TIME Companies

Yahoo Bets Big on Video With $640 Million BrightRoll Acquisition

Yahoo! President and CEO Marissa Mayer on September 10, 2014 in San Francisco, California.
Yahoo! President and CEO Marissa Mayer on Sept. 10, 2014 in San Francisco, California. Steve Jennings—Getty Images

Yahoo reaches deal to buy the video ad platform, helping to lift its ambitions as a video hub

A plan by Yahoo CEO Marissa Mayer to turn her Web portal into a hub for video took yet another (expected) step forward on Tuesday, when the company made official its rumored acquisition of video advertising service BrightRoll.

Yahoo said it is paying roughly $640 million in cash for the San Francisco-based company, which was founded in 2006. BrightRoll is expected to produce more than $100 million in revenue this year, according to Yahoo, which added that it will bring on BrightRoll’s roughly 400 employees to join Yahoo’s digital video advertising team. The deal had been expected since TechCrunch reported last month that the two companies were in negotiations.

“Here at Yahoo, video is one of the largest growth opportunities, and BrightRoll is a terrific, strategic and financially compelling fit for our video advertising business,” Mayer said in a statement.

Mayer has come under fire recently for her acquisition strategy, especially by activist investor Starboard Value. Starboard said recently that Mayer’s acquisitions have yet to bear much fruit and reportedly pushed for a breakup of the company. Mayer countered by claiming that Yahoo’s acquisitions have helped add users while pointing to her largest acquisition, the $1.1 billion purchase of Tumblr, as a source of revenue growth this year. Tumblr also launched an updated video player at the end of October.

“As with every acquisition, we have been extremely thoughtful about our approach to the video advertising space,” Mayer said in a statement about the BrightRoll deal. “This acquisition will accelerate the growth of both companies – we can help BrightRoll scale to even more advertisers globally and they can bring their tremendous platform offering to Yahoo’s advertisers.”

The BrightRoll acquisition is expected to be completed in the first quarter of 2015.

This article originally appeared on Fortune.com

TIME Fast Food

Outrage Over Burger King’s Merger Is Totally Misdirected

A sign stands outside a Burger King restaurant on Nov. 1, 2006 in San Francisco.
Justin Sullivan—Getty Images

The bottom line is it's a solid deal

Outrage is a useful tool in a democracy, but not when it’s directed at the wrong target or ignores the facts. As the criticism of Burger King’s so-called ‘tax inversion’ deal with Canadian fast-casual restaurant and coffee chain Tim Hortons heats up in the political arena, several facts are being blatantly ignored. While it may be ideologically satisfying to label the merger as being unpatriotic because it will deprive the U.S. Treasury of tax dollars, it is also an overblown criticism.

Consider how shareholders of public corporations get taxed. Unlike investors in private companies who get taxed once on their pass-through income, public investors get a double hit.

To take a simple example, for every dollar that a public company makes in income, it has to pay 35% in federal income taxes as well as more in state and local taxes – let’s call it another 5%. The remaining 60 cents are then distributed as dividends to shareholders. Of that 60 cents, the shareholders now have to pay personal taxes in the average range of 20% to 39.6% depending on how long they have held the stock. Again, taking state and local taxes into account, in aggregate then, most shareholders pay somewhere between 55% and 67% in taxes on their investment in a public company.

This analysis, of course, ignores tax loopholes that large public companies are able to take advantage of but such loopholes rarely yield more than a 5-10% benefit, which still leaves shareholders paying an average of 50% in taxes.

Even those who believe in progressive taxation would be hard pressed to agree with this tax scheme. True, shareholders may also achieve gains through the appreciation of their stock, which is not taxed twice, but that is meant to be a bonus to incentivize people to invest, not to be an offset against dividend income. The latter could make tax incentives for investing a zero-sum game, which makes no sense.

