Google Inc (GOOGL), Facebook Inc (FB) And Their Investments In Future Technologies


Google Inc (NASDAQ:GOOGL) and Facebook Inc (NASDAQ:FB) have both relied on many forms of advertisement to generate billions of revenues for the company. But both the companies don’t bother spending huge sum in exploratory technologies, which is not even remotely connected to its core business. An article in ‘theguardian’ discusses about these hobby projects of Facebook and Google and how these companies can afford such investments.

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Both Google Inc (NASDAQ:GOOGL) and Facebook Inc (NASDAQ:FB) generates close to 90% of its income from advertisement in many forms which supports variety of services on the internet such as, search, chat, mail, video/audio/photo sharing, file sharing and storage and so on. With the capability to provide variety of support to consumers on the internet both Google Inc (NASDAQ:GOOGL) and Facebook Inc (NASDAQ:FB) are capable of tracking the user behavior on the internet and target advertisements to the user based on their likes and dislikes, which makes them even more successful compared to its competitors.

But even with a very successful core business behind its back, these tech giants cannot rely just on advertisements to generate revenues for many years to come. So in an effort to arrange for future revenues, these companies spend few billions on exploratory future technologies, which might have bigger impact in the future.

Facebook Inc (NASDAQ:FB)’s acquisition of Oculus Rift VR for $2 billion earlier this year was one best example. Oculus Rift VR is a company which came up with a Virtual Reality headset, which looks promising but these are early days for the technology and when mature enough it has the potential to grow big. Facebook astonished the street through this acquisition.

On the other hand, Google Inc (NASDAQ:GOOGL) has a secretive experimental sector, Google X. This division of Google works on various innovative projects and they even acquired 14 startups which works on various new technologies. Some example projects that happens in Google X are, Google Glass, Driverless cars, Project Loon which targets internet to developing areas through network of balloons in stratosphere and so on. How can these companies manage to invest in such ambitious projects?

Both Google Inc (NASDAQ:GOOGL) and Facebook Inc (NASDAQ:FB) have a larger pool of resources, brain power and most importantly the financial means.  Google has $126 billion and Facebook has $24 billion in assets. Shareholders wanted the abundant cash to be utilized to generate diversified revenue stream, which they can benefit from even if the company’s core business fails someday. With billions of users both these companies can even get the trial version of its products to bigger audience very easily.

Google Inc (NASDAQ:GOOGL) and Facebook Inc (NASDAQ:FB)’s ability to analyze user behavior gives them edge in the industry to succeed in whatever they do. Google can no more be called as a advertising company, since its online book search can challenge many academia, Its Project loon can challenge many telecoms, map service can challenge many mapping firms and its driverless cars can challenge the auto industry. Facebook look at the Oculus Rift as an opportunity to showcase the immersive technologies capability to tie the users inside a room with animation and virtual reality.

Can both Google Inc (NASDAQ:GOOGL) and Facebook Inc (NASDAQ:FB) succeed with these technologies for future is still unknown, but both these tech giants are making an effort to roll out new services that can influence the future.

As of 30 June 2014, David Tepper‘s Appaloosa Management Lp hold around 3.6 million Facebook Inc (NASDAQ:FB) and 600,000 Google Inc (NASDAQ:GOOGL) shares.

Disclosure: None

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