Facebook acquiring WhatsApp for a ton of money. But why?
Yes, its true! Whether you believe it or not, WhatsApp has been picked up by Facebook for a humongous sum of $19 Billion payable in both cash and stocks. Facebook and WhatsApp have been extremely popular and are intended towards social networking, but it is their approaches that make them different yet successful.
While Facebook lets you connect with people and share your opinions publicly – everything you post or like shows up on your feed, WhatsApp is a more private way of doing things, in which you actually choose people to communicate with and your communication exists only between you and those you choose to communicate with.
But what could have driven Facebook to pay this much of money? Well, just like many acquisitions of recent times – Google-Motorola, Microsoft-Nokia and Lenovo-Motorola, this acquisition too puts the acquiring company in a much stronger position, while still retaining the old characteristics of the acquired company. But, there are many logical explanations that seem to crop up, when we talk about the Facebook-WhatsApp deal. Here are some we found astute.
It is pure survival logic:
Facebook hasn’t been inflexible about its business practices – like say BlackBerry, and that is one of the reasons behind its success and continuous survival, while many other social networks have tanked and some like Google+ haven’t are still in a weak position. Facebook has been repeatedly strengthening its position through acquisitions. The company faces a great amount of competition from sites that make sharing easy, convenient and better.
Before WhatsApp, Facebook acquired Instagram and start ups like Little Eye Labs and Branch. It basically is preparing for the future when it acquires these apps. Facebook emerged in a time when networks like MySpace picked up, became insanely popular and then had a huge download, before disappearing without a trace. Facebook is safeguarding its future by diversifying and picking up almost everything that is catchy and has a future when it comes to social networks. What we have seen in the short history of social networks is that there is a saturation point after which people try and move on to better ventures. When Facebook acquires such ventures, it increases its ability to reinvent and stay ahead of the curve.
Now that Facebook has bought WhatsApp, Yahoo and Google can’t
Facebook acquires firms to stay at the top of its game. But it also does so to maintain the huge lead margin it has over others, something that would be very affected if, instead of Facebook, lets say Google were to acquire these services. While Facebook CEO Mark Zuckerberg has assured us that WhatsApp will continue to function in the same way, at least for now, whether it changes or not doesn’t matter in the long term for Facebook. Facebook can still yield profits without depending on these apps, thanks to its shares and various other investments. Yet, acquiring these apps for hefty prices means that the competition cannot touch them and therefore Facebook stays ahead.
Facebook tried earlier to lap up Snapchat in a failed attempt. At the time, there were rumours that Yahoo and Google were in the same race. WhatsApp, on the other hand, has been raking up huge numbers such as 1 million registered users everyday making it a huge temptation for any company which can afford to buy it. Once Facebook has a leg ahead of the competition, it can decide how and what to do with its acquisitions.
Facebook is trying to boost its mobile presence further
While amongst social networks, Facebook comfortably retains the crown of number one every year, in the mobile messaging segment, it faces a huge amount of competition from the likes of WeChat, Line and until recently, WhatsApp. With Acquiring WhatsApp, it has extended its mobile presence beyond the Facebook Messenger and shouted out a warning for all rivals in this segment.
WhatsApp has had huge success in this segment with over 50 billion messages being exchanged daily – something that is always going to be huge factor in mobile presence. It is also noteworthy that smartphone usage has trumped online usage and a presence in this segment definitely will have returns in the long run.
Facebook needs to and wants to have a far reaching audience, that stays connected more
Facebook works in a certain way and WhatsApp works differently. Generally, the practice has been that you check Facebook and then log out, unlike WhatsApp, where people stay connected until they have internet access. This big difference in connectivity is where WhatsApp trumps Facebook – for example, the number of pictures shared on Facebook daily is 350 million, which WhatsApp tops with 500 million. This acquisition means that you are connected to one of Facebook’s networks all the time.
Not just that, with WhatsApp, Facebook inc. rakes in a huge and different audience – it even rakes in people who want their privacy too much and do not want to have a presence on social networks. It also becomes more accessible to users. It gives it a huge presence through out the world and the accompanying consumer penetration.
Whatever the future holds for Facebook, it is, in our estimation, a smart move to lap up WhatsApp, even if it was at a whopping $19 Billion.