From a political standpoint, it may be beneficial to demand that American companies not repatriate abroad for tax reasons, but the merger of Burger King with Tim Hortons has a lot more to do with the tight margins in the burger joint business and the more robust margins in the fast-casual restaurant and coffee chain trades. As Burger King struggles with hyper competition from McDonalds, Chipotle, and Starbucks, it needs to explore expansionary opportunities. The fact that Tim Hortons happens to be in Canada – in this case, at least – is incidental.

Moreover, the likely tax savings for Burger King by a tax inversion would only be around $3.4 million this year, given that Canada’s total corporate tax rate is 26.5% and Burger King paid an actual tax rate of only 27.5% last year, which would not be a lot for a company with more than $1 billion in top-line revenues and $340 million in profits on a run-rate basis for 2014. To put it another way, If the management of Burger King agreed to an $11 billion merger simply because of $3.4 million of cost savings, it would be bad management indeed. However, that is not the case here and all signs, when rationally examined, point to the fact that this deal is important for Burger King’s future growth, which will also benefit its employees, shareholders, and customers.

Questioning mergers based on anti-competitive factors is fine, but questioning the wisdom of patently good corporate deals simply because there are ancillary tax benefits is silly. It distracts from larger issues like labor relations and the pressures of global competition on the American economy, while doing nothing to benefit the discussion about tax reform.

This particular example has no real meat, except perhaps in the press.

Sanjay Sanghoee is a political and business commentator. He has worked at investment banks Lazard Freres and Dresdner Kleinwort Wasserstein, as well as at hedge fund Ramius. Sanghoee sits on the Board of Davidson Media Group, a mid-market radio station operator. He has an MBA from Columbia Business School and is also the author of two thriller novels. Follow him @sanghoee.

TIME Companies

Google Buys Music Streaming Service Songza

The music streaming service says its product will remain unchanged, for now

The music streaming service Songza announced Tuesday that it’s being purchased by Google, adding to the tech giant’s already sizable presence in the online music sector.

“We can’t think of a better company to join in our quest to provide the perfect soundtrack for everything you do,” Songza said in a statement. “No immediate changes to Songza are planned, other than making it faster, smarter, and even more fun to use.”

Songza didn’t reveal a purchase price. The New York Post, citing unnamed sources, reported last month that Google was offering about $15 million, far less than the billion-dollar-plus valuations of online music behemoths Spotify and Pandora. Songza streams music in “smart playlists” curated by experts and tailored to an individual users habits.

The acquisition adds to Google’s subscription music service launched in 2013 as well as its ownership of YouTube, already a heavyweight in the online music sector, which the company says will be launching a paid streaming service.

The news comes after Apple’s announcement in May that it would buy Beats Electronics, which sells high-end audio equipment in addition to a music streaming service.

TIME Companies

This Is How Much All That Muscle Milk Is Worth

Hormel Acquires Muscle Milk
A carton of Diet Muscle Milk at the Diet Muscle Milk Fuels NY Fashion Week at Lincoln Center on September 12, 2010 in New York City. Brian Ach—Getty Images

$450 million deal for CytoSport meant to broaden the company’s reach to younger consumers

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Hormel Foods has agreed to pay about $450 million to acquire sports-nutrition maker CytoSport, a deal meant to broaden the company’s reach to younger consumers.

The deal to acquire CytoSport, which makes Muscle Milk products, is expected to close within 30 days. CytoSport’s 2014 annual sales are expected to total about $370 million. Hormel HRL 0.61% expects the deal will add about five cents a share to earnings in fiscal 2015, with a neutral impact on fiscal 2014 results.

CytoSport first formed in 1998 by Greg and Michael Pickett, a father and son team that aimed to compete in the sports nutrition category. The company’s first protein products hit the market in 1999, though the Muscle Milk powder — which is the company’s most popular product — was released in 2000. CytoSport has also expanded abroad in recent years, in Canada and the United Kingdom.

For the rest of the story, go to Fortune.com.

