The real reason Facebook bought Onavo

Editor's Corner
Shane Schick

A little while back as I was researching a story for FierceDeveloper, I approached an analytics firm I'd never heard of, Onavo, to see if I could get some insights. The answer was a polite yet unfortunate no, but I didn't take offense. In the end, I guess they just "liked" Facebook (NASDAQ:FB) more than me.

Since the news broke last week that Facebook was acquiring Onavo for an undisclosed sum, there has been plenty of speculation about how the startup might play a role in the social networking giant's future ambitions. Onavo is a developer of apps designed to help smartphone users understand how much data apps are taking up on their smartphones and then compress that data. In some cases, the company promises it can squeeze down data use by up to 500 percent.

The Onavo purchase marks Facebook's first office in Israel, though that doesn't seem like a huge driver for such a deal. The social networking firm could theoretically open up a branch in Tel Aviv whenever it wanted. I'm also not completely sold on the idea that Onavo is primarily a tool Facebook will use to further its Internet.org initiative, which seeks to expand online access everywhere in the world. Though Onavo's app could certainly provide a useful tool in countries where data usage is difficult to manage, Internet.org is intended to be a collective effort that also includes Ericsson (NASDAQ:ERIC), Qualcomm (NASDAQ:QCOM) and Opera, among others. Data compression on its own will not be the solution to the globe's Internet problems.

I think Onavo is of interest to Facebook because of what it will offer in terms of mobile analytics. One of the benefits of its app is that it gleans traffic data on hundreds of thousands of mobile apps across millions of devices. Onavo has built tools that can differentiate between users who have found an app directly through an app store and downloaded it versus those who click on a mobile ad for an app and download it that way. Onavo can also go one step further to compare and contrast different kinds of activity and results across various networks--including Facebook.

Facebook's main source of monetization is and will likely remain advertising, and having a tool in its arsenal that can definitively prove there are higher clickthrough rates from ads on Facebook's service than, say, TapJoy or Millenial Media, could offer a significant advantage. When you pair that with the data Facebook collects on the interests of its millions of users, Onavo's technology potentially becomes even more powerful.

Though there's a lot of data available through things like Apple's (NASDAQ:AAPL) App Store and Google (NASDAQ:GOOG) Play, those numbers are principally about downloads. As they become more sophisticated about their campaign spending, marketers will want to dig deeper and look at retention rates. There's no point in spending on in-app advertising in a mobile game that lots of people install but don't bother to play. As Facebook has learned the hard way, success is inevitably measured by the number of active users, and Onavo gives the company a way to quantify that for a wide range of apps. This is why developers should be paying attention to this acquisition. It could be further proof that they should keep their friends close, but Facebook even closer. -Shane

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