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Facebook's WhatsApp Purchase

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Feb 25, 2014

WhatsApp


 

 

WhatsApp is Facebook’s most recent and most expensive purchase to date, at $19 billion what is so valuable about this platform that most of us have never even heard of.  $19 billion in stock and cash is no small sum and although the network boasts over 400 million users the $19 billion number still sounds incredibly high.  With no plans to allow advertising on the network, and an impressive but not justifying user base, what is so great about Zuckerberg’s latest purchase?

 

Well lets start with identifying exactly what WhatsApp is, essentially it is a replacement for text messaging.  It gets rid of the pay-per-text model and allows users to message one another as long as they have another users phone number, a cheaper way to text.  The trend has yet to really catch on here in the west but the other half of the world has transitioned away from traditional text messaging and primarily uses networks like WhatsApp, WhatsApp itself being the dominate international platform.  But still $19 billion!

 

Well Zuckerberg may have made a very bold but well thought out move here.  First of all this network is growing fast, much faster then Facebook (remember growth drives valuation).  Second he has prevented WhatsApp from being purchased by Google, a major competitor in the social networking world these days.  Thirdly Zuckerberg claims that WhatsApp is going to be a key component in his plan to making the world more interconnected and in bringing internet to the 2 thirds of the world that currently do not have access.

 

Ultimately Zuckerberg has made a huge power move here by acquiring what could potentially be a monster of a network before his competition.  WhatsApp also fits into his plans for the creation of a true international network.  Zuckerberg is watching the trends and paying particular attention to growth, as social networking is at its core about trends and about what the users want.  At a glance the $19 billion dollar purchase may seem like madness but upon closer examination it may be truly genius.

 

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by Jarrad Kulick