Facebook + WhatsApp - One year later...
Alok Kejriwal
Disney bought my last Company! CEO of Games2win. I'm a passionate digital entrepreneur with a love for Mobile Gaming & Product! Penguin published author of best-selling books “Why I stopped wearing my socks”,"The Cave".
Exactly one year ago, on the day when Facebook announced it was acquiring WhatsApp, I was commissioned by the Economic Times of India (#1 Pink Paper in India) to write my entrepreneurial view of the acquisition.
This was before the e-com / mobile app frenzy had reached dizzying heights as we we see it today and people were frightened and shocked at the audacity of the price paid by FB. I had argued FOR the acquisition and I think my points have played out well. This is the full article & I have summarised the key points below:
First a joke!
Fanta Singh was informed that Facebook had acquired WhatsApp (the messaging app) for 16 billion ‘daulars’. Fanta Singh was hard of hearing and did not believe his ears. He asked his friend to repeat, which he did: Facebook was paying 1 lac crores to buy WhatsApp.
On hearing this, Fanta Singh began to laugh hysterically! Later he said, “Arre, what a bewakoof (stupid) that Zuckerberg Paaji is! Does he have bhains buddhi (buffalo brains)? Why did he pay 1 lac crores for an app that is FREE?”
If you’ve had your laugh, let me also earn your respect.
A year ago, I was trying to get a peculiar sized table made. It was a square table that needed to be portable, light in weight and sturdy. After a couple of nerve-wracking sessions with my mom’s carpenter (who always has a 1 cm pencil stuck behind his ear), I was making no progress. The bidi-smelly fellow was just not getting it. In the end, he said, “Alok bhai, don't worry. I will draw more pictures and send them to you by WhatsApp. You have WhatsApp naa?”
I was stunned.
The War over a Nation - Circa 2014
When Facebook closed the deal, WhatsApp had 450 million monthly users and was adding 1 million users a day! This places WhatsApp as the 3rd largest country in the world and if it continues to grow at the same pace, it will become the largest country in the world!
Now tell me, is US$ 16 billion too expensive to own the world’s largest country-in-the-making?
The biggest shocker in the deal announcement was the revelation that 70% of WhatsApp installed customers use the app every day! That's 300 million people or the equivalent of the entire population of the USA daily marking attendance!
If I were to tell you that you could have control over this digital population, would you even bother negotiating a price? Would owning a nationality of citizens that have traditionally been the toughest to recruit, famous for being disloyal, fickle, inattentive and mostly inert, be temptation for anyone to resist?
World War I and II were fought by nations to control each other. World War III has begun. Only this time it is companies fighting over digital countries.
Circa - 2015 : WhatsApp has reported a 70 million daily active user base in India. In my opinion, that tops all digital media and also beats Google)
The Price of Paranoia
Steve Case is probably the greatest salesman ever born. He took his puny America Online Corporation (AOL) and sold it at an obnoxious, dizzying and spine-chilling price of US$ 160 Billion to the all and mighty Time Warner Corporation in the year 2000.
What was Steve Case selling and Time Warner buying? Pure, unadulterated, untouched PARANOIA.
Mark Zuckerberg revealed his paranoia when he publicly announced that, “WhatsApp is the only business in the world that had better retention and usage than Facebook.” Like Time Warner, Facebook has not understood what to do on all things mobile. It feels helpless and therefore makes wild, bold buys like Instagram (1 billion) WhatsApp (16 Billion), while failing to buy Snapchat for US$ 3 billion
Doubt in 2014 : – To pay an irrational, insane and obnoxious price to treat your paranoia that might not be true in the first place!
Today, in 2015 if a Flipkart that loses 1 Billion $$ a year is worth 15-20 US$ billion & tween crazy app Snapchat is worth 20 Billion, then what is WhatsApp is worth now?!
Consumer Revenues - Alternative revenue stream
For years Mark Zuckerberg said, “No ads on Facebook.” In the infamous movie ‘The Social Network’, his character avoids falling for Madison Avenue advertising revenue overtures that his now estranged co-founder was trying to garner.
Mr. Koum the founder of WhatsApp, is also very vocal about not having advertising as a revenue source. If you sign up for WhatsApp as a first time user, you will be treated to a “declaration of independence” – a long mobile page that berates advertising and its evils; and how the founders of WhatsApp vow never to pollute their beautiful products by ads.
Grump! So much for saying no to easy money!
So, a lots of people don't get it. If advertising is bunk, then how will WhatsApp make money?
It's the address book, silly!
Messaging services such as Japan's LINE and Korea's WeChat are demonstrating massive traction with in-app services for consumers such as stickers, gifts etc. Skype makes a ton of money by charging for premium services over its VOIP services.
Its logical for WhatsApp to become a massive revenue generating monster from its consumer base who will pay a few cents here and there for tricks and treats.
And that suits Facebook very well that currently only depends on ads for revenue!
What do you think of this deal? Please comment and share your opinion?
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Alok Kejriwal is a digital entrepreneur, based in Mumbai. He currently runs Games2win as his fourth startup and is the founder of therodinhoods.com - India's only social network for entrepreneurs. Connect with Alok on Twitter @rodinhood , Facebook and add him to your circle on Google+
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Co-Founder Bytelearn | Ex Co-Founder Instasolv (Acquired by Vedantu), 3x Founder | TEDx Speaker | Angel Investor
9 年Yeah Alok your justification for facebook making a great deal by paying peanuts ..only $ 16 bn seems absolutely perfect. Today WhatsAPP must be worth a 100 Bn atleast!
Finance
10 年It was a masterstroke by Facebook. Whatsapp is best mobile based social network in itself.
Global Practice Head, Sales and Marketing, Consumer Goods Industry at Tata Consultancy Services
10 年One way of looking at the $16 billion valuation is whether that much money will come from future earnings of WhatsApp. While the use base is massive and growing phenomenally, how they will monetize is a big question. They have a good chance of success but an equally good chance of failure. Only time will tell. But in my mind, another factor must have heavily weighed on the mind of Zuckerberg in going for the acquisition. Which is the price of not acquiring WhatsApp ? WhatsApp was perhaps one of the biggest threats to facebook as it is a run away success as a messaging app and FB had a big hole in this area. Zuckerberg's paranoia perhaps is because of this potential competition from WhatsApp and what better way to mitigate competition than buy away competition ( remember Larry Ellison ). So, like Godfather, he made an offer that WhatsApp could not refuse. So, the $16 Billion is not so much an estimate of future earnings. Rather, what is price Zuckerberg should offer Koum that he cannot refuse ( learnings from Snapchat's snub ) ?
CEO at Stellaro Brands, Ace Vector Group
10 年Opportunities abound for monetising without taking display ads. The biggest one is in the area of wallets, payments and P2P transfers
Child health and maternal health - India
10 年Check out weixin. That's WeChat within China. Thats the future of Whatsapp.