By now you’ve probably heard all about Facebook’s astonishing $19 billion acquisition of mobile messaging service, WhatsApp. But the question on most people’s minds (including ours) remained: “Why in the world would they pay so much for it?” After all, you can buy A LOT with $19 billion. Just look at this awesome comparison from TechCrunch:
It’s pretty clear that this recent acquisition makes Facebook’s $1 billion purchase of Instagram a few years ago seem like child’s play. So what’s the deal with WhatsApp? After a bit of digging, here’s the general breakdown of why we think FB decided to invest in this seemingly unknown mobile service and where it could possibly take them.
What is it?
WhatsApp was founded in 2009 and is a cross-platform mobile messaging app which allows you to exchange messages without having to pay for SMS. In just a few short years it has grown to over 400 million monthly active users, with 500 million photos and more than 16 billion messages shared DAILY. The kicker? 70% of those monthly users use the app EVERY single day.
Mark Zuckerberg wrote on his Facebook page: “Our mission is to make the world more open and connected…We do this by building services that help people share any type of content with any group of people they want.”
With Facebook’s obsession to connect everyone around the world, it’s logical that the next step would be growing the mobile user base. And WhatsApp is trendy. Scratch that- It’s incredibly trendy, with an adoption rate of about one million users PER day! It’s most popular with young people who want to send photos and texts to friends overseas without being charged international data fees. This extends Facebook’s reach into developing countries who have otherwise seen slow adoption rates to Facebook itself. Not to mention it will also extend Facebook’s advertising reach, if (and when) they so choose to apply ads to WhatsApp.
Most importantly, as WhatsApp continues to grow Facebook will be able to successfully transition away from computers and onto mobile devices (which has been the trend for practically everything in the past few years). Sure it already has a mobile version of it’s website, but WhatsApp adds a whole new dimension of instant messaging and photo sharing that can keep Facebook dominant in most countries.
At only about half the size of Facebook, WhatsApp still has lots of room for growth and that’s what the primary focus will be for the next few years. New features will be added of course- WhatsApp already announced earlier this week that it is adding a free internet voice calling feature, similar to Skype.
As far as ROI is concerned, it’s a little too early to tell how that will go. Facebook and WhatsApp operate on two completely different business models. Facebook is free “and always will be” while generating the majority of their revenue from advertising. On the flip side, WhatsApp, is completely ad free but charges $1 per user per year (beginning after the second year of app usage). This business model could end up providing Facebook with the opportunity it needed to seek new and more customer friendly ways of creating revenue.
One thing is for sure, with the way Facebook has managed to grow and stay relevant over the past decade, we can expect some big things with what’s to come with WhatsApp.