Why the Whatsapp buyout is a good deal for Facebook
On Thursday Facebook announced that it is buying Whatsapp, an Internet- based crossplatform messaging service, for a whopping $19 billion in cash and stock. Facebook had also tried to acquire Snapchat earlier this year, but the $3 billion offer was turned down by Snapchat’s founder, Evan Spiegel.
Facebook’s new found interest in messaging services isn’t surprising when we consider just how important it is for Facebook to stay in the centre of our web-based social lives, as Zuckerberg himself tells you repeatedly, “connecting people”. Before turning to successful competitors, the social networking giant made a few unsuccessful attempts themselves at venturing into the territory, with an app that you may remember called Poke, and then with diligent makeovers of their integrated messenger application.
In their earnings announcement in November last year, Facebook said they saw a decrease in the number of daily active users, which had a lot to do with teenagers deserting the social network. Accounts were not being deactivated, but there was no longer a vivid presence of users.
Experts suggested that while Facebook’s user database had surged to 1.2 billion users, it had come at a price. With the increasing number of users, private space had gradually shrunk. Anyone could see a picture that you were tagged in, for instance, which didn’t seem to fit in with the watertight segrega- tion that younger users cherish in their social cirques. So while Facebook turned into a dump for viral pictures and inspirational quotes, private messengers like Whatsapp, Line, Kakao and Snapchat quickly gained both users and popularity.
While the Whatsapp acquisition gives Facebook instant ownership of 450 million active users, 70% of whom are active every single day and a large chunk of whom are youngsters, it is also worth considering the growth that Facebook will see in developing countries — where the primary way to access the Internet is a mobile phone.
One of the things that made Whatsapp successful was that while competitors embraced multiplayer games to make users spend more time on the app and pushed advertisements in order to
Whatsapp acquisition gives Facebook instant ownership of 450 million active users, 70% of whom are active every single day and a large chunk of whom are youngsters.
monetise their infrastructure, Whatsapp focussed on the basics — lightening fast communication, servers that never faced outage, and a clean interface. Jan Koum, cofounder of the company with Brian Acton, has a note on his desk listing three simple rules: “No Ads! No Games! No Gimmicks!”
This buyout doesn’t look to change those principles, not yet at least. 450 million users are great, but Zuckerberg is right in thinking that this is a service that will soon be connecting more than a billion users across the world. «Once we get to being a service that has a billion, two billion, three billion people one day, there are many clear ways we can monetise”, he said. These numbers don’t seem farfetched when you consider how quickly Whatsapp has grown.
As Apple and Google started to take a bite out of the Canadian manufacturer’s BlackBerry devices and Blackberry’s refusal to make their pioneering Internet messaging service ( BBM) available for other platforms made it obscure, Whatsapp filled in. Though BBM opened its doors to Android and Apple users last year, but it was too late then.
If we compare the first four years, Whatsapp has grown about three times faster than its closest competitor, Facebook, which had 145 million active monthly users. (Gmail comes in third with 123 million users a month.)
Zuckerberg more than anyone understands the value of letting a company grow to its maximum potential before starting to think about the profits it can generate; he used it so well with Facebook. So while there is a small chance that the Whatsapp application on our smartphones will change dramatically, Facebook has changed the world of instant messengers in one go and irreversibly.