Google Balloons vs. Facebook Drones Battle for Wireless Internet Supremacy
As initially reported by TechCrunch, Facebook is in talks to buy Titan Aerospace. Mark Zuckerberg wants a fleet of drones to soar over Africa at 65,000 feet, using solar energy to beam a wifi signal back down to some of the most impoverished places on Earth.
It's a lofty (pun intended) and idealistic notion, but not one without precedent. In fact, the idea of promoting wireless networks through aircrafts was pioneered 20 years ago by veteran satellite-makers Globalstar and Iridium. Both firms aimed to improve cell phone coverage rather than Internet access, but the underpinning idea of using aerial devices as a transmitter is the same. I should add that both Iridium and Globalstar went through bankruptcy as a result.
More recently, Google came out with its own Internet expansion plan called Project Loon, which uses a network of large balloons floating on stratospheric winds as the transmitters. Read that last line again because it wasn't a joke. Yes, balloons.
So why is Facebook getting more press than Google?
For one, Facebook's project involves the word "drones" (buzzword of the year!), which is actually an inaccurate description of Titan's Solara lineup. The aircraft may look like our impression of a standard unmanned aerial vehicle (UAV), yet flying at 65,000 feet for up to five years makes it an atmospheric satellite.
But it's deeper than that -- Facebook's governance structure actually makes it more capable of altruistic projects like bringing Internet to the masses. Just one person, Mark Zuckerberg, controls 57% of voting rights in the company, granting him a dictatorial power over the largest social media company in the world. So, despite being a Fortune 500 company, Facebook is still (in some regards) a start-up that's subject to the whims of its creator.
Remember that just a few weeks ago he hashed out a $19 billion deal over dinner!
Zuckerberg's hegemonic influence at Facebook means that he isn't hindered by the usual corporate checks and balances. In a normal firm, the CEO reports to the Board of Directors, who are in turn accountable to shareholders. Under this system, investor activism and the fear of corporate raiders drive companies toward short-term profits - a far cry from the doggedness needed in strategic thinking.
Investors simply aren't interested in 10-year growth plans that measure success by societal benefits. They're concerned with real dollar returns. And even though he doesn't need anyone's approval, the Zuck has an ace up his sleeve. Here's his simple proposition: any person who is introduced to the Internet by way of Facebook's drone program is likely to become a new Facebook user. And with well over a billion users already, expanding Internet access could be an innovative way of continuing subscriber growth. Not a bad pitch, right?
Unfortunately, there are a few legitimate concerns:
Both Facebook and Google are facing an uncertain regulatory environment. In 2012, Congress mandated the FAA update its rules on commercial UAVs by 2015. The process is ongoing and will likely encompass both of the Internet expansion projects.
And that's just in the U.S. With the shadow of recent NSA revelations hanging over foreign policy, I don't think foreign governments are going to welcome the permanent presence of American aircraft in their airspace.
What happens at the first sign of trouble? What happens when a mechanical failure or weather anomaly brings one of the drones crashing back to Earth? Commercial airplanes are designed for travel between cities, so the chances of them crashing in a metropolitan area are diluted. But these UAVs are meant to be directly above populous areas, raising the probability of a PR disaster.
Looking at these issues specifically, Google clearly has the upper hand. The balloons are smaller and much cheaper than UAVs, so crashes don't matter as much. Plus, balloons are less threatening than this:
The Foolish bottom line
On a personal level, this kind of philanthropic commerce gives me hope. Don't fall prey to the cynics that tell you everything and everyone is self-motivated. It's just not true. The Mark Zuckerbergs and Elon Musks of the world didn't earn their place in history by being overly concerned with money. Ideas are their currency, and some would argue that we should let them spend it freely.
While I admire their ingenuity and humanitarianism, as an investor I'm not yet fully sold. I want to hear more on safety precautions, how privacy concerns will be addressed, and what kind of precedent this sets for space privatization.
Regardless, Facebook and Google continue their disruptive ways, that rule-breaking mentality that initially drew Motley Fool co-founder David Gardner to recommend both stocks to his readers. David first recommended Facebook in July 2012 and Google in May 2008. Those who followed his advice are sitting on gains of 134.7% and 115.5%, respectively.
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The article Google Balloons vs. Facebook Drones Battle for Wireless Internet Supremacy originally appeared on Fool.com.
Gaurav Seetharam has no position in any stocks mentioned. The Motley Fool recommends Facebook and Google. The Motley Fool owns shares of Facebook and Google. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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