Facebook

August 23, 2011, 6:02 AM EDT

By Brian Womack

(Embargoed for use at 12:01 a.m. Eastern time on Aug. 24.)

er Aug. 23 (Bloomberg) – Facebook Inc., the world’s largest social network, is planning acquisitions that will improve site design, keep its service reliable and advance mobile features to stave off competition from Google Inc. and Twitter Inc.

The company aims to make about 20 purchases in 2011, up from 10 last year and one in 2009, Vaughan Smith, Facebook’s director of corporate development, said in an interview.

Facebook is betting that a focus on design will entice people to spend more time on the site, while adding mobile services can cater to the growing number of members using handheld devices. As it grapples with competition from Google and Twitter, Facebook also must bolster its system so the site runs smoothly amid rapid growth. The company has made 13 acquisitions so far this year, including adding a mobile group- messaging service it rolled out to users this month.

“Two years ago we didn’t have a track record in acquisitions,” Smith said. “While we expected them to work well, it was still a crapshoot how they’d turn out. We’ve built a culture that supports entrepreneurs, and it’s working incredibly well.”

Facebook makes money from advertising and by taking a commission when software developers sell virtual goods on the site. As a closely held company, Facebook doesn’t disclose financials. A person with knowledge of the matter said in May that the company is likely to generate more than $2 billion in earnings before interest, taxes, depreciation and amortization this year.

In addition, Facebook has raised more than $2 billion from investors, including $1.5 billion from an investment led by Goldman Sachs Group Inc., announced in January.

Google’s Cash

By contrast, Google has $39.1 billion in cash. Google, the biggest Internet search engine, unveiled a new social-networking service, called Google+, in June. It already had attracted 29 million people by the end of July, according to ComScore Inc.

Facebook, based in Palo Alto, California, has made mostly small acquisitions, with target companies sometimes having one or two employees. The company has a market value of $72.5 billion, according to SharesPost Inc., an exchange for private shares. That’s more than the valuations of publicly traded Internet companies such as EBay Inc. and Yahoo! Inc.

The company can use cash and stock for acquisitions, according to Lou Kerner, an analyst at Wedbush Securities Inc. in New York. Facebook also can sell shares in the secondary markets for additional cash.

No Hindrances?

“I don’t think a lack of cash, even on their balance sheet, is a significant deterrent for the acquisitions that they’re looking at,” said Kerner, who declined to estimate how much cash the company has for purchases.

Many of Facebook’s deals have been targeted at adding talent as the company vies with larger rivals for skilled technology workers. Google has announced plans to hire about 6,000 people this year globally.

“Facebook is just trying to get the smartest people possible in any way it can,” said Debra Aho Williamson, an EMarketer Inc. analyst. “The idea of bringing in new talent, smart talent, people who have created interesting products that Facebook can capitalize on, is going to be important to them.”

Facebook has been sharpening its focus on mobile, which is how more than a third of users access the site. In February, the company acquired Beluga, a startup that helped users send messages to groups of people through their mobile phones. Facebook earlier this month introduced its own application — based on Beluga’s technology — that handles messaging on Apple Inc.’s iPhone and phones based on Google’s Android software.

‘Top Priority’

“The future of all computing is mobile,” Wedbush’s Kerner said. “Mobile, I think, is the top priority at the company.”

Snaptu, a mobile startup Facebook acquired earlier this year, was bought for about $60 million, according to a person familiar with the matter. Smith said he is open to larger acquisitions, but declined to be more specific.

On top of its mobile-computing push, the company has added services that let users manage their friends by groups or ask others questions on the site. As new features pile up, Facebook needs to manage its user-interface design, said Josh Bernoff, an analyst with Forrester Research Inc. in Cambridge, Massachusetts.

“The challenge is that Facebook does a lot more things than it used to,” Bernoff said. “To get that all to be easily navigable is not simple.”

Sofa, Push Pop

Purchases in design this year have included Sofa, a software and user-interface company, and Push Pop Press, which offered publishing software for touch-enabled devices.

The average U.S. Facebook user spends more than seven hours a month on the service, according to ComScore. With the jump in users — to more than 750 million from 500 million in July 2010 — as well as exponential growth in applications and products, the company is working to manage rising complexity in its vast computer systems. To help, the company opened a new data center in Prineville, Oregon, earlier this year.

Still, Facebook has yet to make an acquisition in computing, and may seek to buy companies with technology and workers that will help it strengthen its system.

“They have to over-plan for massive growth,” said Jeremiah Owyang, an analyst at Altimeter Group in San Mateo, California.

–Editors: Jillian Ward, Nick Turner

-0- Aug/23/2011 10:01 GMT

To contact the reporter on this story: Brian Womack in San Francisco at bwomack1@bloomberg.net

To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net.

