Friday TechMunch: The Whys and Wherefores of the WhatsApp Acquisition

When it was announced last week that Facebook had decided to push the boat out and snap up WhatsApp for $19 billion, many users (myself included) read the news with a kind of fuzzy dismay.

Not only would Facebook now own a hefty majority of the IM market around the world (79% to be precise) with the many privacy concerns that might entail, but surely it would only be a matter of time before the flood of adverts and requests for user information start to filter through…

Or maybe it would just turn it off entirely in order to promote Facebook Messenger?

So far so good however – despite the one major service outage (presumably the entire team were too busy celebrating) – Facebook has promised not to make any significant changes to the app, privacy settings and all, for the foreseeable future. With any luck, that should be just enough time for another wizzier chat app to appear (here’s looking at you, Telegram!) and we can all jump ship, taking our mobile data with us and leaving a library’s worth of unfinished conversations in our wake.

But if it’s not planning to bombard us with advertising, why did Facebook buy WhatsApp?

Well, maybe it just wanted to get the jump on Google (also reported to be courting the company); maybe it wanted to take out one of the largest competitors to Facebook Messenger; or maybe it just wanted a full address book of numbers to market to if/when a Facebook smartphone should appear.

All or none of these could be factors, but it might be simpler to reason that WhatsApp is used by over 450 million people every month and a good proportion of those users have been, so far, out of Facebook’s steely grasp. Text messages have been largely free across the US for years now so WhatsApp wisely focused its attentions elsewhere; today it’s a strong presence in markets where Facebook isn’t quite so well embedded. In fact, in Latin America, Africa, and Europe, WhatsApp is pretty much the largest player in IM – reaching up to 90% of the mobile messaging market in most of those countries.

By filling in these territory gaps with WhatsApp, Facebook’s mission to connect the world takes a few steps closer to success, and considerably faster than it might have managed had it decided to go it alone.

It’s also clear to Facebook that while smartphone adoption continues to grow exponentially, traditional SMS is living on borrowed time. In 2008, there were less than 150 million smartphone users on earth – today there are 1.5 billion and in 2017 there will be 2.5 billion. The space that texting used to fill is hotly contested with the likes of WeChat and Viber rapidly gaining ground and BBM recently clocked up 20 million downloads across Android and iOS. Happily, because WhatsApp was designed purely and simply as a mobile platform, with or without its own line of mobile devices, Facebook is now an eminent player in that space and can continue to ride the cresting wave of smartphone love as it sweeps across the planet.

But is WhatsApp actually worth $19 billion?

Only time can tell. It might be the best decision Facebook ever made, it might be the most embarrassing. There is huge competition from Skype to Gtalk, to BBM and SnapChat, and the world of social networking is as fast paced as it is ruthless. Plus there’s always the chance that the world’s collective mobile phone networks might stick their heads together and do something about all of these pesky apps. WhatsApp did cost them $33 billion in lost SMS revenue last year alone, after all…