Cloud-based video games are becoming an increasingly common focus among tech and social media companies, as some of the biggest names on Silicon Valley are trying to grow in this area. One social media giant, Facebook (NASDAQ: FB), made news on Wednesday when it announced it was further expanding into the video game market with a notable acquisition.
Specifically, Facebook confirmed that it would be acquiring a Madrid-based company called PlayGiga, which specializes in cloud gaming. A spokesperson for Facebook confirmed on Wednesday the deal after a Spanish newspaper last week went on to report that the company was getting bought out.
“We’re thrilled to welcome PlayGiga to the Facebook Gaming team,” said a Facebook representative according to CNBC. “We are excited to announce that the PlayGiga team is moving on to something new. We are continuing our work in cloud gaming, now with a new mission. We want to thank all of our partners and customers for their support over the years,” added PlayGiga in an official statement later that day.
While not a particularly massive merger by conventional standards, with some sources suggesting that the deal would be worth around $100 million in total, it does follow a trend that’s been going on with not just Facebook but other social media companies as well. Facebook, in particular, has been trying to move away from the online advertising market, which is where it derives the bulk of its revenue, and instead diversify into other areas.
Back in 2014, Facebook bought out virtual reality headset manufacturer Oculus for $2 billion and has just recently begun selling new models of the Oculus for $399 back in May. At the same time, Facebook also announced back in 2016 Instant Games, a collection of light games for Facebook users, as well as its own game streaming service, Facebook Gaming. Facebook claims that around 700 million users are engaging with its gaming content every month, a very significant figure even for a company of Facebook’s size.
Shares of Facebook inched up around 2.5% over the course of the day, although this might not necessarily be due to this piece of news. Since the beginning of 2019, Facebook’s stock has done quite well, gaining over 50% during the year. While various data scandals and privacy issues have hounded the tech giant, it hasn’t stopped analysts from being generally optimistic about the company’s stock.
Facebook Company Profile
Facebook is the world’s largest online social network, with more than 2 billion monthly active users. Users engage with each other in different ways, exchanging messages and sharing news events, photos, and videos. On the video side, the firm is in the process of building a library of premium content and monetizing it via ads or subscription revenue. Facebook refers to this as Facebook Watch. The firm’s ecosystem consists mainly of the Facebook app, Instagram, Messenger, WhatsApp, and many features surrounding these products. Users can access Facebook on mobile devices and desktop. Advertising revenue represents more than 90% of the firm’s total revenue, with 50% coming from the U.S. and Canada, and 25% from Europe. With gross margins above 80%, Facebook operates at a 40%-plus margin. – Warrior Trading News