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Facebookis making a series of design changes to the site to make it clearer to users who can see the content that they post, an issue Google has been criticising about since it launched its own social network, Google+, in June.”You have told us that ‘who can see this?’ could be clearer across , so we have made changes to make this more visual and straightforward,” said in a facebook.com/blog.php?post=10150251867797131″>blog poston Tuesday.  The main change is that will now display the intended audience for a photo, a text post, a tag or any other piece of content right next to it, or “inline” as stated in the blog post. Until now, those controls have been on a separate Settings section of the profile.”Your profile should feel like your home on the web — you should never feel like stuff appears there that you don’t want, and you should never wonder who sees what’s there,” the post reads.Now, every piece of content on a user’s profile will have a drop-down menu that lists its current access level, and other available options for changing it. These include sharing something only with people on one’s “friends” list, with “friends of friends,” with “everyone” on or off , or with a “custom” hand-picked list of people. The “everyone” option is changing its name to “public” because has determined the word “public” is more descriptive of that broad level of access.These “inline” access options will also be added to the content-posting box so that they are more easily accessible to people when they’re posting new photos, videos or written messages.”This dropdown menu will be expanding over time to include smaller groups of people you may want to share with, like co-workers, Friend Lists you’ve created, and Groups you’re a member of. These will make it easy to quickly select exactly the audience you want for any post,” ‘s blog post said.Since launching Google+, Google has been claiming that its site offers a simpler, more effective way to share content than . Google has said that ‘s privacy and content-sharing controls are too complex and inconvenient, leading users to often share inadvertently with a larger audience than intended.While the jury is still out on whether Google+’s Circles feature indeed offers an improvement over ‘s functionality, ‘s move today clearly seems motivated to address any competitive advantage Google may be trying to get with Circles.Another change is introducing is allowing users to modify the audience of a post after it’s published, which they couldn’t do before, the company said.is also introducing a review period for photos and posts in which users are tagged, giving the tagged users a chance to review the photo or post before it’s displayed on their profile, in case they want to un-tag themselves.A feature has had for years, which lets users see how their profile looks to another user, is gaining a more prominent placement in the profile page to make it more easily accessible and promote its usage.Along with the privacy-awareness changes, is also expanding users’ ability to tag others and label posts with geographical locations.Previously, users could only tag people on their “friends” list, but now it will be possible to tag anyone. Painting Denver . tent rental . With locations, it was only possible to “check in” with the Places feature on a smartphone, but now people will be able to add location tags from any device, and apply them not only to places but also to status updates, photos or other posts.

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Facebook’s Chris Cox, detailing the features on the company’s official blog, writes, “The main change is moving most of your controls from a settings page to being inline, right next to the posts, photos and tags they affect.” Even as Facebook executives unveiled these features early this morning during a live webcast, users like Dushyant Verghese were quick to express their opinion on the official Facebook blog. “I am glad a photo tag approval system has been included. Now, I can un-tag myself from those group photos that my friends keep putting up as part of a calendar app or a friendship day cartoon,” Verghese wrote.

The 33 million Indians who throng Facebook would be part of the worldwide community that would be able to add location information to any of their posts (or updates), even after they make it, instead of having to ‘check in’, using a mobile device. Earlier, Facebook users could only ‘check in’ to locations (socially share the places they visit) using the Places feature on a smartphone. However, Cox says, “Lots of people use Facebook to talk about where they are, have been, or want to go. Now, you can add your location from anywhere, regardless of what device you are using, or whether it is a status update, a photo or a wall post. Of course, you can always choose not to add a location at all.”

The privacy changes are being seen as a direct response to social networking rival Google+, which, while still in its testing stage, appears to have got the balance right. Google+ user Amith K, a Bangalore university student, says, “Earlier, in order to change your privacy settings, you had to go through the actual settings tab. Now, like Google+’s ‘circles’ feature, Facebook users can control each individual piece of content with a drop-down menu.” From the moment users join Google+, they can categorise friends and contacts into different groups called circles. And, when data is shared on Google+, the user is allowed to decide who he would share the information with—whether his family, friends, colleagues or everyone on the site.

Google+ has seen its user base flattening out at about 10 million users after a meteoric start in June. As users struggle to figure it, Facebook is using this opportunity to reinvigorate its own user base and cement its market lead, say social media analysts. Facebook, which has scooped up 13 companies this year, has targeted properties that dress up its site’s design and enhance mobile features, as it competes with Google and Twitter.

On the new privacy features being a mirror image of Google+’s ones, Shomir Dutt, user operations analyst at Facebook, says, “I’m guessing these changes would have been in the pipeline for a long time. They’re not something you can come up with in a month. No doubt, Google+ has had them from the beginning. Facebook just took some time.”

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