Drone Wars: Google Inc. Beats Facebook to Acquire Titan

Tech giants Google and Facebook want to connect more people to the web using drones. Amazon wants to use unmanned aerial vehicles as a package delivery system.

Apr 17, 2014 at 1:05PM

Google (NASDAQ:GOOG) wants to get loonier. The Internet giant announced recently that it will buy the New Mexico drone maker Titan Aerospace, beating Facebook (NASDAQ:FB), which also had designs on the company, to the punch. The social networker didn't want to get left behind and instead acquired a British company, Ascenta, that also makes unmanned aerial vehicles, for $20 million. 

Titan would fit nicely into Google's "Project Loon," an attempt to bring wireless service to areas of the world that do not have it. Facebook would probably use drones and other technology that Ascenta is working on for the same reason. Previously, Amazon.com (NASDAQ:AMZN) indicated it wants to deliver packages using unmanned aerial vehicles.

How will the drone wars drive investor returns? 

Searching for growth
Google, recognizing that growth in its primary cash cow, Search, may plateau in developed countries, is looking for ways to connect people living in hard to reach areas to the Internet. There's a big untapped market, too; two thirds of the world's population does not yet have access.

As part of that effort, Project Loon, as originally conceived, proposed to use high-flying balloons to close gaps in wireless coverage in certain geographical areas of the globe. Theoretically, once connected, some of these people would begin using Google products. Adding drones may become part of the process. 

Any payoff from Project Loon would likely take several years to contribute to Google's bottom line. However, investors who believe in Google's vision and are willing to delay gratification could reap the benefits down the road.

Liking the drone
Although its user base is rapidly increasing (see the chart below), Facebook doesn't want to rest on its laurels. Part of the company's strategy is to expand globally to compensate for any potential domestic slowdown. The company wants to attract people, especially those in developing countries, to its experience. Using drones may be necessary to reach people who currently do not have Internet access.

Facebook Q
Source: Facebook

Package in a hour
Amazon wants to get a package to your front door within an hour after you place an order. Delivery via drone is one way the company thinks it could happen. With no pilot needed, Amazon could accomplish this less expensively than today's overland methods, which would boost Amazon's low profit margins. If not for a long history of double-digit revenue growth, the company would likely be just another run-of-the-mill outfit instead of one of the most successful companies in recent times.

However, the Seattle-based company would have to overcome many obstacles, including getting regulatory approvals, to fly drones in confined airspace in certain areas of the country. So, don't look for any immediate benefit from drones for Amazon, if at all. Stick with the company if you believe it has the potential to keep satisfying e-commerce customers using traditional delivery methods. 

Foolish conclusion
Google wants to use Titan Aerospace drones to expand its user base by connecting more people to the Internet. Long-term investors will benefit if the company's seemingly loony plan pans out.

Facebook will probably use unmanned aerial vehicle technology from Ascenta, a British company recently acquired, to help do the same. The social networker wants to ensure its already-high user growth rate continues. 

Amazon's lofty vision of using drones to deliver packages might have a tough time getting off the ground. Overcoming regulatory hurdles would be just one of the issues affecting the plan. Investors might have to just accept profit via traditional delivery methods. 

Don't blame drones, but your credit card may soon be extinct
The plastic in your wallet is about to go the way of the typewriter, the VCR, and the 8-track tape player. When it does, a handful of investors could stand to get very rich. You can join them -- but you must act now. An eye-opening new presentation reveals the full story on why your credit card is about to be worthless -- and highlights one little-known company sitting at the epicenter of an earth-shaking movement that could hand early investors the kind of profits we haven't seen since the dot-com days. Click here to watch this stunning video.

Mark Morelli has no position in any stocks mentioned. The Motley Fool recommends Amazon.com, Facebook, and Google (C shares). The Motley Fool owns shares of Amazon.com, Facebook, and Google (C shares). 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.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't 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.

©1995-2014 The Motley Fool. All rights reserved. | Privacy/Legal Information