Late
yesterday, Facebook purchased WhatsApp for the large (and ludicrous) total of
$19 billion in cash and stock. This is one of the leading acquisitions in
Silicon Valley history — and yet, if you’re American, you possibly don’t even
know what WhatsApp is, let alone why it’s worth $19 billion.
In a sentence, WhatsApp replaces text messaging (SMS) — and it has grown to 450
million monthly users in under five years. as a purchase price of $19 billion
might appear like insanity, particularly when compared to its $1 billion
acquisition of Instagram, it’s actually a savvy (or desperate, depending on
your point of view) move to ensure that Facebook remains the world’s major
messaging platform.
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What is WhatsApp?
Well the little answer of this
question is that WhatsApp is a best substitute
for SMS (texting) for every major mobile platform like iOS, Android, Symbian,
Windows Phone, BlackBerry) — and it also
let you to send photos, videos, and audio clips as well.
Because it uses
the internet, and your data package, it avoids the crazy fees that some
carriers charge for SMS. WhatsApp has done for instant messaging what Skype did
for international calling, mostly.
Why haven’t you
heard of WhatsApp? Because, for anything reason, it hasn’t yet become popular
in the US Asia . The growth rate of WhatsApp has been utterly
insane: In November 2013 it had 190 million monthly active users; today, it has
450 million active users and 320 million daily active users, with 1 million new
users joining every day. Upwards of 50 billion text messages are sent and
received by WhatsApp every 24 hours (more than doubling Facebook’s usage),
along with hundreds of millions of photos and video messages. WhatsApp is huge.
In terms of
monetization, WhatsApp is free for the first year, and then $1 per year after
that. There is no publicity. The entire service is developed and maintained by
less than 50 employees. The company has never spent a penny on its promotion.
WhatsApp is a classic model of identifying a gap in the market, and then
producing a very simple app that completely fulfils that need. (The back-end —
which is probably one of the busiest databases in the world — is programmed in
Erlang, incidentally.)
Depending on
how sceptical you are, there are a few answers to this question. . The most comfortable
answer is, Facebook is scared of losing its rank as the world’s major social
network and messaging platform. Instagram warned
Facebook’s role as the best place to share photos, and Facebook scooped it up.
WhatsApp, which
already dwarfs Twitter, Skype, and Facebook Messenger in terms of users and
usage, was most likely keeping Zuckerberg up at night — thus the acquisition. ”WhatsApp
is the only app we’ve ever seen with higher engagement than Facebook itself,”
Zuckerberg said during a conference call yesterday.
Another opportunity
is that Facebook simply sees WhatsApp as an easy way to pick up its “next
billion” users. Facebook, which sits at around 1.23 billion monthly active
users, has earlier stated that the only way it will keep growing is if it taps
developing markets in Asia and Africa .
WhatsApp is already huge in both those areas. It’s also worth pointing out that
Facebook now has access to a lot of mobile phone numbers, and a lot of new
advertising eyeballs — though, for now, Facebook says WhatsApp will remain
as-is, just like Instagram.
At the
end of the day, though, spending $19 billion — more than 10% of Facebook’s
total market valuation — without
a clear purpose in mind is a big pill
to swallow for Facebook’s share holders. (by the way, Google reportedly
offered $10 billion for WhatsApp, but was turned down.) Having said that,
considering carriers squeeze billions of dollars per year from SMS, possibly
$19 billion is actually a small price to pay for a big slice of that pie —
maybe this is actually a sign that Facebook is diversifying,
in case the bottom falls out of the advertising market.
finally, Facebook is paying a lot of money to make sure
that the bulk of the world’s communications continue to flow through its
network. What the company’s end game is, although, no one really knows. Putting
so much information in the hands of a business company makes me a little bit nervous.
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