{{ searchResult.published_at | date:'d MMMM yyyy' }}

Loading ...
Loading ...

Enter a search term such as “mobile analytics” or browse our content using the filters above.

No_results

That’s not only a poor Scrabble score but we also couldn’t find any results matching “”.
Check your spelling or try broadening your search.

Logo_distressed

Sorry about this, there is a problem with our search at the moment.
Please try again later.

As the news broke that Facebook would be parting with a truly massive $16bn to acquire messaging service WhatsApp, the internet (as is its wont) was awash with opinion. 

Would this devalue Facebook? The market certainly seemed to agree, with almost 5% being shaved off the FB price after hours. So, is this a crazed land-grab that will spell the end of Facebook, WhatsApp, or both?

Or a very smart decision? 

Dwarfing even the $12.5bn Google shelled out for Motorola, the deal is impressive by any means.

At time of writing the most concrete figures suggest there will be $4bn in cash, along with $12bn in Facebook stock on the table (plus another $3bn in restricted stock available to WhatsApp employees). In addition, WhatsApp founder Jan Koum will join Facebook’s board of directors, while, and this is an important point, WhatsApp will function as an autonomous unit. 

So what does a deal this big really mean for users, and for marketers?

The continuing evolution of Facebook as a platform. 

facebook Paper

Firstly, this has to be seen as being primarily about platforms for Facebook.

Despite its truly massive user base (1.23bn at last count), impressive active use figures and profits exceeding expectations, the platform is still dogged by a media adamant that ‘teens are leaving Facebook’, that it simply ‘isn’t cool’ any more, and a variety of related complaints.

‘Teens’, to poorly homogenize a massive market segment, probably don’t care. They like message services because they are cheap, private and generally faster to use than Facebook’s existing messenger service.

Internally Facebook may well be aware that the platform growth it has enjoyed won’t last forever, and is making strident steps to evolve into a more diverse, app based ecosystem (see my previous post on Paper for more on this).  

In the future it seems highly likely that Facebook’s current platform will merely act as a hub for a variety of apps. Facebook has made rumblings itself about the current nature of the platform, which is in many ways more of a marketing platform that happens to be social than a true social network at this point.

It has struggled in the past with trying to be all things to all people, so diversification, rather than a homogenous lump covering everything, makes a lot of sense. Currently it’s the bloated Sunday newspaper of the social world, so placing content and services into segments to increase usability and focus can only be a good thing.

What about user privacy?

Always a big issue with Facebook. However the news that WhatsApp will be run as a separate entity is highly encouraging. Facebook may well have learned its lesson from the backlash over its previous Instagram purchase: Users want privacy, and autonomy. 

WhatsApp in particular relies on this.

No user would hand over their text messages wholesale to Facebook, and private messages are exactly that – private.

If there was any chance that these would or could be shared without explicit permission then there’s risk of a huge user exodus.

Keeping WhatsApp separated ties in with Mark Zuckerberg's comments at Facebook’s previous earnings call, where he made clear points that many of the company’s future apps would not require sign-in or connection with Facebook itself. 

Can Facebook make money from messaging?

Mark Zuckerberg

As I mentioned earlier, the purchase coincided with a significant drop in Facebook stock prices, however it does seem this is more closely related to market skittishness than genuine danger, although there has been some consternation over the high price paid, especially in the wake of a seemingly more reasonable $1bn offer from Google recently.

However, with estimates putting active users at more than 400m, it’s fairly easy to see how WhatsApp can make money.

While it may be true that some users might well follow the uninstall/reinstall route to avoid payment, the majority will keep paying that dollar each year, which equates to an easily identifiable revenue stream.

One of the major threats is the continued rise of rival services like Line and particularly WeChat, which saw user growth of greater than 300% in Q4 of 2013. 

It’s currently difficult to identify WhatsApp’s true USP. It is however possible that the acquisition could finally grant Facebook a toehold in the exploding Chinese market, and if careful moves are made to expand WhatsApp’s current capabilities, enabling easier use of stickers, emoticons and picture sharing, then it could be a genuine contender in the market. 

It’s also worth mentioning the explosion in mobile shipping globally this year, with smartphones set to outship feature phones this year, and the entire smartphone market set to almost double. The opportunity for increased growth, especially with several recent pushes towards cheap wi-fi enablement, is obvious. 

What does it mean for marketers?

Overall this has little effect on the approach marketers need to take toward Facebook. Content still needs to be the main focus, with clear KPIs based around wider attribution. Ads on Facebook should be valued for brand equity as much as for direct response. 

Message service marketing brings its own particular headaches, but as SMS marketing has shown in the past, it’s far from impossible, and message services do offer the potential for more dynamic content usage. 

