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Facebook Buys Monoidics Assets

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Reportedly, Facebook (FB) has acquired the assets and technical team of UK based software verification company, Monoidics. Founded in 2009, Monoidics develops software that helps check other software for bugs and problems. However, financial terms of the current acquisition were not disclosed.

We believe that the Monoidics takeover will boost the development of Facebook’s mobile applications, an area the company has been focusing a lot over the last 12 months. The current acquisition follows Facebook’s April takeover of mobile startup Parse and last year’s acquisitions of Instagram, Glancee and Threadsy.

These acquisitions have significantly improved Facebook’s exposure to mobile. At the end of the first quarter of 2013, the company’s monthly mobile active users (MAUs) were 751 million, up 54.0% from the year-ago quarter. More importantly, mobile ad revenues contributed 30% of total ad revenues.

Growth in mobile customer engagement is critical for Facebook in order to generate higher revenues from mobile advertising. Technology and talent acquisitions have helped Facebook to launch new advertising products (Lookalike Audiences, Managed Custom Audiences and Partner Categories).

To boost customer engagement in mobile, it launched Twitter like hashtags (#), Facebook Home and Instagram’s video application. The video application is particularly important as eMarketer predicts mobile video market revenues to double this year, touching $518.0 million.

Facebook is reportedly working on a new mobile service known as Reader for Apple’s (AAPL) iOS and Google’s (GOOG) Android operating system. The service is primarily designed to display news collected from users and publishers. Most recently, Facebook rolled out its new tool Graph Search, which it expects to gradually expand to mobile in the near future.

We believe that Facebook’s massive mobile user base presents a tremendous growth prospect in the near term. We expect the company to continue to pursue strategic acquisitions that will help it to further monetize this huge user base going forward.

Additionally, improving customer engagement will help it to aggressively compete in the ad market against the likes of Google and LinkedIn (LNKD). However, increasing investments related to infrastructure development may hurt Facebook’s near term profitability.

Currently, Facebook has a Zacks Rank #2 (Buy).

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