Facebook Will Use Drones to Bring Internet to New Markets

NEW YORK (TheStreet) -- Facebook (FB) has been quite the acquirer over the last year. In 2013, Facebook made nine deals, and it has already made three in the first nine weeks of 2014. Reports from Techcrunch now say Facebook spent $60 million to acquire Titan Aerospace. The deal will allow Facebook an entry into the drone market and a chance to significantly increase Internet penetration around the world.

Facebook stock opened higher and was at $70.64 at 10:58 a.m. -- up 156% over the past year.

Titan Aerospace is a privately owned company that makes near-orbital solar powered drones. The devices fly high in the sky for five years before they need to land to recharge. The company's models include the Solara 50 and Solara 60, which are ideal for regional Internet systems.

So how will that work? First, let's backtrack. Facebook is one of the leaders of Internet.org, which seeks to bring affordable internet to emerging markets. The company's motto is "Every one of us, Everywhere, Connected." It's hard to believe, but two-thirds of the world's population has little or no access to the Internet. Facebook may be buying Titan Aerospace to help fix this problem. Facebook would likely begin producing satellites to send to areas of the world without Internet, like parts of Africa. This would allow for better connectivity to more people.

The $60 million price tag seems measly compared to the $19 billion Facebook just spent on WhatsApp. Furthermore, the deal might not serve Facebook itself too much -- reports indicate that Titan Aerospace will make products exclusively for Internet.org.

When you think of a Facebook acquisition, you probably think of adding talent or users to increase revenue. However, in this deal Facebook is spending money to help its charitable organization. The deal has long-term prospects for revenue growth, but it won't be a quick positive.

Facebook, with Internet.org partners Ericsson (ERIC), Nokia  (NOK), Samsung and Qualcomm  (QCOM), wants to connect nearly five billion people to the Internet. Today, 2.7 billion people around the world enjoy the Internet. And with 1.2 billion monthly users, Facebook counts on almost half of the total connected population as customers.

Every new internet user becomes a potential Facebook user. With only one-third of the world connected, Facebook still has a huge untapped market. Over time, the Titan Aerospace drones should help snag new users.

The acquisition from Facebook also puts the company head-on in a battle against Google (GOOG). Google launched its Project Loon initiative in 2013. Project Loon uses balloons to provide Internet to areas of the world without connections and to provide temporary Internet solutions to areas impacted by disaster. Just like Facebook, Google is hoping to gain new customers through expanding access to the Internet.

Facebook took some heat for their acquisition of WhatsApp. However, investors have considered the deal and kept buying shares. Facebook shares continue to hit new highs and have crossed the $70 mark -- they're up 29% YTD and over 156% since this time last year.

This latest acquisition shows that Facebook is committed to connecting the whole world. Who knows? Soon rural Africans will be able to send messages on WhatsApp using Titan's drone service.

At the time of publication, the author held no positions in any of the stocks mentioned.

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

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