Facebook spent a whopper to buy WhatsApp. Well whopper is an understatement. They spent $19 Billion, off which only $3 Billion is subject to shares vesting. So let us first put that number in perspective
Facebook bought a small company with a team of 32 engineers for $19 Billion. Let us compare this with the market value of some well known companies.
Looking at the Market Caps (as of 19 Feb 2014):
Nokia – $27 Billion
Blackberry – $4.74 Billion
Twitter – $30 Billion
T-Mobile – $9.49 Billion
Tesla – $23.74 Billion
Google recently sold Motorola for $2.91 Billion. Also, they bought another hardware company called Nest for $3.2 Billion. These were all big deals and big companies.
So well, is Whatsapp worth its price?
I have read countless reports of how the user base that WhatsApp has is important. Reports say Facebook is spending this much money to make sure that they acquire these users, this point is irrelevant. Facebook has the largest and the most global user base in the world. They do not need to buy another company to acquire users. In most probability 90% of Whatsapp users would already be Facebook users!
So why?
We are in the mobile age and the day is not far when the only things that the mobile networks will be selling would be data! Even today we rely more on messaging apps and Internet telephony apps to send messages and make calls. It also helps us overcome the high costs of telephone calls and messages. This wave began with Blackberry, which had the BBM built into its phones, which has since become a cross-platform app. Apple has been for long, baking iMessage and FaceTime into its phones. Viber, Skype, Line, WeChat and WhatsApp are all attempts at doing the same thing.
Making voice and text communication possible through the use of data.
When mobile networks becomes fast enough across the world to make calls over the internet. Everyone will switch to only data connections. People would no longer use voice calls or text offered by network providers. At that point, the company with the strongest and most connected text and voice communication app will have the greatest sway on the mobile industry.
People are going to need to send text and talk on phone. The only thing that is going to change is the orifices through which these communications pass. WhatsApp is present on the most number of platform (they even have an app for the Nokia Symbian phones). As a result of this they have the greatest market share when it comes to this space.
Its about controlling all communications in the years to come.
WhatsApp probably has the strongest positioning for controlling this communication going forward. There will be more aggregation within this space going forward. I do not think Apple will try to control this space beyond its own eco-system. They will focus on making their hardware and software the most secure and use that as a marketing tool to sell more hardware. Blackberry has thrown the hat in the ring and in my opinion BBM is the only card they have got left. Skype has lost its sheen after its acquisition by Microsoft. I think Viber is the only other contender in this game apart from WhatsApp. The others will get acquired or will die a slow death.
Now when you look at it like this, you get a real understanding of the value and the potential of WhatsApp. Its not that Mark is using ‘Zucker-opoly’ money to buy companies (he has to answer to a board!); its just that his vision is clear.
Every moment, every thought, every communication that you ever share, Facebook would be a part of it. That is the idea!
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