This week was quite interesting in the tech world, with the unexpected news that Facebook will acquire WhatsApp for an amount worth between $16 and $19 Billion. While a steep price tag, it does allow Facebook one more avenue in which to reach users, both in the US and abroad, whose communication habits continue to evolve. Moreover, down the line it gives Facebook another key property – along with Instagram – in which to sell ads. At Firebrand Group, we advise our clientele on long-term strategy, so while not in the immediate future, I do see a time when brands can go to one centralized hub and place ads across all Facebook properties, which is one of the most strategic aspects of the deal.
That being said, whenever a deal like this happens I turn to my network of respected experts to get outside opinions to learn from. Here’s what they had to say:
Yes, the $19 Billion dollar price tag (stocks and all) is shocking. And it makes you wish you were in the business of creating mobile apps that had the gift of connecting a worldwide audience. But most of us aren’t. I’ve used WhatsApp for more than 3 years and have adored its ability to keep me connected – without SMS or texting – to both overseas friends and to my family when I’m out of the country.
The non-WhatsApp-user simply compares the price tag – $19B for WhatsApp vs less than $1B for Instagram (a seemingly more-popular stateside app). But Facebook is buying, not only, a larger current user base (450 million vs 30 million at the time of the buyout), but the mobile potential of its newest acquisition. I suspect WhatsApp will continue to operate as it always has (thankfully), with a new $.99 yearly price tag for users – well worth it – but with the mobile connectivity to allow Facebook to reach a community that was previously outside their reach. I don’t always applaud mergers, but this is a good one.
–Danielle Smith, Media Trainer, Host, and Author
The acquisition makes perfect sense if Facebook wants to broaden their reach in the mobile messaging apps industry that Facebook current app lacks. Down the line, I believe the company will run independently just like Instagram. We definitely won’t need to worry about ads appearing in our timeline as the founder of Whatsapp Jan has a stance against doing so. I’ll believe there will be add-ons for its feature to monetize in the future.
Is it worth the valuation? Strategically, this move makes sense if Facebook wants to keep growing as a company. They will have to pay premium prices to do it before competitors like Google does it.
Time will only justify if Facebook made was right move.
– Aaron Lee, Grand Master of Customer Delight at Post Planner
A lot of people see this as a sensible defensive move that Facebook is taking to snap up competition, but at $42 per user, it seems an expensive acquisition for a service that charges $1 per year. That’s a 42-year breakeven, unless Facebook increases fees or risks user abandonment by injecting advertising, which does not seem to be the plan.
As for what this does for WhatsApp, I don’t think it does much bad or good (other than that a 55-employee firm just got a third of a billion dollars per employee.) It seems Facebook will continue to keep Messenger, Instagram and WhatsApp separate, so I don’t expect we’ll see much change to WhatsApp.
–Augie Ray, Financial Services Executive
The deal makes me believe that Facebook may be quite worried about losing the younger audience, and the tremendous number of (young) users on WhatsApp was far too attractive for Facebook to pass up. In addition, it’s probably an easy merge with Facebook Messenger.
What troubles me most about this deal, however, is that such a huge purchase amount screams “tech bubble”! We thought the Instagram purchase signaled that, but that was nothing compared to this. What kind of valuations are other hot up-and-comers going to expect? And will the big boys shell out for it? That’s not infinitely sustainable.
–Amy Vernon, Prize-winning Writer, Journalist, and Consultant
It’s like the monopoly board. Facebook is smart. They make wise investments and capitalizing on the top, most downloaded, most frequently used social apps. They are looking for ways to define themself outside of their initial product and evolve in a similar way Google did with search.
Google owns search. Facebook, now even more than before, owns social interaction.
–Mimi Banks, Director of Social Media at Lancome
Facebook’s purchase of WhatsApp seems to me an extension of its larger product development strategy, underscored by the recent launch of its standalone homegrown newsreader app, Paper. Messaging apps fit in that high utility, high frequency niche – a win for any social engagement tool. It’s lighter, faster, and robust in features. My international friends and I exchange voice and video IMs. Great way to share slices of my life here in a much more intimate, personal way than a wide “broadcast” on Facebook.
It’ll be interesting to see how much of WhatApp’s features are replicated in Facebook’s native messaging app. These are exciting times for social platforms.
–Lynn Teo, former Chief Experience Officer at McCann Erickson and Startup Advisor
With the breadth of conversation about teenagers leaving Facebook, it’s not surprising that the WhatsApp acquisition happened this year. As more and more conversations move to one on one, the 400M active users (mostly in the US) on WhatsApp, is a tempting one to a platform that is used to buying its way out of problems in recent years rather than developing its own solutions.
This acquisition can go one of two ways: WhatsApp remains a standalone product and Facebook has a whole new batch of data to apply to its ad platform or Facebook takes WhatsApp and its current messaging platform, merges them, and kills both of the originals. Either way Facebook wins.
–Heather Taylor, Vice President, Head of Content and Strategy at Social@Ogilvy
This deal shouldn’t be a surprise. Facebook realized fairly quickly that their Facebook Messenger app would not be a preference over the simplistic functionality and internationally popular WhatsApp. Part of WhatsApp’s popularity may very well be to the rise of data costs, elimination of unlimited and the increasing OS market share of Android – which has yet to implement a wifi-enabled or network-specific messenger system.
-Abby Whitmer, Senior Director, Global Digital Marketing at AHAVA
If you’re closely monitoring the messaging apps in Asia (WeChat, Kakao Talk, LINE), the deal makes a lot of sense for Facebook as WhatsApp brings in 450M total active users and 1M users signing up every day.
Over all, the deal gives Facebook access to two largest emerging markets that will beef up its user growth in Asia – particularly India.
This means WhatsApp will remain ad-free, without having to compromise its core beliefs, with the ability to leverage Facebook’s infrastructure as Instagram has.
Currently, WhatsApp is charging per user 99 cents per download and needs other avenues to keep generating income from its growing user base. Facebook, which is known for constantly breaking things and adding new features to maintain its revenue, will help WhatsApp figure out this area with its vast resources at its disposal.
– Jonha Revesencio, Founder, Social Media in Asia
Of course, predictions are never perfect – even if they come from as well-informed practitioners as my colleagues above – so it will be interesting to see what’s to come between Facebook and WhatsApp over the next year, and beyond.
Which of the above statements do you disagree with?