Who knew a mobile instant-messaging app with no frills or any distinctive features of any kind would one day be valued at $16 billion? Whatsapp may not be have been a familiar name before (at least with Americans), but it certainly is the name on everyone’s lips right now.
Some quick numbers – Facebook has 1.2 billion users, but because that’s not the whole world, it is acquiring Whatsapp and its 50 employees and 450 million users that exchange some 53 billion messages a day, a volume that equals the total number of messages sent through SMS each day, worldwide. For all the work it is doing, Whatsapp charges… one dollar a year.
Many questions surround the deal, specifically what Facebook wishes to do or achieve with Facebook, and whether the venture is worth $16 billion.
Whatsapp’s numbers are appealing – its 450 million users were acquired in five years, making it the fastest growing mobile messaging app in the world. Its users are more active – 70% of users get on Whatsapp every day, versus 62% for Facebook, and getting higher user engagement and a larger share of consumer’s time spent online is something that Facebook wants, even if it does not yet know how (or perhaps not even want) to monetize the attention.
A vocal segment of Whatsapp users are convinced that Facebook, operating on a business model heavily reliant on advertising revenue, will introduce ads to the messaging service. Yet it is most likely that these worries are misplaced – it will be the equivalent of Facebook buying a $16 billion shoe, putting it on, and then firing a bullet through its own foot. The messaging market is highly fragmented – between Google chat, AIM, Skype, SMS, Twitter, Facebook chat, iMessage, and other players such as WeChat in China, it is not difficult for users to switch to another service should they feel unhappy with what Facebook may introduce.
If not ads, then what?
In its post announcing the acquisition, Facebook reiterates its desire to help bring more connectivity and utility to the world, and promotes itself as an environment where “independent-minded entrepreneurs can build companies, set their own direction and focus on growth while also benefitting from Facebook’s expertise, resources and scale.” Let’s break this down. “Bring more connectivity”, meaning, as a brand, Facebook exists to connect the world. How will it do that? Place this in light of “independent-minded entrepreneurs”, the acquisition of Instagram, and the launch of Paper, and suddenly we are looking at Facebook’s strategy for the future: to acquire or build a house of applications, centered around communication and content sharing of any kind, with anyone.
With the purchase of Whatsapp, Facebook gains access to an audience that prefer communicating one-on-one or with very small groups, rather than sharing information more widely on a wall that is accessible to family members, friends, and potential employers alike. In fact, each social network/messaging app out there – Snapchat, Instagram, Twitter, is a slightly different form of sharing and communication platform, with different value propositions, and rather than folding its acquisitions into its main social network, which acquired users clearly do not want, Facebook is rightly letting them flourish, with its support.
Still, the purchase of Whatsapp is hardly a philanthropic act, but monetization may be a discussion best left for the future, depending on how the world continues to evolve. Will we one day make mobile payments through messaging? It is not an impossibility, and Whatsapp, with a global reach and secure system, will make that extremely easy. In the meantime, a slight integration between Whatsapp and Facebook is not impossible as well. I wish for a Read Later button on Facebook that syncs with my Instapaper account; I don’t see why Facebook may not also make it easier for Whatsapp users to share content they come across on Facebook in their Whatsapp messages with friends. If Facebook is serious about keeping communication open and connecting the world, it should make it easier for other apps and networks to exist and work with its content. Who knows how the future of communication will eventually evolve? But clearly Mark Zuckerberg has an idea, and is working to realize it.