WhatsApp: WTF?
by Adam Skikne
Earlier this week, Facebook acquired WhatsApp for $19 billion. And while everyone may have their opinion of why Facebook acquired WhatsApp, what they have planned for WhatsApp, or whether or not it was a good or a bad deal for Facebook, no one can definitively know the answer to any of these questions for sure at this moment in time.
Sure, the internet is full of people with opinions and the best way to take an opinion is with a pinch of salt. Having said that, Facebook’s decision to acquire WhatsApp for $19 billion could very well be the single worst decision in the history of business. Ever.
Here’s why:
1. 19 Billion Reasons
The great thing about WhatsApp is that it is incredibly simple and has focused on doing one thing particularly well. WhatsApp doesn’t collect your personal data and it doesn’t depend on advertising for revenue. WhatsApp is basically free for the first year and then charges you $1 a year thereafter.
So did Facebook acquire WhatsApp to collect more data? Did they acquire them to make money. The answer, at least at the moment, is ‘no’ on both accounts. In fact if every one of WhatsApp’s 450 million monthly users paid their $1 subscription, it would take WhatsApp just over 42.2 years to generate $19 billion dollars. This $19 billion would not be pure profit.
It would not be worth the same as $19 billion dollars is worth by today’s standards.
And we will probably not be using WhatsApp 42.2 years from now.
2. WhatsApp doesn’t automatically give Facebook Access to Millions of “Poor” People in Emerging Markets
Ok, so for many, WhatsApp is the default SMS or messaging app, especially for “poorer” people in emerging markets. But is Facebook’s play really spending $19 billion dollars to get WhatsApp on “poor” people’s smartphones just so that they can get them to use Facebook? That sounds stupid.
But if Facebook acquired WhatsApp to target the next billion people who will be accessing the internet for the first time in emerging markets, they have a big problem. WeChat.
WeChat offers the same functionality as WhatsApp as well as a completely mobile social network that can potentially replace Facebook for many users. And in a recent article by Quartz, while WeChat has 150 million users less than WhatsApp, each WeChat user is worth an estimated $95 each – making WeChat worth around $30 billion.
Not only are WeChat users worth more than WhatsApp users, WeChat is looking to aggressively expand into Western markets. WhatsApp will not only have to fight off WeChat’s superior offering in these markets but they will also struggle to gain traction in China (where WeChat comes from) because of WeChat’s head start and the fact that Facebook is pretty much banned in China.
3. Facebook Fails
I think Facebook has a lot of potential as a company. They have an enormous user base, all our data, tons of money and some super smart people. But they also have a terrible track record of announcing things that should revolutionize social media but fail miserably instead. Some of these Facebook fails include:
- The effect of changes to the News Feed algorithm for posts from friends
- The effect of changes to the News Feed algorithm for posts by brands
- @Facebook.com email addresses
- Facebook Graph Search
- Facebook Home (despite being a cool product)
- The HTC First (this was actually quite a cool entry level phone)
- Facebook Poke (to compete with Snapchat)
- Facebook’s controversial IPO
- Not being able to solve advertising on Instagram (although this may change)
- Instagram Video (to compete with Vine)
- Instagram Direct (once again to compete with Snapchat)
So even if buying WhatsApp is a good idea and fits perfectly into Facebook’s genius plans…things don’t always go according to plan. Especially for Facebook. After writing this post, I think I realise that the only possible reason Facebook bought WhatsApp wasn’t to increase revenues, get more data or even more users. The acquisition was most likely to prepare for the upcoming battle between with WeChat. Will the $19 billion dollars that Facebook spent on WhatsApp be worth it? We’ll find out as the battle unfolds on the tiny screens in our pockets.
