February 21, 2014
Back in November I wrote on my personal blog that the tech battleground had moved from Social Networks (Instagram, Pinterest, Tumblr) to Messaging Applications (WhatsApp, Kik, BBM). Data had shown that for younger generations these applications had appeal and were experiencing great utilization where as Social Network play was decreasing as demographics pushed towards a younger age.
So, in a way, it absolutely makes sense that Facebook would purchase WhatsApp. Facebook now has a recent history marked by gobbling up user-rich-apps that a) have shown appeal to younger generations and b) threaten to replace Facebook (in many ways) moving forward (think Instagram). It also to a degree is an open statement about the success/failure of Facebook messenger. While I think Facebook messenger is a nice addition to the Facebook experience, ultimately Facebook is basically saying that it could not complete globally for new users with the likes of a WhatsApp or maybe they didn’t feel they even competed at all.
So what is Facebook getting for it’s roughly $19 Billion in stock and cash? Well they are getting a rich user base. WhatsApp currently has 450 million “monthly” users with about another million joining each day. This doesn’t necessarily guarantee long term mobile relevance — but it comes pretty close. Each day mobile is playing a larger part in our general internet experience and it makes sense that that’s where the action is.
But $19 BILLION? Why is WhatsApp’s fair market value 19x the purchase price of that of Instagram back in 2012? That I’m not quite sure of. All I know is that somewhere inside of SnapChat’s HQ the Red Bull isn’t going down as easy as it once did.
How will WhatsApp monetize? Before the Facebook buy/sell WhatsApp made a modest living through a $1 a user subscription fee. All I can think is that moving forward that will increase. WhatsApp and messaging services like it do have a lot to offer (Free Voice Over IP Long Distant “Voice” calls for one). Indeed the “Times They Are-A-Changing!”