WhatsApp promises ‘no ads, no games, no gimmicks’ after $19bn Facebook acquisition
WhatsApp has promised “no ads, no games and no gimmicks” following Facebook’s $19bn acquisition of the messaging service – a pledge that suggests the social network is making a defensive play to ward off the threat of a competitor, rather than seeking an immediate new revenue stream.
WhatsApp is an over the top messaging app that allows users to send each other text, audio and pictures via the the mobile internet. The volume of messaging on the service is close to overtaking the global amount of SMS messages people around the world spend every day.
It has more than 450 million purely mobile monthly users – with 70 per cent of those active on any given day – and it is on track to reaching 1 billion users soon. In presentation slides following the announcement, Facebook used comScore figures to demonstrate how WhatsApp’s user figures have grown at almost four times the rate than its own service did in its first four years, and far faster than Gmail, Twitter and Skype.
In a conference call following the announcement last night (19 February), Facebook CEO and founder Mark Zuckerberg said the acquisition is in line with the company’s journey to become a mobile company.
WhatsApp currently generates venue by charging users a nominal fee of $0.99 per year, although it does also offer a free service.
Both Zuckerberg and WhatsApp chief executive Jan Koum agreed advertising would not be the right way to monetise Whatsapp further and instead they are focused on growing the service across the world – particularly in the US where Facebook’s CEO said the app does not get as much attention as it does in territories such as Europe, Latin America, India and Asia.
WhatsApp will operate “independently and autonomously” from Facebook and Koum will join the social network’s board of directors.
Why $19bn?
Facebook’s biggest purchase prior to acquiring WhatsApp was Instagram, which it bought for $1bn in 2012. Last year it also reportedly placed an unsuccessful $3bn bid to buy photo messaging app Snapchat. The Facebook deal now means WhatsApp is more than twice as valuable as the likes of Marks & Spencer and ITV.
While the $19bn price tag may have made many jaws drop, Benedict Evans, tech and telecoms analyst at Andreessen Horowitz says the it illustrates Facebook’s continued determination “to be the next Facebook”.
He adds: “It’s striking to compare the aggressive reaction to the disruption shown by Google, Facebook and other leading web companies today with how some of their predecessors a decade ago stumbled and lost their way.”
And just like those companies of yesteryear deemed to have lost their way, Facebook itself has recently been accused of losing its edge after admitting teen usage of the site was decreasing. The “youth factor” may have also inflated the WhatsApp price, according to Greg Sterling at Opus Research.
He adds: “I think [expensive price tag] comes from the frustration of not being able to buy Snapchat, and then there is the youth factor. Facebook really needs to have vehicles to attract younger users, and Instagram is not going to do that by itself. [Facebook] is becoming a kind of holding company for different social media properties that appeal to different groups.”
From a marketing perspective, acquisition also provides Facebook the “missing link” to its user information: phone numbers, according to Eden Zoller, principal analyst of consumer telecoms at Ovum. Such information could help Facebook offer better targeting and mobile ad products on its own service.
Zoller adds: “The access to phone numbers now bridges the offline and online worlds of Facebook users.”
In buying WhatsApp, Facebook has clearly acquired so much more than an alternative to its own Messenger app. And with Facebook set to launch more standalone mobile apps in the coming year, the social network has well and truly pinned its blue colouring to the mobile mast.
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