By Jonathan Vanian
July 26, 2018

Facebook’s bulking up on workplace software by buying enterprise startup Redkix.

Redkix cofounders Oudi Antebi and Roy Antebi said Thursday in a corporate blog post that they have agreed to sell their company to Facebook for an undisclosed price.

Considering Redkix has a workforce that’s less than 30 employees, according to deal-tracking service PitchBook, and will shut down its workplace product, it’s likely that Facebook acquired the startup for its talent. A Facebook spokesperson said that the social networking giant is acquiring Redkix’s technology, but did not say what it plans to do with it and confirmed the app is shutting down.

The startup debuted in 2014 with a workplace tool that could coordinate employee communications across email and the company’s enterprise chat interface. It raised around $17 million from investors like Salesforce Ventures, Wicklow Capital, and SGVC, according to PitchBook.

One of Redkix’s early investors was Facebook executive David Marcus, who previously led the social network’s messaging products and is now heading the company’s nascent blockhain project.

The deal makes sense for Facebook because the Mark Zuckerberg-led company has been investing in workplace software and its Workplace suite of business tools, in which it faces tough competition against companies like Slack, Microsoft, and Google.

It’s unclear how big of a business Facebook’s Workplace is for the company, which derives the bulk of its revenue from online advertising. Facebook has previously said that 30,000 organizations use Workplace, but didn’t reveal how many of those firms are paid customers.

Considering Facebook’s recent woes like the Cambridge Analytica scandal that appear to have damaged the company’s reputation with consumers, getting more involved in enterprise software could be one way Facebook could grow sales beyond its advertising business.

Facebook’s shares plummeted on Wednesday after the company reported quarterly earnings in which executives revealed that its not gaining users as fast as it once did in crucial markets like the U.S., Canada, and Europe.

When asked during a call with analysts whether Facebook would ever consider getting into the business of cloud computing, like Google has done, Zuckerberg said the company is “not planning on doing that.” Technology analysts generally consider Facebook to be among companies like Amazon, Microsoft, and Google that operate massive data center facilities, which are necessary if a business wants to sell to others on-demand computing services.

Although Zuckerberg said that Facebook has no plans to sell on-demand computing, the acquisition of Redkix shows that the company wants to continue to invest in selling workplace software to others.

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Still, the deal wasn’t enough to help Facebook recover after its latest earnings. Facebook shares were down nearly 20% to $174.67 in midday trading on Thursday.

Update: July 26 1:45 PM, PST

A Facebook spokesperson said “we’ll look for ways to integrate Redkix’s technology to help connect people and give the world a place to work together.”

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