TIME technology

Apple-Beats: Here’s What Analysts Are Saying

Apple Introduces iPhone 5
Justin Sullivan—Getty Images

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What a difference three weeks can make. Analysts who “struggled to see the rational” behind Apple’s acquisition of Beats when it was a $3.2 billion rumor now think it’s a pretty smart move. “Probably the only smart move within the last 3 years!” according to one Apple skeptic.

Below: Excerpts from the notes we’ve seen so far. More as they come in.

Katy Huberty, Morgan Stanley: Apple beats the service drum.“Subscription music service could make the deal a home run, with every 1% penetration of Apple’s 800M account base equating to $960M of revenue. Apple believes Beats offers the right strategy for streaming music as it leverages both algorithms and 200 human curators to create playlists, which differentiates it from competitors.”

Trip Chowdhry, Global Equities: A smart move from Apple, and probably the only smart move within the last 3 years! “Currently, Beats Music Streaming Service only has 250K subscribers — but with Apple’s power in distribution (iOS Devices and AppStore), subscription to Beats Music Streaming Service can easily grow to 20 million subscribers within the next 12 to 18 months.”

Gene Munster, Piper Jaffray: Thoughts on the now-confirmed Beats deal. “We believe that if successful, adding Iovine and Dr. Dre could help propel Apple into the next level in its content offering, particularly in video, which could pave the way for new products including a television. Finally, given that Beats is the largest acquisition of Apple’s history, we believe it could open the door to other larger acquisitions, potentially around Internet services outside of content.”

Daniel Ernst, Hudson Square: AAPL Beats rhythm and blues. “On balance we are not fans of the Beats acquisition, although, we do not expect a negative market reaction to the news, and we concede Apple Beats holds promise to exceed our very low expectations. As a music-focused premium hardware maker with a budding, well-curated service component, Beats does fit well with Apple, and at $2.6B, the cash deployed represents just 1.7% of the company’s 3/31/14 balance. However, in our opinion even within music, there exists more impactful targets like Sonos or Spotify and moreover so many more targets in a vast array of segments either not, or not well served by Apple today including cloud services, security, commerce/payments, television and games.”

Benedict Evans, Andreessen Horowitz: Content Is King? “Music has gone from being a key strategic lever in the tech industry to an afterthought. The same applies to movie and TV libraries — media has gone from being a choke-point to a check-box, commodity feature than every platform has to offer but where none has any particular advantage… So for a platform owner or device maker, the content you can offer is no longer a strategic asset. Content doesn’t sell devices, because they all have the same content.”

Ben Bajarin, Creative Strategies: Apple, Beats, and Content as Differentiation. “What makes Apple’s products stand out is they are differentiated by hardware and by software. Much of their software runs on no other computers than their own. What if they can bring content into this fold? What if they can acquire exclusive deals, even if exclusive for short time windows, that are only available on their hardware and through their software? Then what if they do release lower cost phones in the $350 range? If you are in China, India, Brazil, Indonesia, and you are a fan of American music, movies, and even TV, would you pay $100 or $200 more for exclusive hardware, software, and content? Again, while I acknowledge the difficulty or ‘moon shot’ of this effort, content (beyond apps) is an interesting differentiator if done right.”

TIME Acquisitions

The Apple-Beats Deal: 7 Things You Should Know

After weeks of rumors, the Apple-Beats deal has finally become official. Here’s what’s happening.

Which parts of Beats is Apple buying?

Apple is buying all of Beats, meaning the Beats Music streaming music service, and Beats Electronics, meaning the headphones and speakers. It’s a software, hardware and talent deal.

How much is Apple paying?

Both companies – Beats Music and Beats Electronics – are being scooped up (pending regulatory approval later this year, of course) for a total of $3 billion; $2.6 billion of that up-front, with a relatively miniscule $400 million to vest later.

When will the deal close?

Assuming it clears regulatory approval, we’re looking at sometime in fiscal Q4 of this year.

Will Dr. Dre and Jimmy Iovine be Apple employees?

Yes indeed. They’ll commute back and forth between Los Angeles and Silicon Valley. Their titles at Apple will simply be “Dre” and “Jimmy.” Iovine is leaving Interscope Records to join Apple full-time.

