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.
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?
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.