WhatsApp With That? Facebook Buys WhatsApp for $19 Billion

Facebook recently acquired the popular messaging app WhatsApp for a shocking $19 billion.

But why?

Statistics show that WhatsApp is a simple app with a lot of potential. Not only has it experienced record growth, but its messaging volume is also rivaling the volume of SMS messages sent across the world. While Facebook and WhatsApp say that nothing is going to change, experts are discussing what this acquisition means for Facebook as a service, as well as what it means (or doesn’t mean) for marketers.

The Acquisition

Through a press release posted in their Newsroom, Facebook announced this record-breaking sale. The agreement totaled $19 billion, with $4 billion in cash, $12 billion in Facebook shares, and $3 billion in restricted stock. According to Facebook, “The acquisition supports Facebook and WhatsApp’s shared mission to bring more connectivity and utility to the world by delivering core internet services efficiently and affordably.” Essentially, the acquisition will help both companies grow and engage a larger audience.

In addition, Facebook made it clear this acquisition essentially won’t cause any changes to WhatsApp. Similarly to Instagram, WhatsApp will still operate as an independent app and separate brand from Facebook. However, the CEO and co-founder of WhatsApp, Jan Koum, will join the Board of Directors at Facebook. Koum is dedicated to keeping ads out of WhatsApp, instead using a monetization system in which the app is free for one year and $0.99 per year afterwards. For now, both Mark Zuckerberg and Koum are in agreement against ads on the app.

Why WhatsApp?

According to Mark Zuckerberg, “WhatsApp is on a path to connect 1 billion people. The services that reach that milestone are all incredibly valuable.” But are they worth $19 billion? Let’s take a look at some of stats that show how valuable WhatsApp really is.

  • WhatsApp currently has more than 450 million monthly active users.
  • A record 70% of WhatsApp’s users are active every day. Comparatively, the industry standard is 10%-20%, and even on Facebook, it’s only 61%.
  • 350 million users are using WhatsApp on their mobile phones daily, which is already over half the number of daily active users that Facebook has on mobile (556 million).
  • WhatsApp is adding 1 million new users every day. This handy chart shows just how quickly WhatsApp has grown in comparison to Facebook, Gmail, Twitter, and Skype:
whatsappgrowth

source: http://techcrunch.com/2014/02/19/whatsapp-will-monetize-later/

  • WhatsApp process 50 billion messages per day. In fact, this messaging volume is coming close to being equivalent to the entire volume of SMS messages sent across the globe. This tweet shows the fast growth in message volume that WhatsApp has seen:

whatsappmessagevolume

  • The average WhatsApp user sends just over 1,000 messages per day. This handy infographic from Statista breaks it down for us:

"Infographic:

You will find more statistics at Statista

  • How much do you think WhatsApp spends on marketing? No matter what you might guess, you’d probably be wrong. WhatsApp has invested exactly $0 in marketing – they don’t even have staff for marketing or PR.

Are you still wondering why WhatsApp was worth $19 billion? Forbes argues that Facebook is essentially buying your attention. According to Reuven Cohen, Facebook has already harnessed a significant chunk of the messaging market through Messenger, and it’s likely that a large portion of WhatsApp’s user base is already on Facebook. However, WhatsApp is unique from Facebook in one key way – it holds the attention of its users. In contrast to most mobile apps, which often aren’t even opened a second time, WhatsApp is being used not just daily, but hourly by many of its users. And it’s this attention that Facebook values at $19 billion.

What This Means for Facebook

While Facebook and WhatsApp are adamant that nothing is changing, experts are still discussing what this acquisition means for Facebook. First on the table is the fate of Messenger, Facebook’s standalone app that was recently updated to allow users to message not only their Facebook friends, but also the contacts on their mobile phones. This product was intended to compete with both SMS and WhatsApp; however, with the WhatsApp acquisition, Zuckerberg is changing his tune. Now, Messenger is back to being an app for Facebook chatting, pushed aside by WhatsApp’s 450 million users.

Over at TechCrunch, Keith Teare views the WhatsApp acquisition as indicative of a larger change that Facebook is undergoing. He believes that the rise of mobile has fundamentally altered Facebook as a service. Rather than functioning as a mobile social network, Facebook is instead a mobile studio that develops and distributes a suite of apps, including Messenger, Paper, Instagram, and now WhatsApp. Furthermore, he argues that at the end of the day, these apps are all ephemeral – subject to rise and fall at the whim of the mobile user.

Overall, Zuckerberg has emphasized the fact that this acquisition of WhatsApp is not intended for short-term gain, but rather to fit into the long-term goals of Facebook. Similarly to Facebook’s Internet.org initiative, which seeks to connect more people across the world to the internet, the WhatsApp acquisition will allow Facebook to reach an even larger number of international users. A significant portion of WhatsApp’s user base is located outside the U.S., and its continued growth in those markets will support Facebook’s long-term goals of international growth.

What This Means for Marketers

Finally, what does all of this mean for marketers? According to Venture Beat, nothing. While monetization was the first topic on most minds after this record-breaking acquisition, Zuckerberg has stated that a monetization strategy may not be in the works for the next five years. For now, the Facebook CEO wants WhatsApp to focus “purely on connecting more people.” Even after this time, it’s still unlikely that ads will be a part of the WhatsApp monetization strategy. Zuckerberg states, “I don’t personally think ads are the right way to monetize messaging.”

Venture Beat argues that in addition to the fact that Facebook plans to honor the privacy of WhatsApp users, this shows that Facebook’s acquisition of WhatsApp means absolutely nothing for marketers – it won’t provide them with any additional user data or an audience to market towards. Instead, marketers should focus on reaching customers on their mobile phones through SMS marketing.

In my opinion, when it comes to Facebook, anything can happen, and marketers should be on the lookout for where Facebook takes WhatsApp in the future.

How do you think Facebook’s acquisition of WhatsApp will affect marketers?

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Elizabeth K

Elizabeth Kent is a recent graduate with an M.A. in Women’s and Gender Studies from Brandeis University. She earned her B.A. from Smith College with a major in the Study of Women and Gender and a minor in Jewish Studies. Elizabeth recently relocated from the Boston area back to Western Massachusetts, where she spends her free time volunteering with a local non-profit organization. Elizabeth has worked as a writing tutor, archival intern, research assistant, and retail associate. Her interests include studying pop culture, kittens, and making meals with as little cooking as possible.

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