Facebook has won the bidding war against Google for the acquisition of the free messaging service WhatsApp. The deal is worth a measly $US19 billion and it has left people wondering why Facebook would pay so much money for a company that doesn’t believe in advertising.
Launched in 2009 by two former Yahoo! employers, WhatsApp was a means to provide a more cost-effective messaging service. The app has 450 million monthly users who are able to send texts, pictures and videos to other WhatsApp users on a variety of mobile platforms.
The greatest feature of WhatsApp is that users are able to chat to friends and family overseas without being billed the ridiculous charges that large telecommunication companies tend to charge for international SMS. The app is free for the first year and only a $1 every year after.
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Facebook has its finger (or perhaps a whole hand) in the WhatsApp pie most likely due to its desire to be the top dog in the global mobile messaging market. Zuckerberg declared in 2012, “We are a mobile company.” Considering that 57% of Facebook’s revenue is due to mobile, it’s no surprise that the company now dominate social media, photo sharing (Instagram was bought by Facebook for $1 billion back in 2012) and social messaging.
WhatsApp trumps other mobile messaging apps such as WeChat, Line, Kik and Viber in engagement levels alone. Each day, 19 billion messages are sent and 34 billion received via the WhatsApp service.
CEO Jan Koum told The New York Times in 2012 WhatsApp is so popular because “we are providing a richness of experience and an intimacy of communication that e-mail and phone calls simply can’t compare with”.
Popularity aside, Jan Koum has stated multiple times the core principles of WhatsApp do not include imposing advertising on its users. The co-founders of WhatsApp want to focus on enhancing the pure messaging experience now and for the future. Facebook will have to implement a strategy that generates revenue, otherwise, how will it ever profit on such a hefty investment? If ads won’t appear on WhatsApp itself, where will they appear?
If there have been no indications as to how Facebook and WhatsApp will work together for this deal to pay off, should we be worried about our personal data? WhatsApp has said it doesn’t gather information such as name, gender, address or age. Users are approved once their phone numbers are authenticated.
Joum emigrated from the Ukraine and has experienced living in a country where phone lines were often tapped and there was not much privacy. Jim Goetz, a partner with Sequoia Capital Ltd, WhatsApp’s lone venture capital investor, believes Koum’s background instilled the importance of privacy and Koum’s values are represented in the framework of WhatsApp. Joum has stated before that user “data isn’t even in the picture. We are simply not interested.”
However, Facebook will definitely have a vested interest in user data to assess emerging markets in order to improve user engagement.
The size of the WhatsApp user base is sizeable and will continue to grow, and this is why Facebook has forked out $US19 billion. Facebook is taking the necessary steps to ensure people don’t keep abandoning the social media platform, which means a loss of advertisers and a loss of income. Facebook has invested in the growth of the user base and as Jody Brazil, president and CTO at Firemon told Infosecurity, “The user base will dictate future revenue.”
Facebook is intent on making mobile a global phenomenon and only time will tell if this acquisition will reap rewards.
Facebook is making sure it controls the most engaged platforms in the mobile app market, a level of control that is starting to look a little Orwellian in its scope. We’ll have to wait and see what Facebook’s next step will be in its bid for global domination, but I’m guessing its next venture will be mobile navigation.
Fi Bendall is the managing director of Bendalls Group, a team of highly trained digital specialists, i-media subject matter experts and developers.