It’s been a little over a month since Facebook’s $19 billion WhatsApp purchase, and with a price tag of $42 per user, tech observers and experts like Harmel Rayat say Facebook has placed a heavy bet that integrating WhatsApp into its platform will make for a formidable alternative to Google Hangouts. As the dust settles on yet another step in Facebook’s quest to beat Google in reaching Skynet status, we can take a clearer look at what the move means for Facebook and WhatsApp users, and what Facebook’s foray into mobile messaging means for its bottom line.
The acquisition of WhatsApp will help shore up two market bases that, if you believe the reports, have become leaky for the social media giant: internationals and millennials. Facebook, like other U.S. tech giants, has had to reassure the international marketplace of its security in light of the NSA’s Prism program and the fear of governmental snooping into U.S. based servers. Assuming that WhatsApp remains based in Asia, it could provide a gateway back to Facebook for the small number of international users who ditched the platform.
For millennials the desire for more direct communication, coupled with Facebook’s advertising methods (which for younger users, has become more intrusive and opportunistic) has led them to apps like Snapchat. While Facebook placed incredible effort to be a social catch-all, millennials and teens sought stripped down alternatives. Observers like Rayat say the addition of WhatsApp aims to stem the exodus, if not reclaiming some of those lost digital souls. “The seemingly unstoppable Facebook was forced to evolve or die off, as traditional social networking shifts. We have to remember that social networking will not dominate the market forever,” says Rayat. “But there’s hope the WhatsApp deal could be enough to stem any massive shift from social networking to instant messaging apps.”
As valuable as the WhatsApp users are for Facebook, the data they generate may be even more so. For a company that has become known for missing the mark in catering to these segments, the ability to identify trends more directly can be an invaluable commodity.
For those worried about the ruination of WhatsApp by Facebook, Instagram should be enough to relieve any apprehension about WhatsApp becoming clogged with ads or seeing radical changes. Since Facebook bought Instagram in 2012 for a paltry $1 billion, the app has done well to not stray far from its original design, with the exception of occasionally sponsored pictures and videos, a la Twitter.
For Facebook shareholders, this move, as large an expenditure as it was, is backed by a history of other large tech mergers and acquisitions that, to date, have at the very least secured investment value, if not adding to the bottom line directly. Google’s purchase of YouTube, Twitter’s purchase of Vine, and Facebook’s purchase of Instagram have all bolstered their value and long term viability. In fact, Rayat says these acquisitions have often outperformed homegrown projects like Facebook Beacon and Google Wave. In addition, a byproduct of these large-scale movements is the investment viability of tech startups as proven by avenues ranging from AngelList to Kickstarter. “Innovation and relevancy are keys to evolving and remaining successful in the social space,” he notes. “Bigger, better companies are born all the time. These companies have to adapt or risk dying off.”
Lost in the WhatsApp/Facebook news is the clear positioning of Facebook as a digital communication/media giant. With the purchase of companies like Branch, Titan Aerospace, and, Oculus in addition to WhatsApp, Google alone rivals Facebook’s multimedia reach. We are not far from a Facebook monolith that is Clear, Skype and Buzzfeed rolled into one.
Time will ultimately tell how WhatsApp fits into the Facebook puzzle, but it is clear that deals like this one are the future of digital and social business. According to Rayat, trickle-up innovation will continue to feed big business as huge payouts pour down to startups whose products drive a sizable user base with concrete digital solutions. It’s the American dream gone viral.