Facebook Buys WhatsApp For $19Bn, But Why - Social Media Today

5/9/2014 Facebook Buys WhatsApp for $19Bn, But Why?
| Social Media Today

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Avtar Ram Singh
I woke up yesterday to the news of Facebook setting plans in motion to buy WhatsApp for a whopping $19Bn
USD. At that point, it hadn't been confirmed whether the deal had gone through, and a lot of outlets were
reporting that this was something "in the works". My gut told me this would go through, and as a marketer and
semi-techie, I couldn't help but get a little bit excited.
Sure enough, Mark Zuckerberg made an announcement on Facebook saying that WhatsApp's entire team will
be joining the Palo Alto outift.
This snippet from Zuck's post stuck out for me.
WhatsApp will complement our existing chat and messaging services to provide new tools for our
community. Facebook Messenger is widely used for chatting with your Facebook friends, and
WhatsApp for communicating with all of your contacts and small groups of people. Since
WhatsApp and Messenger serve such different and important uses, we will continue investing in
both and making them each great products for everyone.
But we'll get to my interpretation of that later.
With a little over 450 million people using WhatsApp each month, and 70% of them active every single day,
WhatsApp has one of the highest daily active user bases in the world. The messaging volume on WhatsApp is
fast approaching the entire global telecom SMS volume. WhatsApp users share 400 million photos and 10
billion messages each day.
Yes. I said 10 billion messages.
As the graph below illustrates, WhatsApp has grown faster in a span of four years than Facebook, Gmail,
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Facebook Buys WhatsApp for $19 Billion, But Why?
Posted February 21, 2014
Keywords: Facebook, Research, Journalism, News, Events, Exclusive, Mobile, Social Media, Social Networks
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5/9/2014 Facebook Buys WhatsApp for $19Bn, But Why? | Social Media Today
Skype and Twitter - names that are much bigger than WhatsApp today.
WhatsApp has been my choice of instant messenger for the last few years, primarily because their CEO Jan
Koum believes that WhatsApp was never meant to be, and will never be an app that makes money via games
or advertising. In his own words, "We want to let people have a conversation."
Thank you, Jan. My initial fear was that WhatsApp would seen see the odd ad become part of its network.
Since I quoted Zuck earlier, it's only fair that I give Koum some time in the spotlight too.
This will give WhatsApp the flexibility to grow and expand, while giving me, Brian, and the rest of
our team more time to focus on building a communications service that's as fast, affordable and
personal as possible. And you can still count on absolutely no ads interrupting your
communication. There would have been no partnership between our two companies if we had to
compromise on the core principles that will always define our company, our vision and our
product.
No ads. Key takeaway.
But why did Facebook buy WhatsApp for $19Bn? I mean, they could have bought 32 Hawaiian islands, about
880 million Honda Civics, 15 NBA Franchises, Instagram 19 times over or 82.5 million bottles of Johnnie
Walker Blue instead.
Because Zuck isn't as stupid as I am, perhaps.
For marketers, this doesn't mean very much right now. We don't have enough information about the acquisition,
and we don't know how WhatsApp is going to change in the coming months. So for now - don't start thinking
about marketing strategies for WhatsApp just yet.
This does raise the question though - is WhatsApp really worth $19Bn? No one has seen WhatsApp's books
as yet, but given that Twitter is currently valued at $20.45Bn with an estimated 600 million users, it's not
absolutely insane (in terms of sheer corresponding numbers) to valuate WhatsApp at $16Bn. I say $16Bn
because $3Bn was given to the WhatsApp's owners and employees, and wasn't part of the valuation of the
company.
Many believe that Facebook just bought out a competitor. That begs the question that does it make business
sense for Facebook to simply start buying out any competitors in the industry that arise? First Instagram and
now WhatsApp?
The picture is a little bigger than that. While to most it would seem this is just a simple grab for one of the
hottest mobile apps in the world, the reality is that Facebook sees itself as becoming a conglomerate in the
future. Each company that Facebook buys (in this space) adds to the knowledge and data Facebook has
access to about the ways in which people choose to communicate.
Yet, looking into how WhatsApp has made money so far, it's only by having users pay for using WhatsApp.
And while it costs as little as $0.99 to use WhatsApp for a year, WhatsApp would generate $450million in
revenue a year. During a call to discuss the merger with investors, Zuck said WhatsApp was on track to reach
a billion users. However - the more interesting aspect of this comes into play when you think about Facebook's
Internet.org project.
It's Facebook's mission to provide access to two-thirds of the world that's not yet connected to the web, and
that's exactly where a service like WhatsApp will boom. A billion users might actually be a low-estimate for
WhatsApp in the coming years.
And think about this. In many developing countries, the primary reason why a number of people upgrade from
feature phones to a smartphone is because they want access to WhatsApp. Period. They don't want to pay
their carriers exorbitant fees for a single text when they can pay for internet on the whole, or even subscribe to
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February 22, 2014
Marquis de LAFAYETTE says:
Before we get wild-eyed about the prospects of Facebook, I'd like to point
out a recent study predicting a less than hallowed future for this absolutely needless
platform that seems to fascinate our youth. (See here: http://arxiv.org/pdf/1401.4208v1.pdf
)
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a service that just connects to WhatsApp and pay a very tiny amount to send unlimited messages on
WhatsApp.
The more you think about it, the more it makes sense that Facebook most definitely needed to buy WhatsApp,
it's their stepping stone into the markets in Asia and Africa that are about to explode with smartphone usage.
Smart buy, Zuck, smart buy.
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Other Posts by Avtar Ram Singh
Instagram Hits 200 Million Users: What Does This Mean For You? - March 27, 2014
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Brace Yourselves: Facebook Pages Are Getting a Redesign - March 11, 2014
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Avtar Ram Singh
Avtar Ram Singh is a social media strategist who values good content over all else. Having worked with
global agencies and brands as well as fledgling start-ups, he helps brands and marketers from various
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The study was promptly smacked down by both the media and Facebook's in-house
Media Guru, which was to be expected. But, the study does contain a kernel of inerasable
truth. If Facebook has gone viral, it is because it demonstrates the same expansion
pattern as a virus. And, therefore, why should it not face the same end as do most
viruses?
Because, "Facebook" is different? Yes, it is not an organism - even if it behaves like one.
Balderdash!
Facebook is taken seriously by the crazed-crowd of Siliconite gazers who think that the
only real value on earth is one described in dollars after a buy-out. As was Netscape, and
AOL and a whole host of Internet startups that, like meteors in the night, blazed across
the sky.
Its true value is "utility" and for the moment its usefulness is highly limited. In fact, part of
its utility is downright dangerous - given that an idle (and stupid) remark can be taken out
of context and destroy a reputation many years later.
Does mankind want, really 'n truly, to "interconnect"? Humans have always wanted to go
beyond the horizon to see other lands, other people. It is a typical attribute of our species,
since we are curious. But, putting one's picture up and "connecting" by exchanging
ritualistic information ("What I just had for breakfast") is not the kind of interconnection that
is wholesome.
Yes, Facebook has become a ritual, a ceremony, in which we show ourselves to the world
in hopes that the mirror, mirror on the wall will comfort us by saying, "Yes, you are the
fairest in the land!"
Meaning further, it's a fad and like all fads it will come to an end.
Should you hold on to Facebook stock? Of course! Ride it for all its worth. Just watch for
when it crests, because from that moment onward it's all downhill ...

