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Facebook and Google - The Drone and Balloon Wars and Beyond

March 10, 2014 | About:

Europe in the early 20th century, the world was waking up to the horrors of Arms race as Britain and Germany were building Dreadnoughts and what not’s, each trying to outdo the other in terms of armament, armour and propulsion. In 2014, two revolutionary companies were in the limelight and the arms race, this time is for a good cause: Bringing internet to the world!

Facebook (NASDAQ:FB) plans to buy a drone maker whose solar-powered aircraft can operate as high-altitude wireless hot spots. These drones can roam the stratosphere for years and can remain stationed for up to five years. Arch rivals Google (NASDAQ:GOOG), are not to be left behind as they are busy building balloons to bring internet access to more remote locations from high in the sky.

Altruism or Business?

As Facebook plans to acquire Titan Aerospace, manufacturers of Drones for $60 Million, Mike Zuckerberg is calling it an act of Philanthropy.

While it is true that these efforts from Facebook and Google, will enable Internet to reach those parts of the world that are still out of bounds, all that investment, is not without a definite purpose.

Facebook and Google have one thing in common- They thrive on traffic. The more the users, the more the traffic. That means more advertisements and revenue. Just what the shareholders would want. Hence, increasing the spread of internet itself will more than anything else benefit Facebook and Google. Take for instance the example of emerging countries like India, where spread of internet is just 13%. It presents a vast opportunity. Given the financial strength of these companies, spending some cash to increase the size of the market itself shouldn’t really be a bad idea.

Beyond the Boundaries

What concerns us more though is what Facebook and Google are capable of doing with the size of networks and user base they command. When you have that kind of Data, you can not only get into, but dominate any line of business you could possibly imagine.

Just limiting ourselves to the realm of Finance, for example, Peer-to peer funding and Crowd-Financing are being seen as the next big thing. Companies like Lending club and Prosper which provide the largest online platforms, have already received investments from Google. The concept is simple. It’s a market place where just like E-commerce (Buyer and seller) we can bring the lender and borrower together. Throw in a bit of regulation and it can be a huge hit.

We don’t expect Google or Facebook to turn into a bank overnight. But imagine if either of them decides to promote this concept using their network. Considering the fact that you can earn from both the borrowers and the lenders, all that money spent on the drones and balloons will suddenly seem much more worthwhile!

About the author:

The author holds a Management Degree in Finance and provides deep insights primarily in the fields of Telecom,Automobile,Technology and retail

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