When Facebook announced the purchase of Whatsapp, the social media was inundated with not so cool jokes about how Mark Zuckerberg could have downloaded it for free. Adolescent jokes aside, one needs to look at the thought behind this massive acquisition, because make no mistake about it – it is a lot of money to spend on a messaging service.
The first thing to look at is the fact that Facebook has been losing out on mobile users, and fast. The fear has been that teenagers are no longer logging into facebook as frequently as they would have done a few years back, and now are more into smart phones and the apps that can be downloaded on it.
Whatsapp had cornered most of the US market and Europe, and is still one of the oft used app in Asia as well. While Facebook Messenger has a lot more users, the percentage of active users is higher in Whatsapp, 70% to Facebook’s 63%. Also, the simplicity of Whatsapp has made it very popular among new users too, and is the main reason why it continues to attract a million users every day.
While $19 billion may sound like a lot of money, one has to keep in mind that it won’t take long before Whatsapp reaches a billion users. And with the subscription being a dollar per year, most people would be glad to pay it. And so, Facebook would be able to gain a revenue of a cool billion dollars a year without having to spend a penny on marketing the product.
Another advantage Facebook has in purchasing Whatsapp is that it can develop the software to include other revenue generating options such as e-commerce payments. Many other messaging apps have already included these features with success in their softwares, and with the simple theme that Whatsapp has give Facebook the opportunity to include any options that it sees will be wanted by the users.
Along with all the above, Facebook now has access to millions of address books through Whatsapp. While Whatsapp is still a “No ads” software, it will be difficult to think that it would continue the same way for long. After all, Facebook would have to answer to its shareholders why more is not being done in terms of getting more revenue from such a massive acquisition.
But perhaps, beyond all this, the most significant aspect of Facebook’s acquisition is the fact that the company would now be on your smart phone with multiple apps. With Instagram, Facebook messenger and Whatsapp, you would be spending more time using Facebook products than ever before, and this is perhaps the major thought behind the purchase of the messaging app. As long as the app is good, most users, especially teenagers, do not really worry about whose product it is. And by owning all the popular apps, Zuckerberg is simply ensuring that Facebook does not become redundant, even for the newest generation of social media users.