16 January 2019

What Facebook saw in WhatsApp

Talk about a whirlwind romance.

It took Facebook 11 days to court mobile messaging portal WhatsApp and one week to hash out the details. Now the parties are ready to live life together.

And it all came down to a US$19 billion offer by the world’s biggest social networking website for the mobile instant messaging (IM) app in the largest technology deal in 10 years.

Hong Kong Economic Journal columnist Liu Yi {劉怡} thinks the question is not about how much it cost but whether it’s worth the price.

Unlike Google, whose acquisitive appetite is well known, Facebook has a more defensive approach to acquisitions.

Recently, however, Facebook founder and chief executive Mark Zuckerberg has been criticized for targeting minnows. Observers and shareholders have begun to question why a US$150 billion company could not — or would not — land a big fish.

The thinking is that Facebook has to look beyond its core social networking business to secure its future. It has only begun to show some good results in third-party mobile advertising but it needed a major proprietary platform to strengthen its hand.

It found the answer in WhatsApp, which explains why Zuckerberg was willing to pay such a high premium to land it.

That’s a sign Zuckerberg recognizes that mobile IM is the next big thing. In this race, Facebook is a slow starter, having tripped on its own Messager service. Applications based on user contact lists have been around for a relatively short time, with WhatsApp and Snapchat in the United States and Europe and Line and WeChat in Asia dominating the market.

In the US and Europe, WhatsApp is the undisputed champion and growing.

Already, it commands a user base of one billion and monthly active users of 450 million. It attracts one million new users a day and daily log-ins are up 70 percent. More than one billion photos, 200 million voice messages and 100 million video messages are sent on WhatsApp each day.

WhatsApp’s phenomenal growth mirrors that of Facebook 10 years ago. With the technology landscape itself changing faster than Silicon Valley visionaries can dream up new ideas, who can tell if WhatsApp might have been the one nailing Facebook some time in the future?

Zuckerberg is not a visionary for nothing. Under his leadership, Facebook has developed a culture that promotes diversity and inclusion. Different business units are allowed to focus on their core business and chart their own development path. Facebook arms them with first-mover advantage.

WhatsApp co-founders Jan Koum and Brian Acton, both devotees of products and technology, might have been influenced by a similar culture in accepting the offer, never mind that it’s something anybody would have found hard to resist.

In WhatsApp, Koum and Acton developed a business model that derives revenue from users, not from advertising or from selling user data.

The product — or service in this case — speaks for itself. Users are drawn to WhatsApp’s ad-free user interface and are willing to pay for the service. Customer loyalty builds over time on customer experience and the cycle goes on. It’s a gift that keeps on giving.

WhatsApp has just 52 employees, more than half of them technicians. They keep the service simple, fast and efficient.

An investor said WhatsApp has reinvented social networking. Few will argue with that.

– Contact the writer at [email protected]



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