Why Parse is Facebook's Most Significant Acquisition Ever.

Facebook's acquisition of Parse a few days ago was met with the usual belly-aching from developers - "Oh, no, it'll get shut down!", "Sellouts!”. Most of the tech press seemed surprised if anything, musing on how this was Facebook's first entry in to B2B.

This entirely misses the point of how significant this acquisition is.

It's well understood that Facebook has a "mobile problem" - just look at the acquisition of Instagram for $1Bn. Instagram was a necessary, but purely defensive move. Parse on the other hand, if managed correctly, is the most significant offensive acquisition Facebook has ever done.

To understand why, we need to go back to 2004. Amazon is proving to Wall St that it can make money (for a while, even that wasn't totally clear), yet from an outside developer's prospective, Amazon was nothing but a large online bookstore.

That's when they hired Werner Vogels away from Cornell (first as Director of Systems Research, later as CTO). Now at the time, going to work for Amazon was a peculiar choice for a renowned researcher like Werner, and there were a lot of very confused comments in the research community as to why he would do such a thing (I had a a lot of these conversations myself, partially as I ended up using his old office at Cornell right after he left).

However, what happened at Amazon under Werner's watch is nothing short of stunning.

Today, pretty much every significant startup in the world (and many, many large companies) run on Amazon Web Services (AWS). Pause for a moment and think about what a remarkable thing that is. So many technology companies, all depending on the technology know how of a BOOKSTORE.

And it wasn't obvious that AWS would be such a success - the key thing for Amazon was to get developer mindshare; you need developers (and investors) to trust that building on your infrastructure is a wise long term bet. Google App Engine never really managed this, and when EC2 was first launched, it was met with a scepticism that seems almost quaint now; "well, they're just selling excess cycles, and when the black friday crunch hits, they'll use it all themselves so don't rely on it"

Obviously, Amazon AWS is a significant win both in terms of revenue, and developer mindshare. But perhaps what is least appreciated is how it obliterates any technical obstacle for Amazon itself in doing anything it wants to on the web - streaming video to compete with Netflix? No problem. Sell and deliver ebooks anywhere in the world? Yepp. An Appstore to compete with Google's own? Why not? A search engine? Check.

In my opinion, it's in this context you should view Facebook's acquisition of Parse. Parse can become to Facebook, what AWS is to Amazon on mobile. Why shouldn't pretty much all mobile startups (and a significant chunk of fortune 500) build apps that use technology owned by a social network, if doing so is significantly easier than anything else? It's much more credible then it was back in 2004 that all web 2.0 startups should rely on a bookstore.

More significantly though for Facebook itself, is the mobile super powers they have just acquired. Using Parse to its full potential, gives them an incredible capability to build fantastic mobile apps, really, really efficiently. I know Facebook is chock full of smart engineers, but let's be honest, they DO have a mobile problem. But maybe not for long.

Will this definitely happen? Of course not - Facebook may not even truly realize what they have on their hands. And if they do, there surely will be internal resistance to the change that has to happen on the infrastructure side. Facebook's main apps has to run on Parse, no question about it. Furthermore, there needs to be a concerted effort to evangelize to external developers, and hard proof that Parse will remain something that can be trusted to be there in the long run.

When thought of like this - as an offensive move to get mobile developer mindshare and supercharge their own internal mobile capabilities - it makes the $85M+ acquisition seem cheap, and leaves the question - who else should have been in the bidding?

In my opinion, certainly Amazon dropped the ball on not buying them (sorry Werner). Google should also have been a contender - they have a mobile problem, and combining Parse and Google App Engine would have been very interesting. Twitter is less obvious, but Yahoo certainly should have been sniffing around, as should a number of others.

For the people at Parse, these should be exciting times - the challenges in expanding their service to host "Facebook scale" apps are tremendous. But the rewards!


(Disclaimer: It randomly turns out that I taught Ilya a couple of times when he was at Cornell, and have tremendous respect for him and the rest of the team at Parse, and as mentioned I occupied Werner Vogels’ office after he left. However, this is all pure speculation on my part!)

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