the Facebook experience where consumers spend a significant amount of time engaged with apps like Spotify, Zynga, TripAdvisor and Zoosk.
Ideally, Facebook would like to be the front door to its users’ mobile applications in a manner similar to applications on its website. Facebook recognizes that mobile app development, however, presents unique challenges for developers (cloud storage, multiple operating system and devices, messaging, geospatial, etc.) and is bolstering its developer offering beyond the social layer it historically provided.
We expect that Facebook will use the Parse platform to help migrate mobile app development back onto the Facebook Platform with likely updates for deeper integration with the Facebook SDK and Open Graph, monetization through Facebook and improved discovery via Facebook Home as well.
This is in direct contrast to Facebook’s web strategy, where the Facebook Platform allowed developers to extend their social graph beyond Facebook’s website to the developer’s own site.