WhatsApp acquisition: Why did Facebook spend more than $16bn on a messaging app?
Facebook has bought WhatsApp for a headline figure of $16 billion, but the deal goes well beyond that.
The monumental deal involves both cash and stock, but Mark Zuckerberg, Facebook's CEO, has already promised his public company will not use advertising as a way to rapidly recoup the buyout's cost or monetise WhatsApp. Facebook will instead focus on growing and connecting everyone in the world.
Once WhatsApp reaches say one or two billion users, Facebook will have "many clear ways" to monetise it.
So it's obvious that Facebook isn't focused on spinning WhatsApp into a money-making machine - at least not initially. So why did the giant social network spend so much cash on a simple messaging app that can't immediately turn a quick buck? Pocket-lint has come up with a list of potential reasons.
Facebook is being pragmatic
WhatsApp is growing faster than Facebook. Facebook revealed last autumn that users have uploaded more than 250 billion photos, for instance, meaning they are currently uploading 350 million new photos every day. Those numbers do not include photo uploads to Instagram, another mobile app that Facebook acquired. To put that into perspective, WhatsApp is processing 500 million images a day.
Facebook will have kept a watchful eye on WhatsApp. By acquiring WhatsApp, Facebook has shown the world that it wants to stay on top. That includes swallowing all pride and buying up services that are outpacing Facebook - which is why the social network was also interested in Snapchat, a rapidly growing messaging app that spurned an all-cash acquisition offer from Facebook for $3 billion.
Facebook is clearly willing to face the facts, and it is itching to own anything that's gaining users at warp speed, even if that means offering billions of dollars for an app that's only a few years old.
Facebook bought WhatsApp so Google or Yahoo couldn't
We've established that Facebook wants to acquire rapidly growing services, primarily because it is pragmatic and doesn't want to lose its top spot to a quick-rising competitor. But Facebook also doesn't want its largest rival to swoop in and buy the fast-growing competition.
When rumours first claimed that Facebook wanted to gobble up Snapchat, several others chimed in and said Yahoo and Google wanted to buy Snapchat as well. It became obvious that there was a rat race to see which big company would buy the popular underdog first. That situation isn't any different when it comes to WhatsApp.
WhatsApp has been boasting for a while that it adds about 1 million registered users a day. Those numbers get the attention of executives at Facebook, Google, Yahoo, etc. It was really only a matter of time before one of them struck a deal with WhatsApp, because the technology space today is just as much about acquisitions as it is innovation.
Facebook didn't build WhatsApp itself, but that just gives it more reason to acquire it. After all, if Facebook didn't buy WhatsApp, Google would...and Facebook can't let that happen. In a world where everything is fleeting and mobile-based, it's important for technology companies to stay relevant, and sometimes that means breaking the bank on apps that are young, fresh and hip.
Facebook wants to re-hook teens with a strong mobile presence
Facebook recently revealed that it was seeing a "decrease in daily users, specifically among teens". That means teenagers are not using the network as much as they once did; they tend to use whatever is "in" or "the next big thing". Thus, with Facebook haemorrhaging teens, it won't be able to stay on top for long.
WhatsApp has more than 450 million monthly active users globally, making it the biggest messaging app in the world by users. That is partly because WhatsApp is a social tool and communication tool in one. When Facebook launched, its main rival was MySpace. Teens wanted online profiles to suit their personalities. They also wanted to connect with others and have a medium for sharing their lives.
But times have changed. Facebook is 10 years old and has around 1 billion monthly mobile active users. Teens are no longer sitting at their computers, making custom online profiles, and stalking friends. They're downloading messaging apps like Snapchat and sending selfies to friends, according to The Telegraph, which says early adopters of messaging apps are typically under 25 years old.
That's because messaging apps are truly mobile and do more than just messaging. They are a new form of social networking. Take Facebook-owned Instagram: it has a community and direct messaging features, as well as liking, sharing, and posting options. It is a mobile social network. No longer do teens have to remain chained to one online profile when they can be fleeting and talkative using an on-the-go app.
Facebook realises this shift in social networking, and even reportedly plans to launch a suite of standalone mobile apps this year. Facebook needs to re-hook some of the teens who abandoned its website for other services. If it can't hook them with new in-house apps like Facebook Paper, it will buy popular rival apps and snag them that way.
Facebook wants to tackle emerging and international markets
WhatsApp is the most popular messaging app in the UK. It's on half the country's iPhones, according to Mobile Marketing Magazine. It is also more active than public companies like Twitter, which has only 218 million active users. WhatsApp is popular around the world and is on more than 95 per cent of all smartphones in Spain.
In a nutshell, WhatsApp is a success in international markets. But that's not all - WhatsApp is also more popular than Facebook in emerging markets, according to data published by The Information. Specifically, it claimed mobile users in India, Brazil and Mexico were more likely to use WhatsApp than Facebook for their messaging needs.
With 450 million monthly active users, WhatsApp is a mobile giant in emerging and international markets. Facebook could therefore scramble to catch up, or it could simply acquire WhatsApp. Facebook clearly chose the latter, and it now has 450 million more users and the means to tackle and maintain a strong mobile presence outside the US.
And that's it. Let us know in the comments if you can think of anything else.