But now the issue around monetising it comes into question
Facebook, the Californian-based social network behemoth, has purchased the instant messaging service WhatsApp in a record $19 billion deal for the company. In doing so it’s managed to make billionaires out of WhatsApp co-creators Jan Koum and Brian Acton as $4 bn was delivered in cold, hard, cash, with a further $12 bn offered up in the form of Facebook shares. Even so, such a deal means that WhatsApp is more valuable than United Continental, American Airlines, and Ralph Lauren to name a few. It also means that Facebook values WhatsApp’s 450 million engaged users at $42 a pop, something that’ll surely be very difficult to wring out of the, currently, minimal-paying userbase.
WhatsApp is a, seemingly, free application used for instant messaging between friends – using a mobile phone number to verify and link your contacts together. It’s also free to use, for a limited time, and then just 69p a year to keep using its services an unlimited amount. It’s safe to say that I am one of those 450 million users, continually engaged with friends through the service, making plans, sharing content, and conversing on commutes. I’m not alone either, as 70 per cent of WhatsApp users are regularly engaged with the service, sending 18 billion messages a day.
But how can Facebook monetise the service? Especially when Koum’s stance from the start was that WhatsApp should never be bogged down with adverts, nor collect and sell information of its users. “From the day we started the company, we always felt that doing advertising in our product would be a very wrong thing to do,” Koum said, earlier this year at DLD14. Even Facebook CEO Mark Zuckerberg agrees with this sentiment, stating “I don’t personally think that ads are the right way to monetize messaging systems,” in a conference call about the acquisition. So why has Facebook, known so well for it’s mobile advertising efforts, gone for a system that neither party believes suits mobile advertising – and what does this mean for marketers?
Instead, Facebook could be playing the long-game. Seeing as WhatsApp has broken past Facebook Messenger as the go-to mobile messaging tool, even usurping SMS messaging, Facebook could well be looking to integrate the service into its network – removing it’s old system entirely. Why would this be a good thing? For one, it would create a bit of universality to the service, meaning almost everyone you communicate with when out and about can be easily reached on Facebook too, regardless of if they have an account or have set themselves up to receive notifications from the social network. This, in turn, means more people visit the Facebook site when at a computer, and that means more people see your adverts and promotions, while simultaneously providing Facebook with even more users than ever before.
However, Zuckerberg seems to counter this – rather obvious – idea by saying “WhatsApp will complement our existing chat and messaging services to provide new tools for our community,” on his Facebook page. “Since WhatsApp and (Facebook) Messenger serve such different and important users, we will continue investing in both.”
And as more and more people are signing up to WhatsApp each day, that means Facebook’s numbers can grow even more. In the early years of WhatsApp, it was growing at a rate that usurped both Facebook and Twitter’s adoption rates, legitimising mobile as the true bastion of communication for the future. Currently it still rakes in around a million users a day. It also means that Facebook has a chance to recapture the youth audience that it began to lose, although that’s most likely a secondary consideration in this deal.
There are a couple of oddities though. For instance, why purchase WhatsApp – who’s key demographics are found in countries that Facebook already has a large hold over – instead of making a bid on Tencent’s WeChat – which is China’s biggest instant messaging service by a long way? China is also a market that Facebook doesn’t have a hold on, and one it could really do with if it wants to expand its reach exponentially. Obviously, this brings even more questions to the table about Facebook’s recent acquisition, especially when the idea that they now own WhatsApp could easily put many off from continuing to use the service.
That is, if they actually change anything. It’s arguable that thanks to Facebook, Instagram has improved in droves – except for the fact that it no longer integrates into Twitter.
Whatever Facebook’s aim really is, this latest deal shows that you can’t afford to ignore the likes of mobile messaging networks, nor can you take your eye off Facebook for a second – even if it’s advertising system seems to be a con.
But as Snapchat investor Jonathan Teo said to Reuters, “Facebook is more about content and has not yet fully figured out communication.” Perhaps this is just their foray into that.