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Monday, 26/05/14

$19bn, 450 million users, 1 huge deal. Here's three perspectives from MediaCom about Facebook's acquisition of WhatsApp 

Facebook buys WhatsApp

Facebook announces acquisition of WhatsApp in a deal worth a total of $19bn (£11.4bn) in cash and shares.

When the news broke of Facebook's latest acquisition the news channels lit up, some questioning the price tag while others could see the opportunity of the acquisition.

WhatsApp, the personal real-time messaging network, allows millions of people around the world to stay connected with their friends and family. With 450 million current users and 1 million more signing up every day, it's certainly in line with Facebook's vision of making the world more open and connected.

To guide you through this deal and the potential ramifications of it, we've pulled together three perspectives from the different areas of the MediaCom business to share with you.


Managing Partner and Head of Strategy
Chris Binns

What is WhatsApp?

WhatsApp is the Instant messaging service that is in the process of destroying MMS & SMS businesses for the mobile companies.

There are 450 million users worldwide, 500 million images are shared daily (there are only 350 million shared on Facebook and 55 million on Instagram). The business model is - no ads and no games - with users getting the first year free and then paying $1 a year thereafter - given it only has 32 engineers and less customer service people, this is a smart, low cost, high volume business.

The investment looks toppy as a proportion of Facebook's market cap (YouTube cost Google 1.3% of market cap, this is 9% of Facebook cap) BUT that doesn't make it a bad move, as suggested below, it's a hefty bet is all.

Why WhatsApp?

Having bought Instagram for a $1bn and now this Zuck is making two bets here really, both coming from the same place - Facebook's mission & vision

"Facebook's mission is to give people the power to share and make the world more open and connected."

"People use Facebook to stay connected with friends and family, to discover what's going on in the world, and to share and express what matters to them."

(The latter is a quote from the IPO period that surfaced on Zuck's Facebook page)

Given the above, the acquisition makes a lot of sense: WhatsApp is freeing up people to share and connect on a cost basis 100 times lower than the data impact of using SMS & MMS; many people (from Cisco to Microsoft and beyond) have predicted the rise of the visual web - this is part of Facebook's ongoing bet that this is nearer than we think and that sharing and connection will move beyond words.

Arguably both these acquisitions are "recruitment" bets as well. Instagram and WhatsApp's core user base is younger than what Facebook's is now. And Zuck doesn't need to recruit these guys into Facebook, but does need them in part of the Facebook family.

So, the acquisition is totally in line with Facebook's long term business vision, even if it won't be an advertising vehicle.

Ben Phillips MediaCom's Global Head of Mobile

The beautiful realisation should be that the consumer is now shaping and defining the use of mobile technology, faster than the developers and creators could have imagined.

Build it and they will come... if you're in the right place, at the right time with the right audience, on the right device!

Initially adopted by those furiously texting one another while avoiding carrier SMS charges the onset of "eat all u like" data bundles flamed the fire and justification of using an app rather than defaulting to Old Skool SMS and all is costly restrictions.

With the acquisition, apparently curated over 11 days, Facebook demonstrates its ability to future proof its communication tool set. WhatsApp resonates well as a simple concept adopted by millions, quickly.

The statement to not place advertising across the application is the right message, for this audience, lest we forget the value of the data collected from any application we install. This data goes a long way to providing the core to delivering relevant marketing messages personalised to individual preference. With data sources coming from multiple applications and platforms you can afford to sacrifice one at a later date to become the display centre if your ad network.

Advertising will change as a result with a shift from mobile banners towards more contextual, rich media, unique ad units. Actively choosing to share our personal information via mobile opens up the opportunity for brands to be extremely targeted and granular in their advertising.

So Facebook, Instagram and now WhatsApp, what next? We can only guess but it's the consumer that has the power to show us what they want, we need to be ready to listen, and too respond. Quickly!

Andy Way, Head of Social at MediaCom Beyond Advertising

The really interesting thing about this acquisition is not really the price vs. potential revenue, which is getting all the headlines, but the fundamental nature of WhatsApp - its simplicity.

WhatsApp is purely a messaging service which stakes it reputation on its minimalist design and technology. This is one of the things that makes it popular with users: it does one thing extremely well and doesn't clutter the service with additional features or advertising. Many of its competitors (Line, Kik, etc) are full-on mobile platforms that allow third-party developers to build on them: games, payment solutions, etc. This is something that WhatsApp does not do, currently anyway…

Zuckerberg's statement that Facebook will allow WhatsApp to remain ad-free is important. What could be more important is whether he also intends to leave it as a pure messaging app or whether the technology will be opened up to make it a true mobile platform.

The deal also confirmsFacebook as becoming, essentially, a mobile business which offers a suite of apps - often with functionality that crosses over with one another. WhatsApp may not have huge North American reach (although I bet there will be a lot of new sign ups there today!), but it does give Facebook a load of new users in emerging markets."


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