Why Did Facebook Acquire WhatsApp? A Bold Move By Zuckerberg

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Last week, Facebook did a little shopping to acquire WhatsApp, a mobile messaging application, for a meagre $19 billion dollars. Yes you read that right: billion. Announcement of the acquisition was met with very mixed feelings expressed by both users and investors alike: “Facebook’s shares fell as much as 3.4% in early trading after the announcement of its purchase…But by the end of the trading day, the shares had bounced back, erasing the earlier losses.” Perhaps even more ominously, WhatsApp crashed for a couple of hours on Saturday night, days after Facebook’s announcement of its acquisition: “Some users complained about the problems, while others joked that the WhatsApp team had gone on holiday following their multi-billion dollar deal with Facebook.” There is no denying that Whatsapp is fast-growing, currently serving approximately 450 million users and adding around 1 million users each day, but the company has, for the most part, been only modestly profitable: “Nearly $19 billion [was paid] for a company that had $20 million in sales last year.”

Assuming that Facebook honours its promise that WhatsApp’s “product roadmap will remain unchanged” and their existing maxim of “No Ads, No Games, No Gimmicks” will remain in tact, it begs the question as to why Facebook would want to acquire an app that seemingly accomplishes the same thing that Facebook messenger does, particularly after recently releasing their new mobile-friendly Paper app . Through his Facebook page, Mark Zuckerberg writes that the deal was prompted by Facebook’s ongoing desire to connect the world through the most innovative and user-friendly means possible: “Over the next few years, we’re going to work hard to help WhatsApp grow and connect the whole world. We also expect that WhatsApp will add to our efforts forInternet.org, our partnership to make basic Internet services affordable for everyone.”

Whether Facebook’s intent is truly as benign as Zuckerberg states certainly remains to be seen. It’s exceedingly difficult to overlook the fact that $19 billion dollars was paid for a company that has 55 employees and that “[$19 billion dollars] is 13 times Facebook’s (not WhatsApp’s) entire 2013 net income – and almost 2.5 times Facebook’s (again, not WhatsApp’s) 2013 gross revenues!” It’s difficult not to be suspicious. Perhaps it’s a shrewd business move on Facebook’s part in order to assert its dominance in the social sphere, prematurely edging out any competition that could potentially make their platform superfluous. Perhaps it’s for the wealth of data that WhatsApp can offer. Perhaps it’s because WhatsApp has astonishing user growth.

Regardless, the fact that Facebook acquired WhatsApp might be considered a bold move by Zuckerberg, but is by no means without strategy. It will be interesting to see what changes, if any, What’sApp will undergo. It is imperative to remind ourselves that Facebook grew out of Mark’s long-established desire to connect the world, but since then has been in a constant state of evolution, and most notably has grown to accommodate targeted advertising. It will be interesting to see how and if WhatsApp will maintain autonomy and how Facebook will leverage off the app to their own benefit.

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The House of Booje

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