This week, the news broke that Facebook had acquired cross-platform messaging app ‘WhatsApp’ for $19bn, in a tale that’s captured the imagination of many, due to the ‘rags to riches’ nature of the story of one of its founder.
The question that seems to be on the lips of many, is why? According to Ryan Tate of Wired, there are many reasons that the messaging app could prove to be a “financial dead end” for the world’s largest social network. However, WhatsApp does have a user base numbering around 450 million, so it’s highly likely that this was a driving factor behind the buyout, especially since it’s a mobile service and this is an area that Facebook is still looking to dominate in.
What is WhatsApp Exactly?
If before now you’ve never heard of WhatsApp, it’s a messaging service which allows people to send mobile messages without network SMS charges being applied. It’s available on all mobile phone platforms and what’s more, it doesn’t use advertising to make up for the fact that it’s almost free, at a dollar a year.
It’s likely that the app will remain ad-free for the time being, but as Wired point out, “Facebook is playing the long game” with this one. Zuckerberg believes that in the long term, with even more users numbering into the billions, there will be plenty of scope for monetisation. However, it’s an app primarily used by teens and students, so it’s not easy to see how this will change as teens aren’t especially interested in clicking through on ads, even in free apps.
Facebook has been reportedly attempting to buy WhatsApp for the last six months and it’s thought that the app’s founders, Jan Koum and Brian Acton turned down an offer from Google that exceeded Facebook’s. This suggests that Google too see potential in the app (or its users, more to the point) and it’s thought that the founders turned down the search giant’s offer as it was thought the offer was put in just “to keep it out of Facebook’s hands”.
The guys at WhatsApp say that nothing will change for the product and that their original mission, “building a cool product used globally by everybody” remains. They point out on their blog that their “partnership” with Facebook is merely an opportunity for the service to “grow and expand” and won’t impact on its users at all.
The service will continue to operate independently and the app developers insist that “there would have been no partnership between our two companies if we had to compromise on the core principles that will always define our company, our vision and our product.”
So What’s in it for Facebook?
Users and better global mobile reach appears to be the answer. When Facebook acquired Instagram, it was as much about the users as anything else, as the app was drawing young people away from the social network. Looking at it from that angle, it’s likely that Facebook is just doing the same thing, buying up another app used mainly by teens that’s proved to be incredibly popular and has a great and growing user base.
Further to that, WhatsApp is a global affair and has a healthy amount of global penetration, especially when it comes to emerging markets and Europe, which Facebook frankly doesn’t.
The fact is, that WhatsApp has more penetration in emerging economies than any other app out there, if a survey carried out by Jana Mobile is to be believed. Facebook is attempting to ensure that at some point in the future, it will be the largest mobile concern globally. This doesn’t come as any surprise, Zuckerberg himself has more than hinted that this is the main objective of the company many times.
Facebook itself haven’t had much luck so far in making its social network penetrate the global markets, so it’s acquiring smaller, innovative companies to help bring this about. Whilst of course the company launched the Facebook Home app and there has long been a buzz around a Facebook phone (remember the fabled ‘project Buffy’), this hasn’t really come to fruition.
This is really due to the fact that Facebook Home was not a good product; it was intrusive and changed the layout and functions on mobile to suit Facebook, rather than the user. Despite the HTC First using FB Home as a ‘skin’ over a standard Android OS, not many people were impressed with that either; not even the network carriers were especially interested, with just AT&T agreeing to sell it in the US.
Facebook Will Dominate Mobile?
It seems now that Facebook’s determination to dominate mobile has taken a different tack then. Facebook Home was really just added to the social networks app and that’s pretty much the last we’ve heard of it.
So now it’s about acquiring users, and the further reach that can be gained by buying up app development companies is their means to achieving that goal, at least for the time being.
But as Wired point out, teens do have a tendency to grow up and begin using other apps that work better with their working life than those they used when they were younger. Of course, that doesn’t affect the reach gained into Europe and other economies, but surely at some point it will affect the user base. In the meantime, it’s all about hoping that the users continue to expand at the astonishing rate that they currently are.
One way or another though, I imagine that Zuckerberg will realise his dream of dominating mobile, tenacity tends to pay off. In the meantime, the scaremongering cries that this could put mobile operators out of business is really just that. WhatsApp is a good product, but it’s unlikely we’ll see it being used as an enterprise app any time soon.
The best thing for me about the news is the story of the founders. As I mentioned earlier, we all love a good rags to riches tale and the news that one of the founders was turned down for a job by both Facebook and Twitter must make the sale (and victory) all the sweeter for the WhatsApp creators.