Everyone is now no doubt aware that Facebook is acquiring the messaging company WhatsApp in a deal said to be somewhere between $16 and $19 billion depending on sources.
For those that don’t know much about WhatsApp, it is the fastest growing social media platform to date, with over 450 million users and approximately 1 million new users everyday. For the first year the App is completely free to use and after that it costs just £0.69 per year to send unlimited messages to any other WhatsApp user. That means at present the company would turn over little over £310 million a year –
So why is WhatsApp worth so much to Facebook?
In recent weeks there has been plenty of talk about the fact that the new generation of teenagers are not signing up to Facebook but are preferring to use messaging services like WhatsApp and Snapchat. Facebook do of course have their own free messaging service as well, but it has never really taken off. Personally I think this is due to the fact that you can message any of your Facebook contacts from within Facebook, so why would you need another App to do the same thing? So do Facebook need to learn how to connect to the next generation?
The other question is how will Facebook monetise WhatsApp to make it worth $16 billion? The obvious choice is adverts, something that Facebook seems increasing keen to push. The problem with this though is that straight away I can see people leaving WhatsApp and moving to another messaging service where there are no adverts. There are after all many other messaging apps out there such as Viber, MessageMe and XMS to name just a few of the hundreds available.
If you think that people will put up with adverts and will stay with WhatsApp then think again. In these new times of Apps people will jump ship without hesitation. BBM or Blackberry Messenger is a great example of this. A couple of years ago it was the messaging App to be using, and teenagers were even buying Blackberry phones just to be able to use it. Then along came WhatsApp. Blackberry tried to recover by releasing the messenger service to all devices, but let’s be honest when was the last time you heard anyone mention their BBM account number.
For this reason I simply cannot understand why Facebook would put such a value on a free messaging service and I am not the only one:
“Enormous values paid for intangible & speculative assets – looks like a bubble to me,” was tweeted by economist Andrew Sentence
Facebook for now have said that WhatsApp will continue to run as its own platform, but what will its future be? Will people continue to use it? Everything is certainly up in the air.
I think this is a terrible move but perhaps I am wrong? Let me know what you think in the comments below