SPECIAL REPORT Facebook recently announced the purchase of the mobile messaging service WhatsApp in a $19bn deal that represents the social media company’s biggest acquisition yet. This is the hottest topic of discussion everywhere. Everybody seems to be awestruck with the price tag attached to the deal. There are a lot of speculations, a lot of calculations and reasoning to analyze the outcome of the deal.
For some, the deal is the best ever deal for acquiring the million users of watsapp in one shot for others it’s just a decision made under the influence of alcohol or insanity. The reasons are different,the interpretations are varied. While INNLIVE try to explore the dynamics of both the sides and let our readers place their bet.
Mark Zuckerberg, the founder of Facebook and Mr. Jan Koum , founder and CEO of Whatsapp have their share of thought on the driving force behind the deal. When, you analyze their thoughts, you feel it’s a win-win situation for both the parties involved. So before, we start with analyzing the deal our way, let’s find out what makes the deal worth or worthless.
Zuckerberg, described five-year-old WhatsApp as an “incredibly valuable” service that was well on its way to connecting 1 billion people around the world.
The deal definitely turns out to be a safe bet for Facebook, which recently strived hard to convince the investors of its strategy to guarantee positive ROI.
“WhatsApp is on a path to connect 1 billion people. The services that reach that milestone are all incredibly valuable,” said Mark Zuckerberg, Facebook founder and CEO. “I’ve known Jan [Koum founder and CEO for a long time and I’m excited to partner with him and his team to make the world more open and connected.”
Koum said: “WhatsApp’s extremely high user engagement and rapid growth are driven by the simple, powerful and instantaneous messaging capabilities we provide. We’re excited and honoured to partner with Mark and Facebook as we continue to bring our product to more people around the world.”
- Can make its mark on the mobile business It can be a new foundation for the Facebook , who was struggling to make it’s mark on the mobile business.
- A better market penetration WhatsApp is particularly big in Europe and Latin America, where its market penetration is thought to top 80% in countries including Brazil, Germany, Portugal and Spain.Now it’s all beautifully fallen in the lap of FB.
- Attracting the younger users:As Marcos Sanchez, vice president of App Annie, an analyst specializing in mobile technology puts it, “Younger users seem to prefer something more ephemeral, something that changes moment by moment,” he said. “WhatsApp gives Facebook a major player in that space.”
- There won't be any adverts
- Zuckerberg has already confirmed that he doesn't think "ads are the right way to monetize messaging systems".
- Facebook will keep WhatsApp separate
- The social network has already stated that WhatsApp's product roadmap will remain untouched for the next few years. That means the WhatsApp you know today will remain the same for the time being. For fans of the service, this is no bad thing.
- More people will get connected
Now there will be a larger user base connecting with the Facebook. It means a higher penetration in the tech world and larger market share.
Key Numbers
- $19bn - Price being paid by Facebook
- 55 - number of WhatsApp founders and employees
- 450m - number of people using the service each month
- 70% - proportion of those users active on a given day
- 1m - new registered users per day
- 1bn - WhatsApp’s target for number of users
- 19bn - messages sent via WhatsApp each day
- 34bn - messages received via WhatsApp each day
- $1.82 - the amount by which Facebook shares fell after the deal
- $2bn - the ‘break fee’ Facebook will pay to WhatsApp if the deal fails to go through
Why the deal can be a blunder?
- Price Tag: Facebook is paying $42 per user with the deal, dwarfing its own $33 per user cost of acquiring Instagram. By comparison, Japanese e-commerce giant Rakuten just bought messaging service Viber for $3 per user, in a $900 million deal. That makes us wonder, is it really worth it?
- Mode of revenue generation is not clear: How the service will pay for itself is not yet clear. Zuckerberg and Koum on the conference call did not say how the company would make money beyond a $1 annual fee, which is not charged for the first year. "The right strategy is to continue to focus on growth and product," Zuckerberg said.Zuckerberg and Koum said that WhatsApp will continue to operate independently, and promised to continue its policy of no advertising
- Reflecting weakness: Rick Summer, an analyst with Morningstar, warned that while investors may welcome the addition of such a high-growth asset, it may point to an inherent weakness in the social networking company that has seen growth slow in recent quarters.
"This is a tacit admission that Facebook can't do things that other networks are doing," he said, pointing to the fact that Facebook had photo-sharing and messaging before it bought Instagram and WhatsApp."Facebook is more about content and has not yet fully figured out communication."
If you think the deal is worth the price tag for Mr. Zukerberg, for the kind of audience and market penetration it will achieve or if you are of the opinion that it was a one sided deal favoring whatsapp alone. No matter how we look at the deal. It will definitely have a huge impact.It will either be a roaring success or a plunging failure. Either way, it won’t be the last bet, it won’t be the last move.
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