It keeps happening.
Something pops up on Twitter, or in your Facebook newsfeed or via email that has you shaking your head in disbelief. There is probably no topic (this week) that caused this kind of visceral reaction more than Facebook’s acquisition of WhatsApp. Personally, I’m still trying to understand if this is a $16 billion or $19 billion deal (half-joking). There has been a ton of discourse about the transaction. There are many who think that this is one of the smartest moves for Facebook, and then there are those who think that Facebook has lost its way.
Putting the emotions aside, what is this all about?
Let’s start off with the number. Let’s call it $16 billion. Currently, WhatsApp has close to 500 million users (and is quickly on its way to one billion). Let’s assume that this is accurate and not an inflated number. Do you think that it is hard to get people who love your product/service to spend between $20-$40, or be worth about $20 in terms of media dollars to a third-party? As absurd as the overall number is, it’s not that difficult to get consumers to spend between $20 and $40 in some way, shape or form on the platform. With that, the data and information has a substantial monetary component as well. From this perspective, the deal isn’t all that ludicrous (and, this is looking at it from the perspective that it is an ad-free environment). Yes, it is big dollars, but if there is usage and people who are benefitting from the service, they will be inclined to stick around and understand that the business may become more freemium, have advertising or that their information is somehow going to be used and tied-in somewhere else.
Now, on to what, exactly, makes WhatsApp so interesting to Facebook.
I’m going to be a simpleton and a market of one. I’ve been using WhatsApp since it first came out, because I switched from BlackBerry to iPhone and wanted a BBM-like function that wasn’t relegated to one type of device/platform. That’s what WhatsApp really is. It is BBM for everyone. It took BlackBerry too long to make their app cross-platform and too many people were already lauding the simplicity of WhatsApp (and other apps like it) or were too locked into the platform to switch back to BBM. Timing is everything. A unified messaging platform where millions of people are sharing everything from quick texts to images and videos and groups chats is a major part of our collective digital social experience.
Public and private social experiences.
That’s something else. Facebook is the public online social network. And, if you’re looking solely at the numbers, WhatsApp is the private online social network. In a world where Snapchat is still getting attention (and turned away a $3 billion offer from Facebook), Facebook (and everyone else) is beginning to realize that our digital social lives are not entirely lived out in public and that there is a deep and hungry desire for users to have spaces that are both public and private. Facebook has attempted to build some of this functionality into their offering, but acquiring a platform like WhatsApp gives them this private social networking in a box. Private and group messaging is an important part of people staying connected. This acquisition also extends the Facebook portfolio.
Perhaps Facebook isn’t about innovation, but about acquisitions and building a portfolio of companies.
Can you name the smartest thing that Facebook has done since launching? This isn’t a slight against the company, but they have been very strategic with a head-down focus on developing and pushing the online social network forward in a bid to keep users connected, sharing more and being as public as possible. To ensure the progress of the core Facebook platform, they have made moves (like the acquisition of Instagram and now WhatsApp) to extend to other services. This is something I discussed in much more detail on January 31st of this year when the company announced the launch of a stand-alone reader app called, Paper (you can read the full commentary right here: Facebook Is Looking Smarter Than Ever). The point is that Facebook will continue to improve what Facebook is, but build, own and buy many other companies to build a portfolio of apps, services and businesses that are all loosely connected to their ultimate mission of connecting the people of the world.
Why this all pisses you off.
It’s just business. We’re up in arms because we don’t see the practical dollars behind it (as we have in more traditional businesses). The numbers are so large and so inflated that we struggle to understand how that money will ever be recouped. It would be impossible not to sit here and be astonished by everything. Temper those emotions. Traditional media companies became massive media conglomerates by buying businesses that were attracting similar customers. Telecommunications companies started buying television studios and then built websites or bought magazine companies or newspapers or radio stations or whatever. This is no different. The digital media companies – with the capacity and dollars – are going to buy as many other major players as possible. This is just what big companies do. It is no different than the game of Risk that we all used to play as kids. One group is trying to dominate, own and manage as many spaces as people are connected in. That was always the vision of Facebook and they are simply doing everything that they can to deliver on that promise.
Why should the Internet be any different from other media entities? Why wouldn’t Facebook make these big moves?