Why Buying WhatsApp Was So Important For Facebook

Unless you had zero contact with the outside world yesterday, you will have heard that Facebook announced it will buy mobile messaging service WhatsApp for $19bn (£11bn). This is broken down into $4bn cash, $12bn in Facebook shares and $3bn in restricted stock.

This is the social networking site’s biggest acquisition by miles – 16 times larger than the amount they paid for photo sharing app Instagram in 2012!

Mark Zuckerberg said in a Facebook post: “I’m excited to announce that we’ve agreed to acquire WhatsApp and that their entire team will be joining us at Facebook.

“Our mission is to make the world more open and connected. We do this by building services that help people share any type of content with any group of people they want. WhatsApp will help us do this by continuing to develop a service that people around the world love to use every day.”

He also added that the service will “continue to work independently within Facebook”.

The purchase is an amazing coup for Facebook, with WhatsApp having 450 million active users every month, and 70% of those active every day. It also shares 10 billion (yes, billion) messages each day.

But there has been questions raised about the amount spent on the app, and whether it’s really worth it.

Well, if you look at WhatsApp’s model, reach and function, it’s quite possibly the most important buy Facebook has made and, possibly, will ever make.

The beauty of WhatsApp is that it’s simple, easy to use and – the most important feature of all – ad-free.

So this raises the question: why would Facebook – a business that generates revenue almost exclusively from advertising – want to buy an app with no ads?

The revenue from the app itself (it charges each user 99p every year, after a 12 month free trial) would only amount to $450 million if every single active user agreed to pay for it, which doesn’t even come close to justifying the amount they paid for it.

However, in a call to investors, Zuckerberg made the point that WhatsApp is on track to acquire more than 1 billion users, giving Facebook access an even wider customer base than they already have.

This move will also assist Zuckerberg in his Internet.org campaign to connect two thirds of the world online. WhatsApp is really important for this, seeing as it’s extremely popular in those developing markets that Facebook want to target.

For those still worried about ads appearing on their beloved WhatsApp, co-founder Jan Koum insisted the app will still have “no ads, no games, no gimmicks”.

In a blog post, he said: ”Here’s what will change for you, our users: nothing.

“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.

“Doing this will give WhatsApp the flexibility to grow and expand, while giving me, Brian [Acton] and the rest of our team more time to focus on building a communications service that’s as fast, affordable and personal as possible.”

Perhaps one of the most important reasons for Facebook buying WhatsApp was that, while the social network’s Messenger app is hugely popular in the US, its global reach is nothing compared to that of WhatsApp – the biggest mobile messaging service on every other continent except Asia.

So was Zuckerberg just buying out a competitor like the Instagram deal? Possibly. But look at it this way: Facebook is now arguably the leader in social, photo sharing and messaging, the three core principles of smartphones these days.

Who knows, maybe it will move into search next and knock Google off its perch! Maybe… probably not.

As ever, I’m keen to hear what you think about this deal. A smart move or an overpriced buy?

Let me know in the comments below or on Twitter @BubbleJobs! :)

Read more:

• The Most Amazing Tweets About Facebook Acquiring WhatsApp