Wednesday night, WhatsApp Co-Founder Brian Acton spoke at the StartX OpenX closing party in Palo Alto, giving some interesting information about his company’s acquisition by Facebook. It was Acton’s first public speaking appearance for WhatsApp, as the company has generally avoided media attention.
StartX, headquartered in Facebook’s former city, is a Stanford University-spun startup incubator. Acton was speaking to a group of a couple hundred Stanford students and grads, as well as other startup founders from around the Bay Area.
Here are some key points from his discussion at StartX:
The acquisition wasn’t totally about teens
Though many people rumored that Facebook’s acquisition of WhatsApp was a way to buy some teen users internationally, Acton doesn’t see it that way. Whereas Facebook tries to get as much user information as possible, Acton said that WhatsApp doesn’t really keep much information other than a cell phone number.
He told Inside Facebook that the company doesn’t break out data by demographic. When asked about how many teenage or younger users WhatsApp has, Acton said that the company doesn’t track it:
We don’t know. You know why we don’t know? We don’t ask people about their age at all. That’s part of why we’re such a private product.
Facebook and WhatsApp will remain separate — for now
One of the recurring themes of Acton’s discussion was what will happen to WhatsApp once the Facebook deal is finalized. Acton repeatedly stressed that Facebook is agreeing to be fairly laissez-faire with WhatsApp, helping them build the app to scale but not focusing on revenue right now.
Acton praised Facebook CEO Mark Zuckerberg, COO Sheryl Sandberg and the rest of the team for respecting WhatsApp’s overall mission. Acton said that the relationship between the two companies will be symbiotic: WhatsApp will help bring new users onto Facebook in underserved countries, while Facebook will give WhatsApp the tools it needs to grow its userbase.
When comparing Facebook Messenger and WhatsApp, Acton said that Facebook has agreed to keep them “separate, but equal,” and notes that they are still different modes of communication:
I think, as they will continue to operate independently, each will continue to experiment in its own way with features and capabilities. Over time, if something is supremely successful, I would expect both platforms to support it. Facebook, I think, recently offered some video and camera capabilities that we’ve already had. Hell, iMessage is adding stuff. A lot of times, people copy from each other.
Of note, Acton said that WhatsApp will incorporate voice services and direct calling between users sometime this year, something Facebook Messenger has also incorporated.
WhatsApp doesn’t really have much data for Facebook to plunder
Many people are already leery of Facebook’s data collection process. Now that WhatsApp will soon be under the Facebook umbrella, users have similar concerns of Acton’s app. As the Federal Trade Commission gave the deal its blessing, it gave WhatsApp and Facebook a stern warning about privacy moving forward.
Acton addressed these concerns, saying that WhatsApp only has a minimal amount of data on its users:
It’s not like on day one, we’re going to start sending all this data to Facebook. By the way, WhatsApp doesn’t have much data. We don’t have much beyond a phone number to work with. Yeah, on Facebook, you have your name, your age … your email address. … We don’t have a lot of data to share to start with.
Being acquired by Facebook was easier than going public
Acton said that there were two main options for WhatsApp as the company started to grow: go public with an initial public offering, or accept Facebook’s offer of acquisition. The acquisition process takes roughly 6 months, while preparing to go public can take three times as long. Acton said he didn’t think he had the stomach for that kind of action, and was happy that Facebook has already gone through it.
The most difficult part of the acquisition? Changing WhatsApp’s accounting basis from cash accounting to Generally Accepted Accounting Principles (GAAP), which Facebook uses.
WhatsApp sees the acquisition as an investment
The biggest two questions that popped up after the acquisition: Why is Facebook doing this? Why are they paying this much?
WhatsApp is a major hit internationally, where it serves as a substitute for SMS (texting), which can get very costly in Europe when you’re texting between countries. Acton said that the major struggle at the start was explaining this to Americans, who aren’t charged extra in California for sending a text to a friend in New York. While SMS is built into most cell phone data plans, it’s a much different story internationally, where texting someone in a neighboring country just a few hours away can be costly.
WhatsApp sees the deal as an investment on future revenue. Facebook will provide support for WhatsApp to keep growing and keep developing an awesome product, while WhatsApp will eventually become a source of cash for Facebook — but neither side is focused on that right now. WhatsApp will help bring about a new group of users who can be advertised to.
Acton explained this relationship to reporters:
I think the goal here is that WhatsApp will bring Facebook another billion users. Whether there’s a direct valuation or an indirect valuation, there’s value. I think Facebook understood that and understands it very well. That’s going to be a billion users of high engagement. We’re a pretty high-engagement product. I think there’s longer-term questions as to how we generate revenue and how we generate value on the bottom line at Facebook, but the point there is Facebook is willing to invest. They’re willing to put forth the dollars and say, “Hey, we’re going to invest in you guys. Not only are we going to buy you guys, but we’re going to invest in you guys.”
Readers: Knowing this, do you still think Facebook overpaid for WhatsApp?
Image courtesy of StartX.