Facebook Wins WhatsApp Gold
By Rebel Raju Admin
No one is criticizing Facebook for being rash in doling out $19 billion
for WhatsApp -- in fact, the acquisition looks like a major coup. With
its simplicity and universal appeal, WhatsApp could be the perfect
vehicle not only to ensure that Facebook has a strong messaging
platform, but also to spur the network's growth in developing markets.
As for monetization -- no worries, it will come.
Facebook on Wednesday announced the acquisition of
WhatsApp in a US$19 billion deal geared toward increasing its global
connectivity.
The company paid $4 billion in cash, $12 billion worth of Facebook
shares and an additional $3 billion in restricted stock to acquire
WhatsApp. Facebook was drawn to the company's ability not only to
connect mobile users worldwide, but also to sustain rapid growth in a
competitive arena.
More than 450 million people use WhatsApp each month, with 70 percent
of them active on a given day. WhatsApp is adding more than 1 million
new registered users per day.
WhatsApp will maintain its brand and independence going forward, and
nothing will change for WhatsApp users as a result of the acquisition,
the companies said. As part of the deal, WhatsApp cofounder and CEO Jan
Koum will join Facebook's board of directors.
Top Dollar
The $19 billion that Facebook shelled out is worth it, considering that
WhatsApp is more than a messaging service, said Brent Csutoras, social
media strategist at
Kairay Media.
"At first, I was shocked by the $19 billion valuation, even if it is
only $3 billion in cash," he told the E-Commerce Times. "However, when
you start looking at other valuations for tech companies over the last
two years, such as Twitter at nearly $10 billion, you find two important
things that have really been essential in a higher-than-normal
valuation: user and user data acquisition, and mobile usage."
The investment will pay off, said Csutoras, especially since WhatsApp fits so well into Facebook's core business model.
"The purchase of WhatsApp helps Facebook further accomplish their
goal, which is to give people the power to be more connected," he said.
"With the growth of mobile, connectivity throughout the world and
technology, it is an amazing valuation -- but also an amazing buy for
Facebook."
What's Next for WhatsApp
Figuring out how WhatsApp will add to Facebook's bottom line will come slowly, said Arvind Bhatia, an analyst at
Sterne Agee.
"WhatsApp is clearly in the very early stages of monetization as
management's entire focus currently is user growth and user experience,"
he told The E-Commerce Times.
WhatsApp's continued growth will be key to its eventual monetization,
said Facebook CEO Mark Zuckerberg a call following announcement of the
acquisition.
Global expansion -- not ad sales -- will be the winning strategy, he said.
The money will come once users worldwide turn to WhatsApp for their
international connectivity needs, said Trip Chowdhry, senior analyst for
Global Equities Research.
"There is the potential here for so much growth in the developing
world, because WhatsApp is one of the only applications that runs
equally well on feature phones and smartphones, and is fast and simple
to use," he told the E-Commerce Times. "This is a very smart and
essential acquisition for Facebook."
