Just about five months since Facebook bought Whatsapp for an unprecedented $19 billion (representing 1/10th of Facebook’s total market cap). Some of the controversy surrounding the sticker price has worn off with the passage of time.
Still, discussion continues to reverberate about what the acquisition means for Facebook and whether or not the company was smart to spend so much. And there doesn’t seem to be much middle ground between the two camps either. You either think Zuckerberg is an idiot and acted out of a defensive impulsiveness or you think he’s five steps ahead of everyone else in understanding connectivity within the new mobile app universe.
For me, it’s pretty simple. Facebook’s acquisition of Whatsapp is a game changer for the company. Every single time someone tells me they paid too much, I just say, “well even my mom uses Whatsapp.”
Here are five other reasons that the price Facebook paid was not too high.
1. Whatsapp is a Growing Global Giant
I find that Americans especially underestimate Whatsapp. With cheap unlimited texting plans here in the States and limited demand for international texting, sending text messages through one’s carrier is still common. That’s not true in many countries–especially developing countries that have never had mobile data plans. Globally then, Whatsapp provides an affordable medium to skip expensive carrier chargers. This appeal alone has turned Whatsapp into an international force of 450 million members with 1 million being added everyday.
I don’t see this trend changing. An entire generation of people will likely gain access to the internet via a mobile-first platform that skips traditional understandings of how we use the Internet. Whatsapp has positioned itself as a leading player in establishing communication and community for these users. When my girlfriend lived in South Africa for 10 months Whatsapp was my primary communication tool, not Facebook. For Zuckerburg, I guess that’s just fine now.
2. It has Inter-generational Reach
Whatsapp’s generational reach is also insane. My family uses it to keep in touch while scattered over different continents. I have groups for my brother and parents, my cousins, and my college and high school friends. Younger users aren’t off-put that their parents are on Whatsapp because, unlike Facebook, Whatsapp keeps group private.
3. A single killer feature is hard to beat
Whatsapp appeals because it has a single really useful purpose that it nails. The app is so much better than Facebook at dealing with intimate groups. In fact, sharing (pictures, video, messages etc) within intimate groups is the single killer features of Whatsapp (for me). I stay in touch with all my high school friends, my family, and am building out other circles of private groups (like work). It’s almost free, easy to use, not in the public domain, and it feels more private with just a phone number needed to register.
4. Taking out a Competitor makes sense
Whatsapp’s meteoric growth demonstrated how the vanguard of new mobile social networks are challenging the paradigm established by Facebook. By acquiring Whatsapp, Facebook not only taps into this trend and supplements itself in areas where it has been very weak (i.e. international), but it also heads off a potentially formidable future competitor. It also acquires a platform upon which it can build additional features like voice communication that piggy-back directly on people’s phone books.
5. Facebook vs. facebook.com
I don’t really use Facebook much anymore. But I use Whatsapp every single day. So, while I’m not on one domain name (facebook.com), I am once again interacting with Facebook “the company.” My story isn’t unique. The sustained yet astronomical growth rate in users of Whatsapp is almost all you need to know.
This matters even more when thinking through how Facebook will be able to leverage the combined user data generated by both entities. I’m sure Facebook will eventually find a way to sync the phone numbers Whatsapp requires with the phone numbers we willingly submit to them in our profiles. I for one can imagine the GPS enabled data they’ll collect on our actions and our interactions and turn that around to serve us “useful” localized content that they charge businesses to provide. Ask yourself this question: what is the price of a targeted ad delivered just at the right time?
Why Facebook Didn’t Pay Too Much for Whatsapp
As Facebook struggles with the “uncool” image of its primary product and platform, its decision to tap into the new wave of how we, as individuals, prefer to interact with our social networks is a valuable diversification play. It also provides a clear path forward for the company. Facebook will become less about it’s single iconic blue network and it seems will instead attempt to reshape itself as the platform that provides the various tools, apps, and communities that we use everyday throughout multiple facets of our life–work, friends, and family. That sort of macro-strategic perspective is needed to justify a price that otherwise can seem astronomical.
The bottom line? Whatsapp was worth the price to Facebook because they swallowed a primary global competitor with hundreds of millions of users and great synergies to balance the strengths and weaknesses of Facebook itself. Plus Whatsapp still has soul, and that’s hard to place a value on.