What will happen to the Beats brand?

It’ll live on as a standalone brand even though it’s owned by Apple — “a first for the company,” says the Wall Street Journal.

Why didn’t Apple just build its own streaming music service?

Tim Cook told Re/code’s Peter Kafka that he thinks Beats Music “is the first subscription service that really got it right.” Cook made no mention of Spotify, instead alluding to the human curation angle as being Beats Music’s biggest strength.

Cook continued, “The thing that Beats provides us is a head start. They provide us with incredible people, that don’t grow on trees.”

How big of a purchase is this for Apple?

Big. Cook told Kafka that Apple’s snapped up 27 companies between fiscal year 2013 and now, but the company’s second biggest buy after this $3 billion Beats deal was buying Steve Jobs’ NeXT Computer in 1997 for just north of $400 million.

Sources: Re/code, Apple, USA Today, Wall Street Journal, Associated Press

TIME Rumors

What to Make of a Potential YouTube-Twitch Deal

On Sunday night, Variety reported that YouTube was about to acquire video game streaming site Twitch for more than $1 billion.

The deal may not be as imminent as that initial report suggested. While sources told The Verge that an acquisition is close, the Wall Street Journal reports that the negotiations are still in an early stage. As of Monday afternoon, Twitch and YouTube haven’t announced anything.

Nonetheless, some in the gaming community are in panic mode at the thought of another beloved service being swallowed whole by a tech titan. We did, after all, just go through this with Facebook and Oculus VR. To help understand what the big deal is, let’s consider what we know about Twitch, YouTube and YouTube’s corporate masters at Google to figure out what an acquisition might mean:

What is Twitch?

Twitch lets anyone stream video games in real-time, with their own live commentary on top. It’s used for everything from huge gaming competitions (such as the yearly Evo fighting game tournament) to amateur broadcasts, some of which have become hugely popular. At first, broadcasters needed special video capture software to stream games from their PCs, but new apps for the Xbox One and PlayStation 4 make it easy to broadcast from those consoles directly.

In addition to the basic video feed and commentary, each stream has its own chat room, where users can comment on streams as they happen. The Twitch Plays Pokemon phenomenon from earlier this year made extensive use of this feature, allowing commenters to dictate every move in the game. Using Twitch isn’t just about watching other people play video games; it’s about hanging out with people around a set of common interests.

Why would Google/YouTube want that?

The problem with YouTube is that people tend to swing by for short video clips, and they have little patience for ads. As the Wall Street Journal points out, Twitch users will watch videos for hours on end, which means plenty of opportunities to advertise, and at premium rates.

Perhaps more importantly, Twitch may be the closest thing YouTube has to a threat. Google buying Twitch would be kind of like Facebook buying Snapchat (which almost happened) or Instagram (which did happen). Even if they aren’t direct competitors, they are competing for the same audience attention and ad dollars.

Would Twitch get shoehorned into Google+, then?

Probably not. If recent rumors are accurate, Google has realized the error of trying to ram its own social network into every product, like it did with YouTube last year. By that logic, Google should be smart enough to leave the Twitch community alone.

But that doesn’t mean Google wouldn’t be interested in tracking Twitch users for advertising purposes. Some sort of optional Google-based sign-in or account link would be a safe bet if this acquisition went through. (Here’s a hypothetical: Sign in with your Google account during Evo and get the HD stream for free, instead of having to buy a $12 ticket.)

Would the Google-Microsoft rivalry spell doom for Twitch’s Xbox apps?

Again, probably not. Google only skips platforms when it thinks they’re too small to invest in, which is why there are no official YouTube apps for Windows 8 or Windows Phone. But there are YouTube apps for Xbox 360 and Xbox One, which means Google thinks Microsoft’s consoles are large enough not to ignore.

Just don’t expect an official Twitch app for Windows Phone anytime soon (although the unofficial LiveGaming app is pretty good.)

What’s the potential upside?

