Facebook Plans to Buy Customer Service Startup Kustomer

Facebook disclosed plans to buy Kustomer, a customer relationship management startup, in a deal valued by sources at close to $1 billion. Crunchbase stated the New York-based Kustomer has raised about $170 million in venture capital funding. Kustomer would help Facebook provide customer support on its main platform and its services such as WhatsApp, Instagram and Facebook Messenger. The deal, subject to regulatory scrutiny, comes as Facebook is already being investigated for its acquisition of startups as anticompetitive behavior.

The New York Times reports that, within days, the Federal Trade Commission and dozens of state attorneys general are expected to file lawsuits “against the company for maintaining its power through past mergers of nascent competitors.” Regulators will point to Facebook’s “$1 billion acquisition of Instagram in 2012 and its $18 billion purchase of WhatsApp in 2014.”

This year, Facebook also acquired Giphy for $400 million. A Facebook spokesperson stated that the deal with Kustomer is “about providing more choices and better products for consumers … [and that] the key to Facebook’s success has always been innovation, with M&A being just a part of our overall business strategy.”

WhatsApp chief operating officer Matt Idema noted that his company’s messaging app, with its 1+ billion users, recently “built a special app for businesses as customers in Latin America, Southeast Asia” and has also seen huge growth in India. “People have made the shift to messaging, with more than 100 billion messages sent per day on WhatsApp,” he said. “And they’re starting to use modern channels like messaging to talk to businesses. It’s a better experience than waiting on hold, than not knowing if your email has been read.”

COVID-19 has also increased “the demand for managing digital relationships with customers.” Kustomer co-founder Brad Birnbaum noted that, “instead of investing in expensive storefronts and retail locations, companies are investing more in digital tools and experiences.”

Kustomer, founded in 2015, simplified “the back-end software used by many Fortune 500 companies to serve customers” and provided an alternative to offerings by “customer service software companies like Zendesk and Oracle.”

Earlier, The Wall Street Journal reported that antitrust authorities “are readying as many as four more cases targeting Google or Facebook by the end of January,” looking at whether Google has abused its power in dominating search and advertising and Facebook in social media. A suit against Facebook would “mark the first government antitrust action against the social-media titan in the U.S.”

President-elect Joe Biden and a bipartisan group of federal politicians have criticized Facebook for lax content moderation policies. According to former FTC chair William Kovacic, “the likelihood of additional suits in the U.S. against Big Tech companies reflects growing bipartisan concerns among elected leaders about their size and impacts … [and] that is giving antitrust authorities confidence that they can withstand any political pressure from the companies.”