Facebook Inc. (Nasdaq: FB) said 2015 would be a “major investment year” when it released Q3 results in October. 
Wasting little time, the social media giant announced today (Tuesday) its first acquisition of the year: voice recognition startup Wit.ai.
According to Wit.ai, its technology can “turn speech and text into actionable data.” Facebook did not disclose the amount it paid for Wit.ai, nor its future plans for using the technology.
Here’s a look at what’s behind Facebook’s first purchase of 2015 – and what it could mean for the FB stock price…
Why Facebook Wants Wit.ai’s Voice Recognition Technology
Palo Alto, Calif.-based Wit.ai was launched in 2013 by VirtuOz Founder and Chief Executive Alex Lebrun along with Willy Blandin and Laurent Landowski. Nuance Communications Inc. (Nasdaq: NUAN), maker of Dragon voice recognition software, bought VirtuOz in January 2013.
Wit.ai’s technology could offer Facebook’s 1.3 billion users a number of new options, like speaking commands to be converted to text as posts or messages. The technology could also be used to complement Facebook’s optional feature that recognizes music and television shows and encourages users to post what they are watching and listening to.
Wit.ai is already used by hundreds of apps and devices. More than 6,000 developers use its platform.
The deal with Facebook, however, will take Wit.ai to the next level.
“Facebook has the resources and talent to help us take the next step,” Wit.ai said in a blog post. “Facebook’s mission is to connect everyone and build amazing experiences for the over 1.3 billion people on the platform – technology that understands natural language is a big part of that, and we think we can help.”
Wit.ai raised $3 million in October via a fundraising round led by venture capital firm Andreessen Horowitz. The firm’s co-founder, Marc Andreesen, sits on Facebook’s board.
Facebook has been growing its Language Technology Group, which could be working on a voice-to-text feature for its popular cross-platform Messenger app.
But beyond Facebook Messenger, Wit.ai’s technology could also give the social media giant a solid footprint in tech’s next big trend – the Internet of Things – if it’s integrated into apps and home-automation devices.
And given the amount of money the Internet of Things will generate, that could be huge for Facebook stock…
Facebook, Voice Recognition, and the Internet of Things
In the Internet of Things, everyday objects have network connectivity, allowing them to send and receive data.
“We’re at the earliest of stages – but it’s going to be a huge opportunity,” says Money Morning’s Defense & Tech Specialist Michael A. Robinson. “There’s going to be a lot of money to be made – a lot of money. You’re going to be able to talk to your car. Your car is going to talk to your home. Your car is going to talk with the traffic pattern. And cars are going to talk to each other. Sensors are going to be deployed by the trillions – all over the world – and will be talking to one another. It’ll be in the tech market, the consumer market, and even the industrial market. It’ll touch healthcare, the military, entertainment – and will literally change our lives.”
According to a recent report titled, “Billions of Things, Trillions of Dollars,” tech researcher IDC forecasts some 212 billion “things” will be connected to this souped-up Internet by 2020.
And voice and facial recognition will be critical in helping tech companies push heavily into this new frontier.
Facebook’s peers and competitors, including Apple Inc. (Nasdaq: AAPL), Google Inc. (Nasdaq: GOOG), and Microsoft Corp. (Nasdaq: MSFT), have all added voice recognition technology to their mobile operating systems for smartphones.
And tech titan Intel Corp. (Nasdaq: INTC) unveiled a new password manager app yesterday (Monday) that uses facial recognition instead of passwords to access information. The app – called “True Key” – debuted over the weekend at the 2015 Consumer Electronics Show.
With its acquisition of Wit.ai, Facebook looks to continue the FB share price gains it made last year…
Facebook (Nasdaq: FB) Off to a Strong Start in 2015
As it continues its mission to connect the world, Facebook enjoyed a stellar 2014. FB stock started the year at $54.38 and finished at $78.02 for a 40% gain.
Investors may get an update and more details of the Wit.ai purchase on Jan. 27, when Facebook reports Q4 2014 results after market close. Expectations are for earnings per share (EPS) of $0.48. That would be up from Q3’s EPS of $0.43 and handily better than the $0.31 EPS in the year-ago quarter.
In a cautionary note, FB issued a tepid 2015 earnings outlook during its Q3 2014 conference call. It said expenses could grow 50% to 70% in 2015 as it boosts headcount and invests in advertising technology.
Of the 32 firms that cover FB stock, 26 rate shares a “Strong Buy,” four rate the stock a “Buy,” and two maintain a “Hold” rating, according to Nasdaq. There are no “Underperform” or “Sell” ratings. Facebook shares were trading at $76.93 at the time of writing.
Don’t Miss Today’s Top Story: According to a recent survey, our nation’s top executives plan to spend a lot of money over the next half-decade investing in technology that will help them attract, retain, and understand customers. And if we “follow the money,” we can take advantage of these long-term spending trends in a way that beats the market by 40%. Here’s how to invest like a CEO for maximum profit…
Related Articles: