Facebook buys WhatsApp. What next?

With the biggest acquisition of the year underway, the question on everyone's lips is what next? Will we see ads on WhatsApp now? How will Facebook leverage WhatsApp and vice versa?

e4m by Sonam Gulati
Updated: Feb 21, 2014 9:23 AM
Facebook buys WhatsApp. What next?

The biggest blockbuster deal of the year is on its way as Facebook has announced that it has reached a definitive agreement to acquire mobile messaging company WhatsApp. The most pertinent question that everyone has is - what does Facebook plan to do with WhatsApp?

It’s status quo for WhatsApp users
The social networking giant has offered WhatsApp around $16 billion, with $4 billion in cash and approximately $12 billion in Facebook shares. The agreement also provides for an additional $3 billion in restricted stock units to be granted to WhatsApp’s founders and employees over four years subsequent to closing of the deal.The deal has got everyone in the industry talking about what will happen now. Both the entities are driven by strikingly different parameters. While Facebook’s primary source of revenue is ads, WhatsApp founders have sworn off any kind of ads, ever. How both of them will synergise to benefit from this deal is yet to be seen.

Meanwhile, announcing the deal, Jan Kuom, Co-Founder, WhatsApp said, “WhatsApp will remain autonomous and operate independently. You can continue to enjoy the service for a nominal fee. You can continue to use WhatsApp no matter where in the world you are, or what smartphone you’re using. 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.”

Mark Zuckerberg, co-founder and CEO of Facebook, echoed the same sentiment on the deal. He stated that WhatsApp will continue to operate independently within Facebook and the product roadmap will remain unchanged. “Over the next few years, we're going to work hard to help WhatsApp grow and connect the whole world. We also expect that WhatsApp will add to our efforts for Internet.org, our partnership to make basic internet services affordable for everyone,” he further added.

There are various ways in which WhatsApp could be used by Facebook. But as of now, this is a move to increase the userbase to billions. According to a report by techradar.com, in a call post the announcement, Zuckerberg said, “Facebook’s explicit WhatsApp strategy is to focus on growing and connecting everyone in the world. But it also stands to be very profitable.” On prospects of monetisation via WhatsApp and adhering to its no-ads policy, Zuckerberg said, "Once we get to being a service that has a billion, two billion, three billion people one day, there are many clear ways we can monetise," he said.

This is Facebook’s second acquisition after it acquired picture sharing app Instagram for $1 billion in early 2012. It was also announced that nothing will change and Instagram will be running independently. Facebook and Instagram delivered on that promise and till date the app remains more or less the same. If anything, it has added few new filters and features that have enhanced its appeal.

Industry views
Mahesh Murthy, Founder, Pinstorm said, “Facebook has declining stickiness and declining usage stats. It needs to justify its sky-high valuation. WhatsApp was one of the few remaining games in town. Hence, Facebook had to pay the price to keep its dreamsand its stock price high,” he said.

On being asked what Facebook could do with the messaging app, he said that while nothing will change on the outside and user experience will remain intact; WhatsApp’s huge user base of 450 million will be the most useful for Facebook. “All of WhatsApp’s user data, including 450 million telephone numbers, will be integrated with Facebook to help them target and sell more mobile advertising,” he stated.

A popular, consumer-centric brand that it is, WhatsApp’s acquisition is the hot topic of discussion for everyone from the industry honchos to the common ‘janta’. Kavin Bharti Mittal, founder of Hike, India’s very own social messaging app, stated that the Facebook-WhatsApp deal highlights the increasing importance of the messaging space and the role it will play in mobile internet going forward. “We're seeing India following a similar growth trajectory, especially in the messaging space; with the proliferation of cheaper smartphones and data plans,” he said.

Mobile advertising network Vserv.mobi’s Co-founder and CEO, Dippak Khurana, said that this is a distinctive opportunity for Facebook to garner increased user engagement and greater fillip to their mobile strategy. “It will also be interesting to see if WhatsApp moves away from its subscription model and adopts advertising. After all, in effect, Facebook is going to be able to have access to 450 million verified mobile numbers, many of whom may not even be on the Facebook app. Additionally, with Google pushing Hangouts as a default mobile messaging app, Facebook was forced into doing something in the mobile messaging space and this was the best way to capture that market,” he added.

It’s an advantageous deal not only for Facebook; WhatsApp too has got the best that it could. According to Murthy, even if WhatsApp waited for a few years to file an IPO, they would not have attained such a value. Whether the value is justified or not is debatable, but seems like no one’s complaining.

In the end, it’s all rosy and optimistic in the world of social messaging apps. Messaging apps like WeChat, Line, Hike, Viber have been flooding the market with some differentiation and getting accepted. This deal is a clear validation that social messaging apps are the next big thing. On a lighter note, Murthy said, “For all those messaging apps out there - wait for some desperate rich soul to buy you.”

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