Just yesterday, Facebook acquired a small Israeli startup called “Onavo” for a cool $150 million. Onavo specializes not in big data analysis – which seems to be today’s hot commodity – but rather data compression and optimization (“small data”). Onavo is of significant value-add to Facebook because its optimization algorithms effectively make the product lighter on data consumption – a major boon to consumers in developing countries that pay a relatively large amount for cellular data – and effective analysis methodologies. In order for Facebook to keep growing, they need to keep growing their network while simultaneously making big data “smaller.”
Social networks like Facebook and Twitter are some of the most useful, updated, and heavily utilized consumer preference databases available – and marketers are constantly looking for ways to monetize on the action. For instance, Facebook has recently been wooing network broadcasters with consumer data reports to help broadcasters understand consumer opinion on their content.
For companies trying to understand foreign consumer preferences, especially in countries in which official data may be fudged or incomplete, it can be quite difficult to ascertain consumer preferences from a hands-off approach. Traditional information agencies such as the Economist Intelligence Unit (EIU) may not have the same reach that social networks do. Social networks, unfiltered by bureaucratic corruption, can bridge the knowledge gap for foreign companies without the risk of government book-cooking. That’s why Facebook needs to grow its presence in developing markets, to make it easier for people to online: to bolster its ad revenues and to deepen its potential as a treasure trove of consumer information.
Acquiring small data pioneer Onavo will certainly make it easier for citizens of developing countries to get online. The more people that are online, the more valuable Facebook becomes. I believe that Facebook, Twitter, et al certainly have the potential to surpass information-collection resources like the EIU, McGraw-Hill, and others at the consumer level – provided that they focus not only on getting more people online, but also making big data smaller. The Onavo acquisition is a step in the right direction.
This text was written and presented by Mr. Ryan Cunningham, Student at the McDonough School of Business of Georgetown University in the course on International Business (STRT-261-01) on October 17th, 2013.