The word was out on earlier this week that Facebook acquired Whatsapp, the mobile messaging startup, for the phenomenal price tag of $19 billion. After the buzz of the negotiations with SnapChat, and acquiring the photo-sharing service, Instagram, in April 2012, Facebook is making bold moves, the transaction being the largest purchase of a company backed by venture capitalists ever (see Sequoia Capital and ).
Whatsapp currently has over 450 million active users all over the world, and offers its service for free or for a minimum fee ($0.99) after a year of use. The market of mobile messaging is currently fragmented, with many players worldwide. Take for example,WeChat, the mobile messaging app with 270 million users, extremely popular in China. Line takes the lead in Japan and other Asian countries, while Kik is the most used in US. Viber, ChatON, and KakaoTalk are among the big players as well.
So what is the big deal about Whatsapp?
Zuckerberg was clear about Facebook Messenger not being replaced by Whatsapp. He also stated that part of the buyout intent was to support Internet.org’s vision to connect two thirds of the world to the Internet. Nevertheless, the strategic reasons of acquiring Whatsapp have much more to do with expanding Whatsapp and Facebook’s reach worldwide:
To emerging markets.
To the next billion of users to have access to the Internet.
To the younger users.
To the mobile-friendly audience.
Zuckerberg and Koum seem determined not to increase monetization efforts immediately, and retain the existing business model. Whatsapp has now available the knowhow and capital to leverage massively its operations, while Facebook reaches markets that are expected to have exponential growth in the coming years.
We are now looking forward to see the competitors’ reactions and what tactics Facebook will employ to boost their portfolio of services (and companies).