As in any acquisition by a big tech company, additional resources are the most obvious benefit. Twitch could tap into Google’s massive data centers to keep things running smoothly, and could make a bigger effort to improve its mobile apps. Chromecast support, with the ability to chat through your phone or tablet while watching a stream on TV, could be pretty awesome. An acquisition by Google could put mobile game streaming on the fast track, especially for Android.

And the downsides?

Twitch’s dominant position in live game streaming would be firmly established, and YouTube would have even less competition than it does now. If the combined companies make a bone-headed decision–requiring everyone to use a real name, for instance–you’d have nowhere else to go. And in a way, it’s just sad to see that the endgame for another small but fast-growing company is to get bought by a huge corporation.

The potential acquisition also raises some questions: How would game publishers respond? Could this be the start of a copyright mess, as publishers try to get their pound of flesh from Google? Would Twitch eventually try to move beyond games to other forms of entertainment, and would that end up watering down the gaming aspect?

If there’s one thing we can count on, it’s that Twitch would follow the usual pattern of major tech acquisitions, and promise that it won’t be royally messed up by its new overlords. But it doesn’t always work that way. All Twitch users can do right now is wait, and hope for the best.

 

TIME Virtual Reality

The Anti-Hype Guide to the Facebook-Oculus VR Deal

Oculus VR

Six quotes deconstructed and stripped of Facebook and Oculus VR's spin.

Whatever else you want to say about Facebook’s acquisition of virtual reality startup Oculus VR, give Mark Zuckerberg credit for having the nerve to pursue and pull the trigger on a $2 billion deal with a still-unproven (and historically lackluster) technology.

But then that’s the purview of companies with unfathomable cash hoards, and so on the other hand, perhaps we shouldn’t give Zuckerberg credit. This is what companies like Facebook — whose start-out names belie their evolving all-consuming functions — wind up of necessity doing. Google is just a search engine company, after all — except when it’s mapping the planet, inviting us to become cyborgs and working to conquer death itself.

There’s a sense, sometimes, that whatever gets this much attention is the next zeitgeist, but it’s easy to confuse the latter with spectacle, and there’s a lot about virtual reality technology in 2014 still deeply mired in hype.

Analyst Michael Pachter may or may not be right about Sony’s VR contender, Project Morpheus, being “a really bad idea for Sony,” but I think he’s spot-on when he said this in a recent interview with DualShockers:

…I don’t think it’s [virtual reality] gonna be a big market. It sounds interesting, but I don’t think there will be enough content to justify making the capital investment … I think it’s chicken and egg. If there’s no content you’re not gonna buy a virtual reality headset, and if you don’t buy a virtual reality headset, there won’t be any content, because no one will make a dedicated game for a very small audience.

That’s the challenge — growing that “very small audience.” If Facebook can develop some sort of killer app for the platform, be it virtualizing how we interact with one another (or the inexorable rise of VR erotica), then maybe. But now you’re talking about overcoming cultural conventions and assumptions, and that takes time and generational turnover. Make no mistake: We’re talking about a paradigm shift much bigger and broader and upending than moving from pen and paper to typewriter, or from typewriter to mouse and keyboard. Taking that shift mainstream is Facebook’s challenge, and every company fooling with virtual reality technology today is still well off from meeting it.

Let’s walk through a few choice quotes circulating in the wake of the announcement last night, starting with Mark Zuckerberg’s acquisition manifesto.

“It’s incredible.” (Mark Zuckerberg, referring to Oculus’s virtual reality technology)

The notion of wrapping large and cumbersome objects around your head, possibly tethered via restrictive cables to computers, to simulate a relatively low-res and crude version of someone’s notion of an alter-verse is arguably not incredible. It’s a compromise, and I’d say still, in 2014, a pretty big one. Even with the advances Oculus VR’s made in recent years, it’s still radically unlike the wraparound promise of virtual reality in films like The Lawnmower Man and The Matrix.

