After months of speculation, it seems that Facebook (NASDAQ:FB) has finally sealed the deal with Face.com, an Israeli face recognition technology startup. It has reportedly acquired Face.com for around $60 million. Face.com specializes in mobile facial recognition and it makes sense for Facebook to acquire it as it now has two of the most popular mobile photo apps – Facebook Camera and Instagram. 
Mobile and photo sharing are two segments which Facebook is really focused on, and Face.com’s mobile facial recognition could help it drive engagement on its platform by increasing the ratio of tagged photos on its network. By providing accurate tagging recommendations whenever users click a photo, Facebook could see a significant increase in photo tagging on mobile, which would directly boost engagement levels on the website as users tag more photos and like or comment on the photos they or their friends are tagged in.
Higher user engagement ultimately translates into higher advertising revenues, which account for most of Facebook’s value. The more time users spend on Facebook’s web platform and apps, the better the chance Facebook has of monetizing them.
We currently have a $33 Trefis price estimate for Facebook, most of which is derived from its social text and display advertising business. It competes primarily withGoogle (NASDAQ:GOOG), Microsoft (NASDAQ:MSFT) and Yahoo (NYSE:YHOO) in the online advertising space.Notes: