媒体及服务 > 无线媒体博客



Scale & Fear Drive $19 B WhatsApp Acquisition

by Nitesh Patel | 2月 20, 2014

Hot on the heels of Rakuten’s acquisition of Viber last week consolidation in the OTT communications space continued, with the world’s largest social network Facebook shelling out an incredible $19 B ($4 B cash, $12 B Facebook stock and $3 B in delayed stock options to WhatsApp employees) for the world’s largest  OTT messaging platform WhatsApp. But why is Facebook, which has its own messenger app, Facebook Messenger, buying WhatsApp?

·         Scale: With over 450 m monthly active users WhatsApp and 1 m new users added per day, Facebook expects WhatsApp to reach 1 B users fast. Although just half way there this is not an unrealistic target, particularly given WhatsApp’s critical mass of users combined with the potential of network effects to accelerate future adoption. However, growth in Asia is likely to be modest given alternative services like WeChat, Line and Kakao are popular. Therefore, attempting to break into key markets dominated by those other applications (e.g. China, Japan, and Korea) will be critical if Facebook is serious about global dominance.  

·         Activity: In addition to WhatsApp’s impressive user base the company claims around 75% of its monthly active users send messages using WhatsApp on a daily basis. Staggeringly, WhatsApp users send 19 B messages per day, which represents a run rate that exceeds total global operator SMS volumes for 2014. Based on this data from WhatsApp I’ll need to update my own mobile instant messaging estimates.

·          Facebook Messenger and the “fear factor: Facebook has kept relatively quiet about the adoption of Facebook Messenger. However, during the deal announcement Zuckerberg alluded to Facebook’s slow expansion to markets outside of the US and its primary use as a non-real time channel to enable Facebook Messenger users to communicate with Facebook Chat users that will access messages when they log into the Facebook online or the Facebook application. Rolling back 4 months, Facebook made a chilling admission in their result announcement in October 2013, to the ears of the investors at least, that it saw decrease in daily users, specifically among the teens.  Messaging platforms are where these young people heading for more active and more private communications with their buddies without their mums and dads watching behind their shoulders, on Facebook.  We believe this mammoth deal is partly driven by the fear that Facebook is losing the “next generation,” and the threat that one of its main competitors, Google, may strike first.  This may make more sense if we consider Facebook’s earlier, failed attempt to acquire Snapchat. However, with lots of competition from local and international OTT app providers, combined with the fickle nature of consumers, there can be no guarantee that WhatsApp will remain the OTT communication app du jour for long.  

Crazy Valuation?

Despite WhatsApp’s potential to scale to over 1 billion users over the next 1 to 2 years, $19 B is sizeable, considering WhatsApp’s current business model. It provides the first year of service for free and charges an annual $0.99 per year. In markets where credit card penetration is low or where the data penetration remains low  WhatsApp is bundling its service with OEMs and partnering with operators to create WhatsApp specific bundles which aggregate the cost of WhatsApp and associated data use.  Even if WhatsApp achieves 1 B in rapid time, each active user would be valued at $19, making Rakuten’s $900 M purchasing price of Viber, implying a $9 valuation per active user, much more reasonable than the first sight. Facebook promised to keep WhatsApp’s current business model, which famously says declares “No Ads! No Games! No Gimmicks!”.  Therefore Facebook will either need to come up with a new business model without distorting WhatsApp’s clean user experience, or simply use it as a tool to tie the 450 m and increasing number of users to the Facebook ecosystem. 

Nitesh Patel and Wei Shi

Previous Post: Good Morning, America! Shall WeChat? | Next Post: "Hable con ella", and she may respond
Leave a comment