Incredible would be a direct neural interface. Incredible would be understanding the brain well enough to make that sort of connection. Incredible would be effortless, fully immersive virtual reality (Zuckerberg is spinning big and bad when he describes Oculus Rift as “a completely immersive computer-generated environment”). Oculus VR is none of these things. And I say that as an investor in the technology: I just ordered the devkit 2. The difference between me and a guy like Zuckerberg is that I see Oculus VR for what it is: another stepping stone in a long line of stepping stones we’ve been slowly traversing for decades.

“Oculus’s mission is to enable you to experience the impossible.” (Zuckerberg on the nature of virtual reality)

Nope. Oculus’s mission is, in fact, to enable you to experience the next stepping stone on the yellow brick road to bona fide immersive simulations well down the road. The “impossible” would be time travel, or maybe faster than light travel, or doing Harry Potter-style magic, or comprehending infinity. Oculus Rift is very much about grappling with the possible and long-expected.

“Our mission is to make the world more open and connected.” (Zuckerberg, describing Facebook)

Facebook’s mission is, and this is generally a legal matter, to maximize profits. That’s first and foremost. Along the way, the company might manage to make the world more open and connected because those interests dovetail, but the paradox is that doing so involves concentrating access to and control of all that openness and connectedness in the hands of a single corporate entity.

That’s been well and good for the sort of presence-detached interface that’s been Facebook’s stock in trade for years, but what would that sort of concentrated control of future virtual geographies (and our presence in them) entail? It’s the sort of question writers like Tad Williams ask in books like the Otherland sequence, and it’s not too soon to start asking it of Facebook and Oculus VR today.

“You selling out to Facebook is a disgrace. It damages not only your reputation, but the whole of crowdfunding. I cannot put into words how betrayed I feel by this.” (Oculus VR Kickstarter page commenter)

I sympathize with those who backed Oculus VR on Kickstarter, and who feel this Facebook deal violates some sort of unspoken bond between Oculus VR and its supporters, but I think it says more about Kickstarter supporters than Facebook or Oculus VR. There’s a deep misunderstanding of what both Kickstarter (as a vehicle to pool money) and crowd-funding (as a vehicle to get clever ideas off the ground) mean.

Kickstarter is a way to allow anyone so inclined to finance a project directly, a middlemen-eliminator coupled to a public stage on which startups audition for contributions. Each Kickstarter is a tacit agreement between supporters and idea-makers to eventually deliver some product or service, but unless otherwise specified, it’s not a promise to not take money from other sources of support, or to not be acquired by a company like Facebook along the way.

Oculus VR founder Palmer Luckey says Facebook’s purchase changes nothing about Oculus VR’s Kickstarter deliverables, and there’s no reason for us not to take him at his word at this point. If Oculus VR starts rejiggering its commitments, then there’s reason to get worried or upset, but until then, it sounds like it’s still business as usual from the Kickstarter standpoint.

“…if Facebook can own the pipe, the platform or the operating system of the future, it will have much greater control over its destiny.” (Sterne Agee analysts, writing about the acquisition)

Analysts say the darndest things, most of it self-evident and/or devoid of insight. If Facebook can put its imprimatur on the Next Big Thing, of course it’ll have a firmer grip on its rudder. Who wouldn’t? The question is whether Oculus VR’s particular take on virtual reality is the Next Big Thing. No one’s satisfactorily answering that question right now, least of all “analysts” saying stuff like this.

“Facebook is making a long term bet on VR, not a short term run on profit.” (Oculus VR founder Palmer Luckey, answering questions on Reddit about the acquisition)

Oculus Rift is unproven technology that could still fall flat. There’s nothing etched in stone here, and the history of virtual reality is littered with brilliant-sounding-at-the-time shipwrecks. If Facebook wanted short term profits, it’d invest in something far less volatile. Short term profits are clearly not — and forget Facebook, because this applies to any company today — what investing in virtual reality interfaces circa 2014 means. Luckey is certifiably correct here.

TIME Social Networking

Facebook’s WhatsApp Acquisition Explained

Also: How you, too, can make a $19 billion smartphone app. Also: Not really.