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February 22, 2014
Julenne Esquinca says:
Hey, thank you for writing this article this subject is the eye of the storm
right now. As a social media user and CM I really am wondering why Facebook made this
move I just think they're trying to position themselves on the market. But somehow I've
never liked Facebook and their policies as also many users around the globe so there have
been massive mobilizations to alternative platforms such as Telegram.

Also we have to remember that also there have been movements specially from young
people from Facebook to other platforms so for me I believe that Facebook is not so cool
anymore and is doing these kind of movements to assure their status. We'll see what
happens thanks and cheers
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February 20, 2014
ANKIT SAPRA says:
Nice Article !!!
I used to wonder why whats app is so simple without adds and they only charge for
subscription of just 0.99 $ an year and even then many people used tricks and hacks to
continue without paying ,and some how a question that what exactly is the future profit
model of Whatsapp but now when Facebook bought Whats app all question being
answered -
May be WHATSAPP CONTINUED WITH FORMULA OF LESS PROFIT AND MORE
USER BASE BEACUSE THEY WANTED TO BUILT A VALUABLE BRAND ,A BRAND
WHICH IS SO POWERFUL THAT A known GIANT NOKIA IS SOLD FOR APPROX. $7
BILLION BUT JUST A FEW YEAR OLD COMPANY SOLD FOR $19 BILLION.
Lesson : IF You cannot earn much profits by selling products/services then build a place
in consumers heart as brand and then like Whatsapp sell to someone at an everest cost,
that is the real game ,,And after all its all about money money !!!!

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February 21, 2014
Avtar Ram Singh says:
Interesting viewpoint! Make no profit for 3 years and then become a
billionaire because you have tons of free users on your service. Not sure everyone is
bold enough to go with that, but then again, data mining is becoming big and is
becoming what everyone wants to do - and Facebook shelled out $19bn on just
that.
Thanks for your comment Ankit.
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February 20, 2014
Keri Jaehnig says:
Avtar,
Still processing. Interesting points. Watching other industries and how they are
considering the developing world markets - Quite a strategic move indeed.
I agree with Warren Whitlock that user counts are not all that.
But, I appreciated your pointing out how people access in the USA and even Europe is not
the same as in all locations, and we can't use the same model of thought for all.
Thanks for your insight.
~Keri Jaehnig
Idea Girl Media
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February 20, 2014
Avtar Ram Singh says:
Hey Keri - absolutely, as of now it's all speculation because let's be
real, if we really knew what the entire acquisition was all about we'd be part of the
Facebook board. However - I do hope that the article was able to help make a little
sense. :)
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February 20, 2014
Quantum PC Support says:
Increasing popularity of waht's app compell facebook to buy it. I think this
decision will work for Facebook. All the best Zukerberg.
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February 20, 2014
Madhava Verma Dantuluri says:
Interesting and wonder how come FB spending so much on a chatting app.
Really too much money, still FB would have had their analysis for long term.

I like your analysis as: "But why did Facebook buy WhatsApp for $19Bn? I mean, they
could have bought 32 Hawaiian islands, about 880 million Honda Civics, 15 NBA
Franchises, Instagram 19 times over or 82.5 million bottles of Johnnie Walker Blue
instead."
Even i can top technology services companies also right...

FAQ
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February 20, 2014
Warren Whitlock says:
I think user counts don't tell the whole tale.

Ive ve not seen anyone who would know talking, so this is speculation. But the amount of
data from those users will be a gold mine without ever showing an ad on a chat screen
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February 21, 2014
Daniel Wentzel says:
I agree Warren: Much like you, I suspect that it just may be all about
the data. "WhatsApp users share 400 million photos and 10 billion messages each
day." Zuck's next acquisition will probably be some data mining technology
company, if he doesn't already have one. A yellowbrrick road to an ever-increasing
stream of gold mines, 24/7/365.
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