whatsapp

What’s Up With Facebook’s WhatsApp Acquisition?

  |  February 24, 2014   |  Comments

The real reason for the acquisition is that any site that moves people away from dependence on Facebook also chips away at its ability to sell ads, which makes up most of the company's revenue.

By now, ClickZ readers are well aware of Facebook's acquisition of mobile messaging app WhatsApp. At $19 billion in cash and stock, it's touted to be the fourth-largest acquisition of the past decade.

In a blog post announcing the acquisition, WhatsApp co-founder and chief executive (CEO) Jan Koum said the company will remain autonomous and independent, and that nothing will change for its users.

If that's the case, what was Facebook's motivation for buying the company?

Simply, if you can't beat 'em, eat 'em!

Presumably, that's the reason Facebook purchased Instagram in 2012 for $1 billion and why it attempted to buy Snapchat last year for $3 billion.

Certainly, profit couldn't be the motive since neither Instagram nor Snapchat is making money, and it's no different where WhatsApp is concerned. The company even brags about the fact that it doesn't sell ads.

No, the real reason for the acquisition is that all of the above services are growing in popularity and, as such, pose a threat to Facebook's dominance. Any site that moves people away from dependence on Facebook also chips away at its ability to sell ads, which makes up most of the company's revenue.

That begs the question of why the social networking giant paid such an enormous amount for WhatsApp compared to the relatively paltry sums offered to the others.

In his article "Why Facebook Had to Have WhatsApp," BuzzFeed reporter John Herman nails it. "WhatsApp is - or was - arguably the largest known threat to Facebook. It was one of the only services that could plausibly claim to be cannibalizing Facebook on a large scale, and one of a small few that pose to it an existential threat," says Herman.

Herman's pronouncement is justified because WhatsApp currently has 450 million users - most of who are outside the U.S. - which is approximately half the number using Facebook.

Of greater significance, Facebook's shift away from a focus on desktop to position itself as a mobile company makes Instagram, Snapchat, and WhatsApp direct competitors. When you consider that more than half of Facebook's ad revenue is derived from mobile, that takes on special significance.

Now that Facebook is a public company, not only must it please users, but its stockholders, as well. As such, it's in the company's best interest to acquire competitors rather than cede users to them.

That presents yet another problem. Like Whack-a-Mole, mobile messaging apps keep popping up everywhere, which means Facebook will likely be forced to fend off other potential competitors in the future. Snapchat notwithstanding, for these start-ups, it is a game to see who can be acquired first.

The question has often been asked of whether any site can be a Facebook killer. Now that the company has reached its 10-year anniversary, the likelihood of that occurring is greater than ever.

Even with all its wealth, Facebook's pockets aren't deep enough to buy every competitor. Therefore, its survival as the dominant social network depends on its ability to adapt to fickle consumer preferences - but the older Facebook gets the more difficult that becomes.

ClickZ Live Chicago Join the Industry's Leading eCommerce & Direct Marketing Experts in Chicago
ClickZ Live Chicago (Nov 3-6) will deliver over 50 sessions across 4 days and 10 individual tracks, including Data-Driven Marketing, Social, Mobile, Display, Search and Email. Check out the full agenda and register by Friday, Oct 3 to take advantage of Early Bird Rates!

ABOUT THE AUTHOR

Paul  Chaney

Paul Chaney is principal of Chaney Marketing Group, a boutique agency that provides integrated online marketing solutions built on the concept that quality, optimized content framed within the proper context drives sales conversions.

He is a freelance writer, popular speaker, and author of four books on the topics of business blogging, social media, and social commerce. His latest is "The Social Commerce Handbook: 20 Secrets for Turning Social Media into Social Sales," published by McGraw-Hill.

Paul sits on the board of advisors for the Women's Wisdom Network, the Social Media Marketing Institute, SmartBrief on Social Media, and MyVenturePad.com.

COMMENTSCommenting policy

comments powered by Disqus

Get ClickZ Social newsletters delivered right to your inbox. Subscribe today!

COMMENTS

UPCOMING EVENTS

Featured White Papers

IBM: Social Analytics - The Science Behind Social Media Marketing

IBM Social Analytics: The Science Behind Social Media Marketing
80% of internet users say they prefer to connect with brands via Facebook. 65% of social media users say they use it to learn more about brands, products and services. Learn about how to find more about customers' attitudes, preferences and buying habits from what they say on social media channels.

An Introduction to Marketing Attribution: Selecting the Right Model for Search, Display & Social Advertising

An Introduction to Marketing Attribution: Selecting the Right Model for Search, Display & Social Advertising
If you're considering implementing a marketing attribution model to measure and optimize your programs, this paper is a great introduction. It also includes real-life tips from marketers who have successfully implemented attribution in their organizations.

Resources

Jobs

    • Recent Grads: Customer Service Representative
      Recent Grads: Customer Service Representative (Agora Financial) - BaltimoreAgora Financial, one of the nation's largest independent publishers...
    • Managing Editor
      Managing Editor (Common Sense Publishing) - BaltimoreWE’RE HIRING: WE NEED AN AMAZING EDITOR TO POLISH WORLD-CLASS CONTENT   The Palm...
    • Senior Paid Search & Advertising Manager
      Senior Paid Search & Advertising Manager (Smarty Had A Party) - St. LouisCompany Description: A warm, loving, [slightly wacky] startup, we view...