Now that Facebook is planning to acquire WhatsApp for $19 billion, perhaps your head is swimming with questions. Among them: How can I also make billions of dollars by selling my mobile app to Facebook? As someone who writes about technology for a living and who’s definitely not a billionaire, I can’t answer that for you. But I can help with some other things you might want to know:

What is WhatsApp?

It’s a messaging app you can use in place of your wireless carrier’s regular texting service. You enter your phone number and WhatsApp looks through your contact list for other people who are using the app. Then you can message those users all you want without limits or overage charges. The app is available on many platforms and is free to download and has no ads, but it costs $1 per year after the first year.

How popular is it?

Right now, WhatsApp has more than 450 million active users — meaning they use the service at least once a month — compared to 1.23 billion for Facebook. Those users send 500 million pictures back and forth per day, about 150 million more than Facebook.

How much money is $19 billion in the startup world, exactly?

A lot. My colleague Harry McCracken put together a chart of big startup acquisitions, and WhatsApp is the biggest. Most deals don’t come anywhere close. Bigger companies tend to change hands for a lot more money, however. For instance, Comcast wants to buy Time Warner Cable for $45 billion.

Is Facebook going to kill WhatsApp and/or ruin it with advertisements?

That’s not the plan. Facebook says WhatsApp will act like an independent company and stay in its own Mountain View, Calif. headquarters. The product will stay ad-free, and the two companies will focus on growth for the next few years. Then, they’ll figure out how to make money in some way that doesn’t involve shoveling ads into the app. (Harvesting all that sweet, sweet user data for targeted ads on Facebook or Instagram would be the safe bet, but more on that shortly.)

Is WhatsApp going to change at all, then?

WhatApp says nothing will change. Perhaps the $1 per year charge will go away at some point, given that Facebook says it’s not a big priority to expand subscriptions.

One potential downside: WhatsApp may become less inclined to work with companies that compete with Facebook, or vice versa. See, for reference, Instagram killing Twitter integration in 2012, several months after Twitter cut off its contact lists for Instagram users. We can only speculate that Facebook’s acquisition of Instagram — or Twitter’s previous failed acquisition — had something to do with the bad blood.

So why is Facebook spending so much money for WhatsApp?

This is the fun part, because every tech pundit thinks they’ve figured out the “real” reason for the acquisition, when in reality everyone’s just making educated guesses.

If there is a “real” answer, it’s probably a combination of several theories, some of which are related. Here’s a sampling:

  • Facebook wants the photos. See the above statistics about how more people share photos on WhatsApp than on Facebook. It’s too big of an activity for Facebook not to own, says Sarah Lacy at PandoDaily.
  • Facebook is becoming a social media conglomerate. Kara Swisher at Re/Code paints Facebook as a Disney-like media giant. It may not be able to own every popular service, but it can become the dominant player with different tools like Instagram and WhatsApp in its arsenal. Each one does things that the other property can’t.
  • Facebook lives in fear of being disrupted in mobile. At this point, Facebook is pretty safe from becoming the next MySpace or Friendster, but it can’t risk losing peoples’ attention at the hands of newer, cooler apps, BuzzFeed’s John Herrman argues.
  • Facebook needs to expand its Europe and emerging markets presence. As TechCrunch’s Josh Constine notes, WhatsApp is huge in developing countries. Facebook could also use WhatsApp to help bring more people online through subsidized Internet, which Facebook already offers in some countries. The acquisition is a shortcut to owning those growing markets.
  • Facebook must buy its way into “ephemeral” and/or “dark social” communications. Just think about all the stuff you talk about, the photos you send and the links you share when you’re communicating privately — if not through WhatsApp then through something else like e-mail — instead of broadcasting to your Timeline. All that data is invisible to Facebook, unless you use Facebook Messenger. (And if Messenger was hugely popular, Facebook wouldn’t need WhatsApp.) WhatsApp can provide troves of data about the things we’re really interested in, which can then be used for targeted advertising on other Facebook properties. Alexis Madrigal’s 2012 post on Dark Social helps put this idea in context.

