When Facebook acquired internationally-popular messenger WhatsApp for a total of $19 billion, the tech world was abuzz with reaction, jubilation and speculation.
We talked with several analysts and experts to get their take on if WhatsApp was the right purchase for Facebook — and at the right price.
Thorsten Trapp, CTO of Tyntec, gave some insight into WhatsApp’s international dominance. He noted that WhatsApp has forced mobile operators to lose billions of dollars in lost SMS fees:
The fact that WhatsApp in Europe has a huge penetration in users opens it up to this huge userbase. Internationally, they are very big as well, and the reason is they are a substitute for SMS. WhatsApp cannibalizes SMS. In Europe, SMS messages are paid per SMS. It’s just within the last year or half year that they were included into phone plans, but way too late. In the U.S., this situation is very different. SMS messages were included into the plan very early on. The dominant reason of using WhatsApp isn’t there (in the U.S.). So this explains why it’s weak in the U.S. International messages were ridiculously expensive, and in Europe, you have a lot of borders.
Kevin Scott, Co-Founder of the Addo Institute, feels that this is a gutsy move for Facebook:
They’re trying to attract younger people, and they’re trying to attract people in the developing world. We did a high school leadership program last fall. Just like so many businesses, they’re trying to get their customer constituencies to share. We tried to get them to share on three platforms — Twitter, Instagram, Facebook. When we said Twitter, kind of a neutral response. When we said Instagram, they cheered wildly. When we said Facebook, there was either silence or they booed. This younger generation is increasingly tough to reach and Facebook knows that WhatsApp is a way to get into that market.
Arnie Chaudhuri, the co-founder of Chaatz, and a former Facebook mobile developer, feels that the price is right for the social network:
There’s no doubt that one of Facebook’s primary objectives is to connect the world and acquiring WhatsApp is key to their strategy. There are still billions of people out there using feature phones that they can ultimately connect, driving incredibly user engagement numbers. There are multiple companies trying to reach them, ours included, but no one has truly been able to do this yet. WhatsApp gives them a huge opportunity in terms of penetrating markets where they’re not currently and makes the $19 billion a worthy investment if they can eventually connect even half of those billions.
There are a few aspects that make messaging apps so valuable. The high level of engagement and active returning consumer base helps to make them very appealing. From a product and human psychology point of view, messaging apps have a high pull factor drawing the user in. Usually when there is a notification, the user immediately drops everything else to turn their attention to the message. Additionally, the time a user spends per day on these messaging apps is more quality than simply browsing . And finally, there’s the cost factor. WhatsApp and plenty of other messaging apps are free and allow people to connect with others from all over the world, vs. the limitations that traditional SMS might have.
Keith Trivitt, Director of Corporate Communications, Matomy Media Group, is also a fan of the acquisition:
Facebook’s acquisition of WhatsApp sends a clear message of where Mark Zuckerberg views the company’s path to sustained success: mobile, mobile and mobile. The fact that WhatsApp is a mobile-only service, and that 70% of its users are active on the service daily, aligns well with Facebook’s mobile push, which requires a highly engaged, active user base accessing the social network across multiple devices all day long. For advertisers and marketers, the WhatsApp acquisition makes a lot of sense. Facebook has been steadily introducing innovative ad-targeting solutions that have turned the social network into a hybrid engagement plus direct-response ad platform. With its acquisition of WhatsApp, Facebook should be able to provide advertisers with even more targeted and real-time mobile-only ad solutions.
Molly McCarty, the Social Account Manger for 3Q Digital, discussed with Inside Facebook what this move means for the mobile ad industry:
Facebook is very clearly the dominant social network, and they will do whatever needs to be done to maintain that presence. Their most recent demonstration of this, is their recent acquisition of WhatsApp for 19 billion dollars. Currently,WhatsApp does not have any sort of advertising on its platform and only costs its users $1 to use. Zuckerberg made it clear that advertising is not his primary focus with WhatsApp. He does not plan on immediately testing ads, like was done with Instagram. Instead, the goal is to grow WhatsApp and once it becomes more widely used, Zuckerberg and Team will possibly shift their focus to monetizing the platform. Until then, the goal is to continue to increase the connectivity of the world.
Readers: How do you feel about Facebook’s acquisition of WhatsApp?