In an event best reminiscent of the assassination of Franz Ferdinand “shot heard around the world," media outlets were a buzz with the news of the $19 billion acquisition of instant messaging service WhatsApp by Facebook.
The largest acquisition Facebook has ever done came at an amount that surpasses the acquisition history of the likes of other tech giants such as Google, Microsoft, and Apple. Pending approval, WhatsApp will receive $4 billion in cash, $12 billion in Facebook stock, and $3 billion of restricted stock over four years. No matter how the financial structure is broken up, WhatsApp has gone from relatively non-existent revenue to a $19 billion payday within five years.
WhatsApp's growth within that time frame is equally astounding as its acquisition price: the service touts almost 500 million users, with over 70 percent of those being active daily users—in Facebook CEO's Mark Zuckerberg's own words, it's the only app with more engagement than Facebook's.
This level of product adoption and consistent daily usage is unparallel in the industry, and these traits alone are enough to warrant Facebook’s pursuit, and eventual acquisition, of WhatsApp... but at $19 billion? Only time will tell how beneficial this investment will truly be.
Facebook interest in WhatsApp is very simple: WhatsApp allows for instant connectivity on mobile devices, the same space Facebook is working diligently to control through increased users and stronger revenues. Facebook’s mantra of “making the world more open and connected” coincides with WhatsApp’s goal of allowing messages, whether by means of text, photos, or audio, to be more accessible and cheaper than traditional phone plans.
The reality for Facebook is that people are more likely to check messages via text on their mobile device then stay logged into their Facebook page all day to have a conversation. Facebook’s ubiquity has not reached the level where it is the platform for communication across all devices and the failure of Facebook Home is proof that users do not want Facebook as their communication landing page—but WhatsApp has found a way to do this despite the heavily saturated market that it is in.
Using wifi or 3G/4G connectivity to send information is not proprietary to WhatsApp, but the application’s clean interface has enabled the service to gain control of the market within a short time span. Facebook’s goal with WhatsApp would appear to be a quick way to push an alternative user growth as market skepticism surrounds the viability of Facebook for the long haul.
WhatsApp's distant rival, Blackberry’s BBM service, recently released a new update to its cross platform version which now offers users BBM Voice, a BBM to BBM VoIP service which looks to engage a new audience in a growing sector. VoIP services enable users to make phone calls via wifi or 3G/4G connectivity for fractions of the price offered by the generic telecom providers.
The VoIP space is growing, crowded, and for some reason very Canadian-oriented. This is probably due to the staggering rates for cellphone services offered by the big telecom providers. Kitchener’s Fongo, Waterloo-based BlackBerry, and Ringcredible, a Netherlands startup recently turned Canadian citizen thanks to an agreement with Contac, are all in the VoIP space looking to take a piece of the mobile market pie from the likes of TELUS, Rogers, and Bell. BBM’s evolution from strictly text messaging service to now include phone services is opening up the platform for greater market exposure and due to the already 80 million active users, BBM Voice has the upper hand over the competition by users alone, although Ringcredible calls are not limited to only users who have downloaded its application.
The acquisition of WhatsApp has rippled into the stock market with Facebook and Blackberry shares up. Blackberry’s positive gains are due to the instant message market increasing in value with WhatsApp $19 billion valuation. It may seem as ancient history to some, but BBM was the preliminary instant messaging platform at the height of the firm’s success and its downfall indirectly supported the growth of WhatsApp.
Despite the petition of Jim Balsillie to develop a cross platform BBM service, Blackberry’s resistance to this concept created a market vacancy which WhatsApp filled in 2009 and BBM eventually conformed to in 2013. As WhatsApp mints its founders as billionaires and Blackberry seeks to return to its enterprise roots with John Chen at the helm, one cannot help but wonder where Blackberry’s BBM software, which trumps WhatsApp, in security would be today?