Oh, and Facebook’s official line is that it acquired WhatsApp to “make the world more open and connected,” which is probably as true as it is vague. Mark Zuckerberg always seems genuine in his world-changing ambitions, but there’s always the business side to keep in mind.

The overarching themes here are about attention and user data. WhatsApp has proven it can capture the former, and while Facebook says it has very little of the latter from WhatsApp, that can change, and messaging can become a rich data source for Facebook’s core advertising business. Perhaps that sounds scary, but it’s not much different from how Gmail works now.

How will we know when this starts happening? Just wait for the inevitable revision of privacy policies allowing WhatsApp and Facebook to freely share their data with one another.

TIME Amazon

Amazon Picks Up Double Helix, but That Doesn’t Tell Us Much About Its Gaming Plans

Double Helix

No, the company didn't just nab Killer Instinct.

As acquisitions go, 75-person games studio Double Helix seems a fair to middling purchase — a company with a catalog of hits and misses, the misses mostly junk movie tie-ins — but then a company like Amazon has its work cut out (and hung from here to the moon) if it wants to make a splash in the games biz, first-party style. And it’s not like anyone can afford Rockstar.

If you’ve never heard of Double Helix games, you’ve probably heard of the fighting series it just rejuvenated on Xbox One, Killer Instinct. That’s a game that probably has you thinking of Nintendo, specifically the Super Nintendo back in 1994, when the series belonged to developer Rare. Microsoft bought Rare in 2002, nabbing Killer Instinct in the process, but sat on the IP for years before handing it to Double Helix (created in 2007 when a movie/TV game-focused development house merged with Dave Perry’s old studio, Shiny Entertainment). Double Helix gave the series a well-received Xbox One-exclusive makeover, so it’s making the leap to Amazon, at least from a public standpoint, on a strong note.

No, Killer Instinct doesn’t go with Double Helix in the bargain, because it was never Double Helix’s IP to leverage (Joystiq reports that Microsoft’s about to announce a new development partner for the series). In fact, most of the games credited to Double Helix over the years belong to someone else. Other than Strider, an upcoming side-scroller for last- and next-gen platforms co-developed with Capcom, and a vampire-hunting game that’s been in limbo for half a decade, I’m seeing nada. Like any creative outfit, the studio doubtless has conceptual stuff kicking around, but it’s anyone’s guess what might have been impressive or interesting enough, from talent to content, for Amazon to pull the trigger on a buy.

Amazon’s not saying much, telling TechCrunch (blankly) that it “acquired Double Helix as part of our ongoing commitment to build innovative games for customers.” If that reads like a confession — that Amazon just copped to designing video games — don’t get too excited: it’s had a games studio wing for awhile now, though its only studio-listed title is a tower defense puzzler for iOS and Android.

If Amazon is building some sort of games console that’s more than another set-top proxy for a slew of casual shmups, platformers, puzzlers, tower defense games and so forth, seeding Amazon-owned talent could be a positive move. After all, content is king, and if you really want to own it, you have to cultivate it. The question is what Jeff Bezos (or whoever he’s listening to — Bezos himself sounds almost dismissive of gaming) wants to be to the games market. A Nintendo-esque, risk-taking, soup-to-nuts innovator? A safe, mainstream, triple-A workhorse? A bit player dishing up relatively cheap, low profile, platform-adjunct games content, Apple- or Roku-style? All of the above?

This Double Helix purchase’s import is opaque, potential-wise. It’s not enough to highlight the studio’s roots and say “Hey, Earthworm Jim!” You have to look at what the studio’s done as the studio it is now, and that means scrutinizing games like G.I. Joe: The Rise of Cobra and Battleship and Green Lantern: Rise of the Manhunters — not awful, but not exactly frame-on-your-office-wall boast-worthy, either. If Amazon’s going to throw down with established players — and that’s still a monumental if — it needs something to boast about. And what that might be may still be a mystery to the company, too.

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