WhatsApp Buy Is Brilliant Or Crazy, Probably
Facebook's hugely expensive acquisition of WhatsApp is inspired. And risky. And probably necessary. Probably, though, is a terrifying word. As in that statement from our doctor we all hate to hear: "It's probably nothing."
On the surface, if you ignore the fact that Facebook is basically paying over $40 per WhatsApp user to get the company, the numbers are appealing as all get-out: the five-year-old mobile messaging platform is adding a reported million new users per day, which means it is growing faster than any other texting app. It has package partnerships with telecoms in various global markets like India via Reliance.
It obviously has low overhead, the biggest probably being salaries to support a handful of Stanford types and their Tesla S and Porsche Joneses. And they haven't had to spend on promotional marketing, thanks to word of mouth and those four-and-a-half stars.
And it’s a killer app. It offers essentially free messaging, video and image included via broadband, obviating texting fees, regardless of where you play, what you pay, or who makes your smartphone. And it's cheap for overseas mobile messaging.
For Facebook, which wants to be at the center of every aspect of peoples' digital lives, and actually has an aging user base, it's a perfect play for staying alive. Young people are using mobile devices to communicate, and the phone function is as relevant to them as the rotary phone. And that is increasingly true of static social media platforms like, well, Facebook. So WhatsApp builds Facebook a nice exterior wrap-around porch for keeping all those younger people in the house.
And while it’s a buck to download, give or take, and you get a year for free after which you only have to pay them a couple of bucks a year for three more years, big numbers mean big money: the app has 450 million users channeling some 10 billion messages per day. And the million new registered users it gets every day will get their friends and family to download it, too. Now you have the social media version of the ping-pong experiment you did to demonstrate nuclear fission: throw a ping-pong ball onto a floor covered with ping-pong balls, each one on a primed mousetrap, you will have a room of bouncing ping-pong balls within two seconds.
Mark Zuckerberg's comment on the company's projected billion users making it invaluable is probably an understatement when it comes to its ambitions to own the social ecosystem.
Yes, it's 19 times as expensive as was Instagram, for which Facebook paid a billion dollars last year (for WhatsApp, Facebook will pay $4 billion in cash, $15 billion in stock and restricted stock). The potential is huge, though, assuming WhatsApp keeps growing, and out-competes a growing competitive field. For now. Probably.