Overall, it’s still a number that’s big enough to hint incredible confidence (or possibly outright hubris) in the market, but personally I see this as a smart step for Facebook, which has clearly been extremely keen on entering the messaging market for some time, but with relatively little success.

There’s clear possibility for growth, and messaging allows focus to be placed on genuine social contact between users again, while still allowing opportunities for business.

Matt Owen

Published 20 February, 2014 by Matt Owen

Matt Owen was formerly Head of Social at Econsultancy. You can follow him on Twitter or hook up on LinkedIn.

203 more posts from this author

Comments (7)

Comment
No-profile-pic
Save or Cancel
Avatar-blank-50x50

Robert Turnbull, md at nesalesforce

Facebook just buying users...

about 2 years ago

Avatar-blank-50x50

AZ

Mark Zuckerberg didn't prove himself to be the most innovative guy in technology but he can make a lot of money. Lots of people doubted Facebook's business model before IPO but now it's making billions of dollars from advertising and through mobile.

We may not be able to see the business model in WhatsApp yet, but who knows in a few years time, it can become an essential part of Facebook's money-making machine.

about 2 years ago

Avatar-blank-50x50

Antoine

Whatsapp is never going to make it into the Chinese market, it is way, way behind what WeChat is doing. I'd say Facebook is desperate to make forays into mobile, but what and download WeChat, I can pay for my cab ride with it, buy food with it... Who doesn't want social buying...? Mark my word, Facebook and Whatsapp will try to copy what this great Chinese app is doing.

about 2 years ago

Neale Gilhooley

Neale Gilhooley, MD at Evolution Design

In 2013 WassApp posted a gross (not even net) profit of $15.4m. A very simplified calculation says at that rate it would take 1,233 years to pay back the $19bn forgetting interest.

Of the 450 million users how many are paying subscribers, to be honest I don't know any and I've been a user for 2 years. Before that I used Viber but too many dropped calls and echo chamber put me off. Then I used Tango - really great free video calls over WiFi, but I think I uninstalled it as it took up a lot of space on my phone. I might put if back when travelling overseas.

My point is that loyalty is not the same as Facebook's where you are tied into a friends network, here you can move service in minutes and it takes and makes all your contacts from your phone address book.

I would have thought for a substantial purchase that shareholders approval ought to have been sought, as it is a significant gamble for a 50 man company making teeny profits.

about 2 years ago

Avatar-blank-50x50

Eliah

"It’s currently difficult to identify WhatsApp’s true USP" - that's easy, actually:
- a massive global userbase (there's life outside of the USA, you know) with 3x growth rate of Twitter
- a nominal paid service model that users are happy to use
- a platform that does one thing only and does it well

What's in it for Facebook and what's in the $40/user cost?
- your actual name and phone number
- your actual private connections (not "friends" you "like")
- contents of your private chats (think of linguistics software combing through them en masse to "undferstand" you better)

This will now be all referenced against the data they already have on you on Facebook and sold, sold, sold.

Ask yourself a question: of Zuck values your phone number at $40, what return on his investment is he planning to make?

about 2 years ago

Matt Owen

Matt Owen, Head of Social at Econsultancy

@Antoine - that's a fair point. To be honest I do think that Facebook will want to increase WhatsApp's functionality. Their own messenger has supported stickers etc and I'm inclined to think even if they don't use it to target the Asian market, they will be considering that as a growing theme for messaging app users.

@Neale - I partly agree, although I'd always assumed that certain message apps were popular in certain areas because of that critical mass of friends using them. It seems to me that a lot of users ONLY connect via apps, fogoing the phone services entirely, so they may be more locked in if all of their friends use one app.

about 2 years ago

Ben Austin

Ben Austin, CEO at Absolute Digital Media

Great read Matt. interesting point about Facebook struggling to be all things to all people.

Whether or not this acquisition turns out to be successful or not, the motive behind it screams desperation. As you point out, teens have been leaving the social networking site in their droves but as well as this, unlike Twitter, Facebook has struggled to strike the all-important balance between advertising revenue and unobtrusive marketing, especially given its recent algorithm change forcing users to promote their content in order for posts to be seen. By securing Whatsapp, Facebook is not only hitting the storylines again but begging young people to come back to its platform.

about 2 years ago

Comment
No-profile-pic
Save or Cancel
Daily_pulse_signup_wide

Enjoying this article?

Get more just like this, delivered to your inbox.

Keep up to date with the latest analysis, inspiration and learning from the Econsultancy blog with our free Daily Pulse newsletter. Each weekday, you ll receive a hand-picked digest of the latest and greatest articles, as well as snippets of new market data, best practice guides and trends research.