Who's the Shopaholic? Google or Facebook?

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A Tour Of The Hardware Lab At Facebook Headquarters As Company Attracts Oculus With Hardware Expertise
David Paul Morris/Bloomberg/Getty ImagesTesting at Facebook's labs.
Bridezillas stampeding for wedding dresses is nothing compared to the shopping frenzy going on in Silicon Valley. Shopaholics Google (GOOG) and Facebook (FB) have been loading up on start-ups.

Shopping Sprees

The gurus at Google Ventures, in which Google is sole limited partner, on Wednesday drove six Uber cars (one of their more successful projects) throughout Silicon Valley, picking up entrepreneurs and giving them the ride of a lifetime, a chance to pitch their game changer. They got "seven minutes in heaven" to pitch -- and then a likely seven in hell for critique.

Google Ventures has built a portfolio of 225 companies since 2009, and it averaged more than one angel investor deal a week in 2013. Searching whogotfunded.com, it looks like Google Ventures is on a similar torrid pace this year. For Google, the $300 million it tossed to Google Ventures is but a drop in the bucket for a company that brought in $59 billion in revenue this last year and has $57 billion in cash. Google Ventures expects to invest $1.5 billion over the next five years, with Google adding an additional $300 million to this year's Google Ventures coffers. In January, Google bought Nest, a smart thermostat and smoke alarm company that was a Google Ventures project, for $3.2 billion.

Facebook bought Oculus Media, a company funded on the Kickstarter crowdfunding platform, for $2.3 billion. Oculus makes virtual reality headwear. This follows the What's App purchase for $19 billion in stock earlier this year and the wildly popular Instagram for $1 billion in stock two years ago.

Shoppers' (and Investors') Remorse

Share prices at both have climbed, with Google up 40 percent over 52 weeks and Facebook up 111 percent. However, Google recently split into two classes of shares, with great controversy about shareholder rights. Also, the general public is getting skittish about all Google's tentacles. On April 7, Reuters reported more than half the of the 4,781 people in a Reuters/Ipsos poll believe that Google, Facebook, Apple (AAPL), Amazon (AMZN), Microsoft (MSFT) and Twitter (TWTR) are too intrusive in their lives and growing more so. And most weren't even aware of the self-driving cars, appliances and other real-world products they have in the works.

Facebook is now in positive price to earnings territory, although very high at 102. Google trades at a more modest 28 price to earnings ratio. Compare that to Apple, with a dividend of 2.3 percent; it trades at only 13.18 times earnings.

Facebook had 1.3 billion active users worldwide at the end of 2013, but other social media companies, including Twitter and Pinterest, are drawing increased attention from advertisers. Pinterest users are 10 percent more likely to buy products on Shopify than shoppers coming from other social media sites. Still, Facebook is the king. A March Shopify study found that Facebook drives 85 percent of orders coming through social media. Facebook's Instagram is also driving sales, although the study did not lump together their sales.

Facebook has been a battleground stock since its initial public offering, with no consensus on the monetary value of a Facebook like. Despite the muttering that young people are leaving Facebook, it has grown its user base, and its earnings releases have shown improving results. Facebook brought in $7.87 billion in revenue over the last year and has $11 billion in cash.

So, Who's the Shopaholic?

Facebook seems to have already recouped its investment in Instagram, but it's too soon to tell for What's App. Don't forget those two were mostly bought with stock. Knowing that Oculus Media was funded on Kickstarter for little more than $2.4 million makes that multibillion dollar price tag a little embarrassing for Facebook.

Google has spent less on Google Ventures than Facebook with its buys. Google also has more money to spend than Facebook. If frequently shopping beyond your means is the definition of a shopaholic, neither one strictly fits the bill, but if you mean frequent indulgence in retail therapy, both could go on a retail diet.


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