Facebook buy Parse to add new revenue stream

Facebook has bought Parse, the mobile-backend-as-a-service startup which has just raised $7m in funding, in what Techcrunch believes is an $85mdeal.

Parse is two years old, and is the brainchild of ex Google staff and Y Combinator graduates who decided to build a set of back-end tools that mobile developers could use, and allows developers to build cross-platform apps for iOS and Android.

It’s thought that there was a competitive bidding war for the service, but Ilya Sukhar, Parse chief exec and co-founder, said that “I don’t think any of the other conversations created anywhere near the excitement level that we had for Facebook,” and that Facebook was a better cultural fit than other company’s that had made offers.

While Facebook doesn’t own a operating system like iOS or Android,  Josh Constine on Techcrunch points out that acquiring Parse is ” the next best thing”, because being able to offer Parses’ tools should help Facebook build strong relationships with developers and allow people to build within Facebook services. Facebook is also still desperate to improve its mobile products, the area in which its new acquisition and its clients excel.

For developers using Parse tools greater Facebook integration could mean their apps become stickier and more embedded into their users’ social experience, generating ad revenue for them. Parse already powers 60,000 apps, with roughly the same amount of developers working on them, and uses a freemium model to monetise the top 10% of its customers – the apps that get the most use.

Another interesting aspect of this deal is that it signals a whole new revenue stream for Facebook, which is going to be able to offer data storage, notification, and user management back-end services. It’s the company’s first real business-to-business service, and a shift from just selling display ads.
The statement from Facebook director of product management Doug Pardy shows that this acquisition is clearly a big step in its plan to bolster mobile development offerings. He says:
By making Parse a part of Facebook Platform, we want to enable developers to rapidly build apps that span mobile platforms and devices. Parse makes this possible by allowing developers to work with native objects that provide backend services for data storage, notifications, user management, and more. This removes the need to manage servers and a complex infrastructure, so you can simply focus on building great user experiences.
This  deal won’t attract as much attention as the $1bn Instagram purchase, but in terms of taking Facebook to the next level of generating revenue from mobile it could be much more significant.