Facebook Drones Part of Zuckerberg's Spending Spree

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March 28 (Bloomberg) -- Buzzfeed's Charlie Warzel, Citizen.VC's Max Wolff and Bloomberg's Cory Johnson discuss Facebook's spending spree with Trish Regan on Bloomberg Television's "Street Smart." (Source: Bloomberg)

$2 billion for oculus.

What is mark trying to do that could be similar to what google is trying to do?

I think google classes tells us a lot of what mark zuckerberg is thinking about in terms of oculus, what they are doing about the next part warm for computing, and this could be it, as well as using a lot of cash to pay for it.

For all the criticism that all this far out spending might engender, i think it is worth noting the company is crushing it in every metric.

Everything seems to be accelerating for them, whether it is faster user growth, skyrocketing revenue per user, advertising per user.

They have taken the mobile business from zero to over a billion dollars in the last quarter alone.

Criticize as we might, as i surely will, it is also worth noting these guys are killing it.

At the end of the day, that is what shareholders care about.

As long as they see there is profitability him as long as the business is growing, you can get away with a whole lot more, than if the business was not doing well.

Charlie, let me go to you.

What could these drones do?

We are talking about providing wi-fi access to people.

Ideally, they would hover above where a normal airplane would go.

Ideally, they will be part of internet.org, this idea that facebook and other tech companies will provide, internet and connectivity in regions of the world that do not have it.

Bring the next couple billion people online.

Does that threaten the broadband industry?

Right now, this feels very much like a marketing technique.

Every time drones are involved for a tech company, it feels like one of those things where they are trying to make news and create buzz.

You are not cool unless you have drones in your arsenal.

Max, we have seen this with jeff bezos, too.

What does facebook need to do to stay competitive?

That is one of the concerns.

It could run the risk of turning into blackberry down the road if they do not stay on top of things.

His is a company that is willing to spend in $19 billion to get a messaging app just an effort to stay on top?

Part of the story is facebook is trying to use its money and tell you on the markets to build a future.

Part of what is frightening is they are not so sure their future is facebook.

It might be drones or private messaging.

That is a little frightening.

That is a little eyes off the prize, even though they are doing well.

On the other hand, they have a history of making wild acquisitions and working hard to show the big boys that you can make money off of them.

I think facebook may have done too well with instagram, so they are getting awfully aggressive.

On the other hand, as long as other folks are doing good things, you can hide behind them and do things that are crazy in ways that silicon valley and wall street have decided is ok.

That kind of works in a way.

Cory, we talk about microsoft, and one of the concerns and there was that they were not created or crazy enough.

Should investors be a plot of this kind of action from our zuckerberg?

I think you can look at each one of these and see the evil genius, i do not know, you can see a plan.

Oculus, you can see a plan where they say, we want to know the ways people will compute in the future era while this may or may not be the platform, this will be the next platform for a little while.

We will learn a lot in the process.

We do not have to go through the rigmarole that google went through with glass.

As far as the drone thing, it is happening at the same time.

Why it is happening now, separately.

That notion is a belief in the market share, that if they can make the market bigger, they will own that market share.

The crucial factor for facebook in the future is not going to be market share or ripping of revenue per user, it is the number of the people on the internet flat out, and they need to alter that with these drones.

Why is it all happening at once?

That is the question.

That is a fantastic question and i do wonder, cory, and i would get your reaction, and then charlie and max.

How much of the idea is easy money contributed to this, that they feel the pressure to do something?

I like when you say that my questions are great questions.

Besides that, what is going on here, they recognize that facebook that their stock price is quite high right now.

They recognize, i would imagine, that this time of easy fed policy -- let's not forget that sheryl sandberg once worked for larry summers.

She knows quite a bit about monetary policy.

Take advantage while you can?

Maybe this is time to spend.

They have done it over and over again.

Using a lot of stock to take a different stake in the future.

I think they recognize a stock is better spent than their cash right now.

Also in a situation where we learn that google is issuing class c shares in order to make additional acquisitions and retain ownership.

Suggests we could see more acquisitions in the tech space.

Charlie, does it feel like 1999 all over again?

We have to look at mark zuckerberg in comparison to a lot of these other people.

He has proven in the past year or so that he is a tech mogul, but it is not good enough in silicon valley just to be a mogul.

Now you have to be a visionary, you need a hyperloop, you need a contact lens that detects diabetes.

In other words, jeff bezos has set a new standard?

There is this idea that you have to be more than just a dealmaker, you have to be someone that will alter the course of human history.

We are also talking about using shareholder money to do this.

Max, what is ultimately at stake here?

Is this something that investors should be pleased with?

Great ideas are more important than great big egos.

When that happens, you have trouble.

That said, if you make a systematic approach of what facebook has done, you run the risk of imposing a pattern where there was not one.

It looks like they will grow if the internet grows, hence the idea of putting more people online.

Or they will grow if they get into a different business.

They have a future monetizing what they did in the past, but to grow beyond that, to be one of the big boys of tech like apple or google, they will need to go outside their comfort zone and figure out three things, how to not overpay, get into the right businesses, and stick it out and make money there.

We are 0 for 3 on how they will get there, but that is a wide-open question and raises the risk profile of this as an investment.

Especially when you talk about valuations and $19 billion.

Coming up, city flunks the big stress test.

Where the bank early went wrong.

This text has been automatically generated. It may not be 100% accurate.


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