Social Media

Facebook acquires Startup Kustomer for USD 1 Billion

Facebook buys Kustomer - Appy Pie

Facebook has announced that it is acquiring Kustomer, a customer relationship management (CRM) start-up. The terms of the transaction were not disclosed however, reports suggest that the transaction value is USD 1 Billion.

The CRM tools help companies manage their communications with customers through phone, email, text, or direct messages in specific apps, such as WhatsApp or Messenger.

The acquisition of a software company such as Kustomer is an unusual move for Facebook. Facebook has acquired many companies in the past, like the gif catalog company Giphy in May and Spanish cloud video gaming company PlayGiga in December 2019. These acquisitions have always been serving as the foundation for building features for Facebook users.

Collectively Kustomer and Facebook will be helping small businesses using its service to advertise and sell goods through the social network’s services. This will lead to these businesses spending more on Facebook advertisements. That’s key for the company, which makes nearly 99 percent of its revenue from advertising.

Kustomer remarked, “Facebook will not be automatically using their data, businesses will have an option to use Kustomer data for their marketing purposes, which will likely include separate advertising services on Facebook. Businesses would continue to own the data that is generated from interactions with customers and eventually, Facebook will host the data.”

Kustomer is based in New York and was founded in 2015. The company has raised approximately USD 173.5 million. JPMorgan served as the sole advisor to Kustomer in the deal.

Dan Levy,VP of Ads and Business Products of Facebook, and Matt Idema, COO of WhatsApp remarked, “Facebook plans to support Kustomer’s operations by providing the resources it needs to scale its business, improve and innovate its product offering, and delight its customer.”

The social network has been slowly building up a big business offering customer services to businesses on its platform, and the plan of the company is to double that, potentially as a paid service.

There are some 175 million people using Facebook in this way, covering both those who use Facebook to engage with businesses that use Facebook as their primary online identity. Considering Facebook has upwards of 2 billion users, 175 million doesn’t sound like a lot.

CRM companies describe what they do is something like omnichannel customer relations. Thus, it gives the Kustomer business users a complete picture of the many disparate places where conversations might be happening with customers — be it on apps, on social media, in websites, via chatbots, or email, etc.

For Facebook, its customer relations profile has been about users within its app walls. This gives it a much bigger opportunity to essentially control that bigger picture and bigger relationship, regardless of the platform being used.

Facebook is not the only social media company making these acquisitions to improve its customer service features. Earlier this month, Snap also bought Voca.ai, a startup creating AI-based voice agents for call centers.

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